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Tue 14th Apr 2020 - Propel Tuesday News Briefing

Story of the Day:

UKHospitality – chancellor needs to make ‘one more big, bold intervention’: UKHospitality chief executive Kate Nicholls has told Propel the chancellor needs to make “one more big, bold intervention” as sector companies “hold on by their fingertips” to remain in business. Nicholls said action was still needed to tackle action by landlords and insurance companies and the Coronavirus Business Intervention Loan Scheme still needed radical reform. It comes as business leaders and Labour called on the government to fully underwrite loans under the CBILS while the Treasury is reportedly considering doubling the amount medium-sized companies could borrow – to £50m – and removing the £500m turnover cap so larger companies can benefit. Nicholls said: “The government is running out of time to get the cash needed to those companies across the sector that are holding on by their fingertips. They simply cannot afford to wait for another two weeks for decisions to be made – businesses will simply not survive and failure to act will seriously jeopardise the economic recovery, when lock-down ends. While there may be a one in 60 success rate across the economy as a whole, that is certainly not the case across hospitality where more than 80% are either not eligible or have been refused a government-backed loan because they have a property interest or other security. We need radical reform to match the Swiss and American approach of overnight approval and an injection of working capital into smaller businesses, with 100% guarantees from government. The medium-sized companies in the sector need access to funding on the same revised CBILS terms – otherwise the mistakes of the original scheme will simply be repeated – and we urgently need a solution of some sort for companies with a turnover of more than £500m, which have access to no government support. As an urgent first step, the government needs to extend the £25,000 grants to all hospitality premises, irrespective of rateable value. More than 70% of hospitality activities takes place in premises with a rateable value of more than £51,000 and this overlaps with those companies excluded from the original CBILS and Covid Corporate Financing Facility schemes and now desperate for help to address commercial rents and other creditors if they are to stave off business collapse at the point of reopening. The chancellor needs one more big, bold intervention to prevent the economic pain being greater.”

Industry News:

Emeny – sector should be careful it ‘don’t push too hard too quickly’: Fuller’s chief executive Simon Emeny has told Propel in terms of pubs reopening, the sector should be careful it doesn’t push “too hard, too quickly”. Speaking in Propel’s latest coronavirus crisis video interview, Emeny said the industry needs to keep encouraging people to do the right thing and not to “press to be at the front of the queue” when it comes to reopening. He said: “When you hear of Transport for London bus drivers losing their lives or how uncomfortable it is going to a shop, it is not something I would wish to force on our industry. We are not the most conducive places for social distancing. So, while I am sure we all want to see our pubs reopening, we have a duty of care to our colleagues and we need to see much more progress in terms of dealing with coronavirus and in developing a vaccine before we even start thinking about opening. Otherwise I think the industry could sleepwalk into a scenario where our costs dramatically increase, our staff feel increasingly uncomfortable about working and social distancing is there for us to monitor and put extra costs into to make sure it’s executed. So, I feel we should be taking our time to make sure it is done properly. Government also needs to understand reopening a pub is not as simple as putting a set of keys into a door. It will take an awful long while to get sites restocked, brewers will take a while to get brewing the right sort of beer again, getting the supply chain working again, and we will take a while to re-integrate with our staff. Therefore, I feel we shouldn’t be at the front of the queue by any stretch of the imagination. I don’t think it would do the industry any favours if we had colleagues off ill with coronavirus or reopened and had to close again.” Emeny will share more of his thoughts in the video interview, which will be released on Tuesday (14 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 to sign up.

Long-term outlook for UK coffee shops remains bright despite coronavirus impact: The future for UK coffee shops remains bright despite coronavirus presenting major short-term concerns, according to the Future of Coffee UK 2020 report from the Allegra World Coffee Portal. The report said the coffee shop segment will undergo profound change, with higher quality offerings, smarter technology and human hospitality playing a key role in future development. Allegra said it anticipated most businesses would be operational again by the summer. The report showed 57% of consumers had raised expectations of coffee quality in the past year while as coffee shops introduce more diverse food ranges than before, 39% view them as a lunch option. In terms of harnessing technology, 40% of industry leaders indicated consumer data capture was the greatest benefit of coffee shop loyalty apps, while 41% of consumers said they were deterred by in-store queues of five or more. When it came to delivery, industry leaders cited keeping beverages hot, high costs, and lack of consumer demand as the primary operational challenges. When it came to sustainability, just 19% of industry leaders believed UK cafes had done enough to reduce their carbon footprint, with only 16% agreeing enough had been done to tackle food packaging waste. Consumers have a more favourable view of the industry, with 42% believing coffee shops can be proud of their overall sustainability efforts. The report highlighted finding and retaining quality staff will remain a key challenge for coffee shops in the coming decade. A total of 65% of consumers surveyed perceived baristas as skilled professionals while just one-fifth foresee automation replacing coffee made my humans. The curtailment of European casual workers due to Brexit will exacerbate the hospitality skills shortage, according to the report, with 82% of industry leaders surveyed believing migrant labour was essential for UK coffee shops. Allegra said fifth wave businesses will continue to spearhead UK coffee shop development. 

Consumers eating earlier and ordering takeaway throughout the week: Consumers are eating earlier and ordering takeaway throughout the week as they adjust their eating habits during lock-down. The research by Just Eat, the online market place for delivery, also showed there has been a 36% rise in dessert orders, with chocolate fudge cake, strawberry cheesecake and apple pie top of the list. Without the daily commute, orders are starting two and a half hours earlier, at 5pm. Lunch has also followed suit, with a trend in orders peaking just before midday. One of the biggest trends Just Eat reported was the rise of food delivery earlier in the week. While vast amounts of people continue to order at the weekend, Brits are getting more meals delivered on Monday, Tuesday and Wednesday. More households are ordering meals for three or more people. Just Eat UK managing director Andrew Kenny said: “Mealtimes have become the thing that punctuates our days and a moment to look forward to when the world around us has become difficult to comprehend.” Meanwhile, Just Eat has launched “Good Deed Feed”, backed by the British Takeaway Campaign, to shine a light on the restaurant and takeaway businesses across the country going above and beyond to support their local communities during the coronavirus crisis. Just Eat is using its network of more than 35,700 restaurant partners to share stories of local takeaway #foodheroes in towns and cities across the nation, to champion the businesses involved and help inspire and encourage others who want to help their communities too.

Problems mount for pubs with cellars full of stale beer: Pubs are struggling to dispose of millions of pints of stale beer left on their premises as the UK entered lock-down – a problem that could delay reopening after the pandemic. Bitter in kegs lasts for about three weeks and lager for six, meaning none of the beer due to be served on tap in the UK’s 47,000 pubs when the shut-down was ordered on 20 March will be usable when restrictions on social gatherings are lifted. JD Wetherspoon chairman Tim Martin told the Financial Times: “The problem was the short notice, so most pubs had high levels of stock. Once it’s in the pub cellar, it’s a helluva job for the brewer to pick it up. Result – great waste.” Last week HM Revenue & Customs relaxed rules around beer disposal so breweries can claim back excise duty on the defunct brew, known as ullage, without having a representative of the brewery present while it is dumped — one obstacle to emptying out the beer during lock-down. However, when social distancing measures lift, it will also take time for pubs to resume operations if cellars are left full of old kegs. The British Beer & Pub Association (BBPA) said it is seeking guidance from the government on timing, as it expects restocking to take three to four weeks. Some 3.6 billion pints were brewed for the on-trade in 2019, according to the BBPA.

Leon-led fund-raise for NHS workers passes £1m target, to expand outside London: The funding campaign spearheaded by natural fast food brand Leon and actors Damian Lewis, Helen McCrory and Matt Lucas has passed its £1m target. The initiative, which plans to supply 6,000 meals a day to NHS front line staff, was launched at the end of last month. It has so far raised £1.01m from more than 10,130 supporters. #FeedNHS was launched on Just Giving with Wasabi, Tortilla, Peach Pubs, Rosa’s Thai, Hop, Pizza Pilgrims, Franco Manca, Farmer J, Dishoom, Tossed, Hache, Abokado and Nusa Kitchen joining Leon in the not-for-profit initiative. Contract caterer BaxterStorey is also set to join this week. So far, 35,000 meals have been served to 11 London hospitals. This week it will expand to Birmingham and Manchester, and added to London, plans to serve 45,000 meals. 

Licensing update: Licensing solicitor John Gaunt & Partners has produced a useful monthly summary of licensing news relating to the coronavirus situation, which can be accessed here
John Gaunt & Partners is a Propel BeatTheVirus campaign member

Job of the day: COREcruitment is seeking a head of marketing for an expanding pub company. With an ambitious growth plan, the business is looking for a marketing professional who has the experience and vision to help grow the brand. As a confident decision maker, they will have led the marketing strategy to meet longer term objectives of developing a brand and increase revenue. They will be tasked with clear targets for increasing business through existing venues as well as promoting openings and ensuring their success. The ideal individual will be hands on, creative and innovative while having a strong understand of commercial strategy. Anyone interested can email with their CV or profile.
COREcruitment is a Propel BeatTheVirus campaign member

Company News:

Wahaca had ‘almost completed’ norovirus recovery when coronavirus struck, taking some learnings from that to make sure it comes out even stronger: Mark Selby, co-founder of Mexican restaurant brand Wahaca, has told Propel the company had almost completed its recovery from the aftermath of its norovirus outbreak when coronavirus struck and is taking some learnings from that to get through the current crisis. Selby said while coronavirus was “a whole different ball game” to what happened in 2016 when 18 of its restaurants had to shut due to norovirus, it was helping him manage the situation “from a personal perspective”. The company has about 95% of staff on furlough, with a core team still working on marketing, payroll and finance. “I think the main thing we learned from the norovirus situation was looking after our people and we’re doing the same here,” said Selby. “They are a key part of the bigger plan we are putting together for when we are able to reopen and we are making sure they are kept informed and feeling valued. From an operational point of view it’s completely different to last time – we didn’t ask for rent reductions or deferrals for example then. We know we are going to come out of this but we don’t know when. Cash concerns are growing and landlords need to wake up to the fact they need to be looking at the long-term scenario to make sure they still have tenants. Operators are not going to be able to pay while there is no money coming through. I think the government is doing a great job and we also recognise landlords need help too, so hopefully the government can support them so we can have a nine-month rent free period put into law.” In terms of its landlords, Selby said some had been accommodating and others “not so much so”. He said trading had been “pretty good” up until the end of February with sales up 4.3% year-on-year – with no delivery. He added: “We’ve been on a three-year recovery journey following the norovirus episode and that was almost complete. I think consumers recognised the work we had been doing and that was epitomised by being named most loved London restaurant group in a YouGov poll in November. We’ve got a good estate of 25 restaurants and a great business so our focus right now is on our people and getting the restaurants reopened when we are allowed to.” As well as its “Wahaca At Home” initiative, Selby said it was looking at getting involved in the Chefs In Schools programme – helping kids who can’t necessarily afford a daily meal – as well as the CriticalNHS and FeedNHS campaigns. In terms of the sector’s future, Selby said: “Inevitably there will be some businesses that won’t survive, but given how our brand has bounced back and is now front of mind again for consumers we are excited about the opportunities ahead. I think the big thing though is going to be the landlord and tenant relationship – I think we will see a real rebalance there.”

Marston’s to meet tenants face-to-face as it look to offer further support: Marston’s is to meet each of its tenants face-to-face as it looks to understand the individual needs of licensees to give them the best possible opportunity when pubs are allowed to reopen, Propel has learned. The company has already suspended rent for its tied tenants and is looking at what further support it can offer. It pointed out as an industry there has not been a consistent approach to the charging of rent and it was “trying to act as fairly as we can with all stakeholders”. In a letter to tenants, seen by Propel, Marston’s said: “Our view is that many pubs will be affected differently and there will not be a ‘one size fits all’ solution.” A Marston’s spokesman told Propel: “All rent payments are suspended for our tied pubs from the day of lock-down until the pubs reopen. We have confirmed with our partners how we will assess the recharge of rent (if applicable) on a case-by-case basis, incorporating government support for fixed costs. We have been clear we do not want to compromise successful businesses with excessive debts.”

Richard Caring-backed businesses reopen kitchens to deliver meals to NHS: Serial sector investor Richard Caring has reopened the kitchens of several of his restaurants to begin donating and delivering food to NHS workers and vulnerable people. Under the Caring Foundation umbrella, brands such as Bill’s and the Ivy Collection have donated and delivered meals to the North West Ambulance Service in Manchester and the Inner City Helping Homeless charity in Dublin. The initiative said: “Our amazing volunteers will be preparing 3,000 meals a week in Manchester and 1,500 meals a week in Dublin. Next week, we’ll also be delivering 1,500 meals a week to the Scottish Ambulance Service in Glasgow.” Caring’s restaurants under his Caprice Holdings vehicle, including Annabel’s and Sexy Fish, are also working with the Felix Project to supply 20,000 cooked meals a week, rising to 50,000, to isolated elderly, children suffering from hunger, families with no income and NHS workers. Annabel’s has opened its four kitchens and plans to delivery 7,000 meals, rising to 10,000, to NHS staff at London hospitals, including Chelsea & Westminster and West Middlesex University Hospital. Bill’s has been delivering meals to Ormond Street Hospital Children's Charity with the Felix Project.

Starbucks reports like-for-likes drop between 60% and 70% in last week of March, down 3% in second quarter: Starbucks has reported like-for-like sales dropped between 60% and 70% in the last week of March, according to the company’s latest SEC filing. By the end of the month, 56% of US company-owned stores were closed, and 45% of licensed stores were shut and most of the stores that remained open were drive-thru locations or licensed units in grocery stores. Prior to 11 March, Starbucks like-for-like sales were up 8% for the second quarter, with transaction growth at 4%. Like-for-like sales for the period overall were down 3% compared with the previous year, reflecting the rapid decline related to the coronavirus pandemic. In China, 95% of its stores are now open and like-for-like sales gradually improved to a 64% decline in March, compared with a 78% decline in February. By the last week of March the like-for-like sales decline had improved to 42%. Chief executive Kevin Johnson said: “We expect the negative financial impacts to the third quarter to be significantly greater than they were in second quarter and to extend into the fourth quarter. In any event, based on our substantial experience in China to date, we continue to believe these impacts are temporary and that our business will fully recover over time.”

Savills appointed to market Hix restaurants portfolio: Savills has been appointed on behalf of Deloitte as administrators to seek premium bids for the restaurants previously operated by chef Mark Hix. Administrators were appointed to WSH & Mark Hix Restaurants, Restaurants ETC and Hix Townhouse last week. Savills is now marketing restaurants in Bankside (£200,000 rent per annum); Farringdon (£85,000); Hackney (Tramshed, £364,000); and Soho (£372,000). It is also marketing the freehold of the Hix Townhouse in Lyme Regis, and the chef’s Hix Oyster and Fish House restaurant in the Dorset town. Premium bids are being sought for the restaurants individually or as a whole. Last week, Hix took to Instagram to say the decision to appoint administrators for his restaurant businesses was done without his support. Hix opened his first restaurant in London’s Farringdon in 2008. In the capital, his portfolio went on to include chicken and steak restaurants Tramshed; Hixter Bankside; and HIX Soho, which closed late last year due to “rising rents and difficult market conditions”.

Peach begins expansion of social enterprise initiative Pub Hub: Gastro-pub operator Peach has begun the roll out of its social enterprise initiative, Pub Hub. Launched last week at The Boathouse in Boulters Lock, near Maidenhead, the company has now expanded the initiative to The Embankment in Bedford and The High Field in Edgbaston. The company said: “The Boathouse started first and will do £6,000 with a surplus made of £1,800, which we will aim to donate next week in food to the needy.” Run through its Peach Foundation and new website, 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. 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 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”.

Rank Group teams up with F&B brands to offer free meals: Rank Group, which owns Mecca Bingo and Grosvenor Casinos, has teamed up with Blue Light Card and UberEats, and several food and beverage brands, to launch an initiative to offer free meals to key workers. A total of 12 Mecca Bingo and Grosvenor Casinos kitchens across the UK have reopened offering a choice from either Clox Chicken Box or Harry Ramsden at Mecca sites or from Absurd Bird or Twisted London at Grosvenor Casinos. Blue Light Card holders can log into their account where they’ll receive an UberEats offer code to have a meal delivered to a work or home address in participating areas between 11am and 3pm. 

Cote extends ‘at home’ delivery service: Cote, the 96-strong French brasserie chain, has extended its recently launched “at home” delivery option, to selected counties outside the M25. The Alex Scrimgeour-led group launched the online shop last week, offering consumers the chance to order main meals, sides, desserts, wine and items from its butchery. It started by taking orders for delivery within the M25, but that nationwide deliveries would be available in the coming weeks. The company has now extended the service’s reach to Buckinghamshire, Bedfordshire, Berkshire, East Sussex, Essex, Hertfordshire, Kent, Surrey and West Sussex. Cote at Home requires a £40 minimum order. There is a £4.95 delivery charge for all orders but free delivery with purchases of more than £80. Deliveries are made Monday to Saturday only, between 7am to 6pm. 

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