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Thu 9th Apr 2020 - Propel Thursday News Briefing

Story of the Day:

McDonald’s pulls guidance as global like-for-likes fall 3.4% in first quarter, 75% of restaurants open, plans $1bn capex reduction: McDonald’s has pulled its guidance for 2020 and beyond with chief executive Chris Kempczinski warning of “more challenges and difficult business decisions to be made”. Kempczinski has voluntarily offered to take a 50% cut in his base salary from next week until at least the end of September with other executives making a 25% reduction. The company said about 75% of its restaurants globally were open, the majority of which have adapted to focus on drive-thru, delivery, and/or takeaway. Several markets, such as the UK, France, Italy and Spain, have fully closed all restaurants. McDonald’s said in January and February global like-for-like sales were “strong” in most countries, but from mid-March a significant decline was seen in many markets. McDonald’s said global like-for-like sales were down 3.4% for the first quarter ended 31 March and fell 22% in March itself. In the US, like-for-likes in the quarter were up 0.1%. In its international developed markets, which includes the UK, like-for-like sales for the quarter were down 6.9% and 34.7% for the month of March. The company said it has taken steps to preserve its financial flexibility, including suspending share buybacks and increasing the cash position by raising $6.5bn in the debt markets during the quarter. McDonald's said it would reduce capital expenditures by about $1bn this year as well as the number of openings in certain markets. Kempczinski said: “The situation remains fluid, and as the duration and scope of coronavirus continues to evolve, it is not possible to estimate the full extent of the impact on our business at this time. There will be more challenges and difficult business decisions to be made. We are confident in our resilience, but we are not complacent. Our priorities remain the health and safety of our people and our customers, preserving financial flexibility, maintaining discipline and serving our communities where it is safe to do so. As we navigate through this unprecedented crisis, we will continue to operate with a long-term mindset, in order to best position ourselves for the future.”

Industry News:

Mark Wingett talks to Jonathan Arana-Morton in latest ‘navigating the coronavirus’ video interview: Propel insights editor Mark Wingett will talk to The Breakfast Club co-founder Jonathan Arana-Morton in the latest of Propel's video interviews with leading operators on how they are navigating the coronavirus crisis. Arana-Morton talks about making sure his business can return better than ever; learning from mistakes; and how the industry now needs to go forward together. The video will be released on Thursday (9 April). Meanwhile, readers can support independent sector journalism and get their news 12 hours early (at 7pm each night) with a Propel Premium subscription. It costs £395 plus VAT per annum for operators and £495 plus VAT for suppliers. Email anne.steele@propelinfo.com to sign up.


UKHospitality and CPL Learning launch e-learning platform: UKHospitality and CPL Learning, which delivers hospitality-based training and development, have launched a new online training platform. UKH Pathway will be free to use while hospitality businesses remain closed due to coronavirus, and will provide access to learning, well-being and personal development resources for furloughed employees. E-learning courses tailored by CPL Learning will also provide hospitality employees with opportunities to develop their skills across a diverse range of subjects. UKH Pathway will provide links to mental and physical well-being resources, assets aimed at developing skills and competencies, and content tailored to hospitality skills. Users will be able to access a library of knowledge and keep a record of their achievements online. UKHospitality chief executive Kate Nicholls said: “Hospitality has been one of the hardest-hit sectors and our fantastic team members have, in many cases, been furloughed during the crisis. UKH Pathway gives them the opportunity to learn new skills and develop their personal abilities. We hope that, not only will this provide employees with an outlet, it will mean we are in the best possible position to thrive once again when the crisis passes, and venues begin to reopen.” Jamie Campbell, chief operating officer at CPL Learning, added: “We recognise we need to continue supporting hospitality team members during this challenging scenario and provide them with a way to stay connected to our fantastic industry. The UKH Pathway is our first step in this process.” Users can register here. 
UKHospitality and CPL Learning are Propel BeatTheVirus campaign members

OakNorth applies to join CBILS, NatWest receiving ten times as many calls than normal: OakNorth Bank has applied to join the Coronavirus Business Interruption Loan Scheme (CBILS) as it looks to help companies source capital to help them through the crisis. It comes as NatWest Group, which is Britain’s biggest lender, told the BBC it is receiving almost ten times as many calls as usual from firms wanting to take out emergency loans. In the past two weeks OakNorth has approved more than £36m of new loans while it awaits CBILS approval from the British Business Bank. Ben Barbanel, head of debt finance at OakNorth Bank, said: “Growth companies are the backbone of the UK economy – their survival is essential to ensuring the UK can get back on its feet as soon as possible following this crisis. Unfortunately, due to exceptionally high demand at the clearing banks, many firms aren’t being able to get access to the finance they need quickly, even if they can demonstrate they were a viable business before the crisis. We are in a fortunate position to be able to help these businesses and have been hosting several more credit committees per week than usual in order to do so. We hope to be onboarded to the CBILS soon and will continue supporting viable UK businesses where we can in the meantime.” Meanwhile, NatWest Group chief executive Alison Rose said although some of the money was beginning to get through, it was facing operational challenges. She said: “Our call centres normally take 3,000 calls a day; we are now receiving 25,000, which is why I'm redeploying staff, retraining staff and getting people to help. The money is starting to move but I appreciate it is a very desperate situation for a lot of businesses.” 

Government urges local authorities to give additional flexibility to licensees: The government has urged local authorities to give additional flexibility to licensees when safeguarding the licensing objectives during the coronavirus crisis. The letter from the Home Office recommends a “considered and pragmatic approach” should be taken to breaches of licence conditions and procedural defects. It also states where businesses experience difficulties in paying premises licence fees and late night levy charges, “the authority should consider delaying any suspension of the licence where the delay in payment or non-payment is related to coronavirus” where business make the authority aware of their situation. Councils have also been advised they should consider allowing deliveries outside of normal times, flexibility on advertising applications, and the use of remote hearings. UKHospitality chief executive Kate Nicholls said: “Hospitality businesses are currently under a huge amount of strain. The majority have no revenue whatsoever at the minute, and those that are operating in some capacity are working hard to support the needs of their communities and key workers. Pursuing a tactic of ‘business as usual’ would have only heaped more pressure on businesses and stretched council resources even further.”

BBPA produces protocol for destruction of beer in pub cellars: The British Beer & Pub Association (BBPA) has produced protocol and guidance helping pubs to destroy beer in their cellars during the coronavirus outbreak. The normal rules for the destruction of unsaleable beer have been relaxed by HMRC. Rather than an authorised company representative from a brewery or supplier having to be present, the beer destruction can be undertaken by designated pub staff such as a licensee. The change in rules allows for duty paid on unsold beer to be recovered, and for the brewer to pass that reclaimed duty back to their pub customer, so long as they follow the protocol. The BBPA said it was imperative such approval was sought either directly from the brewer or – if the beer is supplied by a third party – through the supplier who has in turn secured approval from the brewer. BBPA chief executive Emma McClarkin said: “This guidance the BBPA has produced, approved by HMRC, gives clear guidance to pubs on how they should destroy their beer and how they need to record it, ensuring the destruction is safe for staff and done in an environmentally responsible manner.”

London hotel market sees daily double-digit declines in occupancy and revpar during March: The London hotel market saw double-digit declines in occupancy and revpar every day during March, according to the latest data from STR. Revpar was down 62.1% to £42.88 in March compared with the previous year while occupancy fell 57.8% to 34.5% as a result of the coronavirus crisis. Average daily rate in the month declined 10.4% to £124.15.

Job of the day: COREcruitment is seeking an operations director for a leading national foodservice business. The role will have a broad remit of responsibility including new business development, account management, financial management and HR. The position offers a salary of circa £100,000 and candidates need to have extensive director level experience in corporate contract catering. Anyone interested can send their CV or profile to Pippa@corecruitment.com 
COREcruitment is a Propel BeatTheVirus campaign member

Company News:

Starbucks sets up relief fund for UK employees as part of $10m global programme to help staff: Starbucks is setting up a relief fund for its UK employees as part of a $10m global programme to help staff during the coronavirus crisis. The commitment marks the first time both company-operated and international licensed market store employees across Starbucks can access hardship grants. Support from the Starbucks Global Partner Emergency Relief Programme will be made available to staff in licensed store markets through the Emergency Assistance Foundation; to employees in company-operated markets through the established Caring Unites Partners (CUP) fund; and to partners in Europe through the Starbucks EMEA Partner Relief Fund, which has been established for European company-operated markets including the UK, Austria, Switzerland, as well as the company’s roastery in Italy and roasting plant in the Netherlands. Categories for fund grants include, but are not limited to, housing and utilities, sudden loss of home, death of a family member or partner, and related funeral expenses. Starbucks $10m commitment to the Global Partner Emergency Relief Programme will also create a pathway for international licensed markets to set up their own funds with Starbucks contributing an initial investment, a first for the company. Chief partner officer Lucy Helm said: “As we navigate this global crisis, we never lose sight of the well-being of our partners, who are the heartbeat of this company. During this very difficult time, we believe it is our responsibility to create additional support for partners facing unexpected financial hardship wherever they are. We are proud to be a catalyst for a first-of-its-kind global funding initiative to further demonstrate to our Starbucks partners that we are in this together.” 

Peach to launch Pub Hub social enterprise initiative: Gastro-pub operator Peach is to launch a social enterprise initiative called Pub Hub, which will start through some of its sites, but it hopes will be taken up by other pub operators. Run through its Peach Foundation and new website www.yourhub.pub, the company states its mission is to “to serve three million meals to those in need”. It states: “Pub Hub is a social enterprise, born from the need to keep the hospitality industry and its supply chain running in these extraordinary times. The idea is to cook food from the sites and manage grocery deliveries for NHS staff and vulnerable members of the community. We want to give the pub hospitality and volunteer teams a purpose. We are a not-for-profit social enterprise that relies on volunteers, sponsorship and donations from businesses, brands and you – our local community! Your donations keep our shops and kitchens running and enable us to provide free and discounted meals to the members of your community who need them the most.” The initiative hopes to be a new source of food and volunteer action for those “most in need of support at this time, including NHS and key workers, and those in vulnerable health categories”. It also hopes to support “talent” in the form of giving trained chefs a purpose and supporting their well-being when they would otherwise be at home, and businesses by keeping “local and beloved pubs as the ‘hub’ of the community”, while also “re-engaging with suppliers and providers on a national and local level”. The business hopes it will be a model it can “seed into more UK pubs” and in time “1,000 pubs could be feeding the elderly and health workers at discounted prices”. It is thought the initiative has already been launched out of Peach’s The Boathouse in Boulters Lock, near Maidenhead.

Paul UK reopens four London shops and launches grocery market: Paul UK, the French bakery and cafe brand, has reopened four of its London sites for delivery and takeaway as well as launched a grocery market at its Acton bakery. The Canary Wharf, Hampstead, Marble Arch and Wimbledon branches are open daily from 8am to 2pm offering hot drinks, bread, viennoiserie, sweet tarts and mini macarons to takeaway or for home delivery. Meanwhile, the grocery market delivers fresh bread and sweet pastries, alongside essentials such as milk, butter, and fresh fruit and vegetables. The company said this initiative has been put in place to support the widespread demand for key groceries, and to help alleviate the pressure on supermarkets. The grocery market offers “bread and veg”, “bread and more” and “family top-up” bundles with delivery available to qualifying postcodes within a two to three-mile radius of the bakery. Chief executive Mark Hilton said: “The grocery market is an extension of our bread market that launched two weeks ago and gives customers the chance to pick up essentials without having to visit busy supermarkets. With many people finding it hard to book supermarket delivery slots we wanted to help with the demand by delivering bundle boxes of bread, dairy, and fruit and vegetable essentials, direct to the homes of our local community.”

Stonegate launches online staff community platform: Stonegate Pub Company has launched a new community initiative via its internal platform, Academy Online. Through the new “Stonegate Community” pages, furloughed staff are able to get access to articles on health and well-being, independent advice on budgeting and finances, personal development materials, and regular updates from chief executive Simon Longbottom. The learning and development team is planning a range of content for the coming weeks – focusing on different topics relevant to navigating life during coronavirus – and the interactive platform allows users to like, comment, ask questions and make suggestions on the subject matter. Lee Woolley, head of learning and organisation development, said: “It was incredibly important to us to keep the Stonegate community spirit alive during this difficult time, and with all of our employees already having access to Academy Online it was the logical step to launch our new initiative on the platform. We know we’re going to come back stronger after this crisis is over, and it will be our people that make that revival not only possible but positive.”

The Athenian opens Deliveroo Editions sites, implements ‘walk to work’ scheme: Greek street food restaurant group The Athenian has opened sites within Deliveroo Edition kitchens as it trades online only. The company has launched within the Editions sites in Reading and London’s Swiss Cottage while it will operate via the Brighton kitchen from Wednesday, 29 April – allowing it to keep staff in work. The Athenian has implemented a scheme whereby every member of the delivery team who walks to work will be paid to do so, rather than taking public transport. Weekly care packages have been made available for all staff as well as free meals during shifts. The Athenian will be donating a further 2,500 meals to the NHS as well as continuing to offer a 50% discount to healthcare workers. 

Darden furloughs 20% of corporate staff and 150,000 hourly paid restaurant workers: Darden Restaurants, which operates a number of casual dining brands in the US including Olive Garden and LongHorn Steakhouse, is furloughing 20% of its corporate staff and reducing salaries for roughly 800 remaining employees – including a 50% pay cut for top executives. Darden reported a 39.1% drop in like-for-like sales for the first six weeks of the fourth quarter ended 5 April, including a drop of more than 70% in each of the past three weeks. Darden has entered into a $270m term loan credit agreement bringing its total cash in hand to $1bn. Chief executive Gene Lee, who previously announced he was forgoing most of his salary, also said executive officers were taking a 50% base salary pay cut from 13 April. That includes about a dozen of the company’s top leaders. Company spokesman Rich Jeffers told Nation’s Restaurant News furloughed employees will get 50% of their salary for three weeks. Darden will continue to cover medical premiums for those who previously had those benefits. The furloughs are indefinite. To date, the company has furloughed about 150,000 hourly paid restaurant workers. Salaried managers remain employed. Under the company’s three-week Emergency Pay Programme, furloughed hourly workers receive up to three weeks of pay based on their average pay over the previous 13-weeks prior to the time they stopped working. The company – whose other brands include Cheddar's Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V's – said about 99% of its more than 1,800 restaurants remain open for to-go services. 

Everyman raises £17.5m in oversubscribed share placing: Cinema operator Everyman has raised £17.5m through an oversubscribed share placing. The company placed 17 million shares at 100p each, a 7% discount to Tuesday’s (7 April) closing price. It represents 19.2% of the firm’s issued capital. Majority shareholders Blue Coast Private Equity and BlackRock acquired circa 3.5 million shares each and will own 19% and 12% of the company respectively once the transaction is completed. The proceeds will be used to cope through the coronavirus crisis if lock-down measures are extended to the summer, as well as continuing with the expansion programme once possible. Chief executive Crispin Lilley said: “Our ambition is simply to ensure as we emerge from the restrictions that currently face us, Everyman is well placed to continue to deliver on our growth ambitions. Together with our existing funding arrangements, this placing significantly strengthens our balance sheet, providing further working capital and allows us to pick up where we left off.”

Heineken withdraws guidance as coronavirus dents beer sales: Heineken has withdrawn all guidance for the year as beer volumes fall in the face of the coronavirus outbreak. The company said the pandemic was having a “significant impact” on business in 2020, noting the restriction of movement, outlet closures and the lock-down of production facilities. Total consolidated volume is expected to decrease 4% in the first quarter, with beer volume down 2%. Heineken warned the impact of the pandemic on sales was likely to worsen in the second quarter. Heineken said it entered the current crisis with a strong balance sheet as well as undrawn committed credit facilities. It added it had secured additional financing on the debt capital market in recent weeks. It placed €1.4bn (£1.23bn) of five and ten-year notes in late March. Heineken said it would provide more information on further measures to mitigate the impact in its first quarter trading update at the end of the month.

Veeno to donate 10% of profit from every online wine sale to NHS: Italian wine bar business Veeno is donating 10% of profit from every online wine sale to the NHS. The company has also encouraged its furloughed staff to sign up as volunteers to help those on the front line. Veeno stated: “The NHS has been at the forefront of this battle and we wanted to show our support and appreciation.” Last week, owner and director Rodrigue Trouillet told Propel its staff will be key in the company’s attempts to regain the momentum it had before the coronavirus crisis. Trouillet acquired the company out of administration a year ago and said “real progress” was being made before the country was locked down.

AG Barr scraps dividend as it warns lock-down measures will materially hit business: Funkin owner AG Barr has scrapped its dividend and warned lock-down measures would deliver a material hit to performance as it reported a fall in profit amid weaker-than-expected performance in its core soft drinks business. Sales of soft drinks from "impulse" customers, which accounted for 40% of revenue, had significantly reduced following the government's lock-down measures, introduced on 23 March, prompting the company to warn of a material adverse impact to its financial performance. A 20% salary cut has voluntarily been made by senior executives and board members for at least three months. The company said it would review the dividend position “when there was greater visibility of the impact of coronavirus”. For the 52 weeks ended 25 January 2020. pre-tax profit fell 16% to £37.4m and revenue fell 8.4% to £255.7m. The company stated: “Possibly the biggest impact on soft drinks this year was the weather, with an average summer following on from the hottest summer on record in 2018. Consumption levels fell across the market, with most soft drinks sub categories declining.”

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