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Thu 23rd Apr 2020 - Propel Thursday News Briefing

Story of the Day:

Just Eat UK MD – crisis might lead to a further paradigm shift for delivery: Andrew Kenny, managing director of Just Eat UK, has told Propel the coronavirus crisis might lead to a further paradigm shift for the delivery channel and exclusive agreements between operators and aggregators may not be the most appropriate route forward. Talking as part of the “navigating the coronavirus” video series, Kenny said: “We have seen exponential growth in this channel for many years, but it is probably fair to say this crisis might be a paradigm shift even further for delivery. We are certainly seeing unprecedented levels of new restaurants looking to join the platform over the past month or so. We have changed processes and protocols to try to get that speeded up, to get them online as quickly as possible. My feeling is most will stay post-crisis, inevitably some may not, but I think the vast majority will be looking for ways to further diversify their business. From the conversations I am having every day, operators are looking at ways to make sure the safety net is as wide as possible. They have perhaps been part of exclusive agreements with a single aggregator, but there is a question now as to whether that is the most appropriate route forward. We have used this period as an opportunity to relax any agreements we have had in place with independents, because it feels like the right thing to do to make sure restaurants are putting their best foot forward and having access to as wide a pool of customers as they possibly can. I think that is a trend that will continue and accelerate.” Kenny reiterated the restaurants that are successful in delivery are the ones that “really invest the time and management resource in innovating around the channel”. He said: “Those that are doing delivery, looking to expand it or new restaurants who have never previously accessed the channel, it is about thinking hard about the level of resource they can put behind it and giving it the dedication that will make it really successful for you. Things will normalise but clearly the pace at which the government decides to ease the lock-down restrictions will be important. Ultimately it is all of us as customers who are going to dictate the pace of the recovery and how we get back to our normal lives. It is safe to assume a large proportion of the population will be incredibly cautious when restrictions get lifted. So, I think that does change a lot of things for the hospitality industry. Delivery is a channel that can support it as much as possible going forward.” At the same time, Just Eat has launched a new partnership with Pret A Manger for delivery and click-and-collect. Last week Pret reopened ten sites located near hospitals for takeaway and delivery, after requests from NHS workers and hospitals. Kenny will share more on his thoughts in the video, which will be released on Thursday (23 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.

Industry News:

Burger King calls on landlords to work with tenants to find rent solution: Burger King UK chief executive Alasdair Murdoch has called on landlords to work together with their food and beverage tenants to find a solution to the impasse over rents. In an open letter, Murdoch, who is backing the #NationalTimeOut campaign, said the current shutdown in the UK is neither the fault of landlords nor occupiers and he was writing to “initiate a conversation about our relationship now and into the future as we emerge from the current shutdown in the UK” . He wrote: “The non-payment of rent is an issue that goes beyond the leisure sector with all commercial businesses that normally operate from rented property subject to closure affected in a similar way and those businesses are having to take a similar stance. It is extremely unlikely any traditional lease written will have had the ability or clauses to reflect the current situation we find ourselves in. This crisis affects the whole UK economy, which will take time to recover. We recognise and understand landlords are affected by this crisis and the non-payment of rent, which is why we have asked government for support for landlords as well during this period. In relation to the restaurant sector specifically, we understand as we emerge from the current crisis ours is one of the areas that may be subject to a number of restrictions that will prevent us from returning to normal operations for a considerable period of time. This means we will not return to 100% of normal operations on our first day of trade. We are likely to have to operate in a different way with increased costs for equipment such as personal protective equipment. We may also have to adopt changed ways of working or trade with reduced cover numbers as we accommodate social distancing and safe operation. As we rebuild our operations, we would like to engage with you in relation to what the recovery will mean for landlords and tenants and how we can work together to ensure we build for the long term. High streets, shopping centres and out-of-town retail have all been hit hard in the current crisis and how we rebuild will be extremely important. We want to ensure landlords in the future are fairly compensated in a way that secures the long-term occupation of property. We want to work with you to establish how we and as many other operators (including all BK franchisees) as possible can reopen and re-establish their businesses. It is these businesses that have driven one in every eight jobs in the UK since 2009 and that play an important part in driving footfall to all locations where they operate. I believe if we work together, be that through stepped rents, turnover related rents or other innovative solutions, we have the best chance of keeping the most outlets open. I am happy to discuss all ideas. The point is we cannot go back to the old ways of working – we must work directly with you and your teams.”

Consumers wary of returning to pubs and bars post-lock-down: Just under two-thirds (63%) of people will not feel comfortable returning to pubs and bars after the coronavirus lock-down is lifted, according to research by YouGov. The research, conducted this week, asked about 1,650 adults how comfortable or uncomfortable would they would feel visiting a range of places once the government loosens the current restrictions. Meanwhile, 57% of restaurant customers are uncertain about dining out again, and just 37% said they would be comfortable going to restaurants after the UK coronavirus lock-down restrictions are relaxed. Only 36% said they would feel comfortable in coffee shops and 32% in terms of visiting pubs and bars. 

BBPA presses local authorities to speed up grant payments as research highlights best and worst areas for providing funding: The British Beer & Pub Association (BBPA) is pressing local authorities to speed up grant funding after research revealed many are yet to pay out to eligible businesses. Its study of the 325 authorities in England showed the areas that were worst and best at ensuring the £10,000 and £25,000 grants – given to businesses with a rateable value of below £15,000 and £51,000 respectively – were being made. Among the worst was Birmingham, which has 418 eligible pubs, but only 11% have been paid their grant. Meanwhile, in Manchester, only 17% of the 399 eligible pubs have received funds while Brighton & Hove Council has paid out to 22% of the 251 eligible pubs. At the other end of the spectrum, Winchester has paid out to all 122 eligible pubs, Redcar and Cleveland has paid out to 98% of the 108 pubs that should receive grants and in Southwark 93% of the 198 eligible pubs have received the money. BBPA chief executive Emma McClarkin said: “We need the local authorities to learn from best practice and get the support to pub businesses as a matter of urgency.”

Government clarifies holiday position for furloughed staff: The government has confirmed staff on furlough continue to accrue holiday in line with their contract. This can be varied if agreed with the employee but not below the statutory 5.6 weeks. It has also been confirmed staff can take holiday while on furlough, although this would be paid at the employee’s normal rate, meaning employers will have to pay the top-up over the government grant amount. S4labour chief product officer Richard Hartley said: “Employers can request and restrict when their employees take holiday meaning there will be a careful balance between short-term cash flow and the longer term issue of a burdening holiday accrual. The government has stated it is keeping its policy on holiday under review. S4labour will release the ability to put employees on holiday while furloughed and calculate the top-up amounts within the next week.”
S4labour is a PropelBeatThe Virus campaign member

Access Hospitality produces ‘getting operational’ guide: Access Hospitality has curated a free guide to assist hospitality operators manage the lock-down and prepare their business for reopening when it is safe to do so. The guide provides a planning checklist, steering operators through work that can be carried out while the venue is closed, factors to consider in the three to four weeks prior to reopening and how they might shape their business in the first week of operation. The guide goes on to consider how the hospitality landscape might have changed once businesses reopen and where social distancing may become normal. Access Hospitality managing director Henry Seddon said: “When hospitality is open for business again, the prime focus will immediately be on generating cash flow, working out how to reduce costs and drive sales without detracting from quality and service in the longer term. Each business will be different, but our aim is to provide a template that helps operators put their plans together, to highlight some of the issues that they can start to think about at different stages of their planning process and to stimulate some discussion around what their business will look like, and how it will operate, in the future.” The guide can be downloaded here

Job of the day: COREcruitment is supporting a reputable foodservice business that is looking to change and grow in 2020-21. The executive team is looking for an experienced and passionate person within senior operations who is ready to take on a managing director’s role. They will ideally have experience in a high-volume environment – circa £50m upwards – as well as strong knowledge of business and industry or independent education catering. A salary of up to £120,000 will be considered. For more information, email
COREcruitment is a Propel BeatTheVirus campaign member

Company News:

Loungers extends bank facilities and places new shares: Cafe bar brand Loungers has extended it bank facilities and is placing 9,250,000 new ordinary shares of 1p each. The company said this would provide additional liquidity headroom should closure be enforced for an extended period of time, together with growth capital “to enable it to emerge strongly from lock-down and recommence its roll-out at the appropriate time”. The company reported 99% of the company's employees have been furloughed via the government's Coronavirus Job Retention Scheme. A skeleton staff of business-critical employees has been retained to administer the company during the closure period and to prepare for the reopening of sites. Meanwhile, all capital expenditure and other non-discretionary spend has been paused and creditor payment terms for the duration of the site closure period have been re-negotiated. It is negotiating with landlords in respect of waiving March quarter rent payments. The base salaries/fees of the directors of the company have been reduced by 50% while the sites are closed (as a result of a 20% deduction and 30% deferral until sites reopen). As at 17 April 2020, the company had £4.1m of cash on its balance sheet, undrawn facilities of £3.0m and net debt of £35.4m. Its current lending banks, Santander and Bank of Ireland, have agreed to provide an incremental £15.0m revolving credit facility for an 18-month period. A total of £10.0m of the new facilities can be drawn immediately and a further £5.0m can be drawn on condition the company raises equity funding of at least that amount. Covenant tests at 12 July 2020 and 4 October 2020 have been waived and subsequent quarterly tests to 3 October 2021 have been reset. 

Domino’s launches Partners Foundation to support colleagues, executives donate part of salary towards scheme: Domino's Pizza Group has launched its Partners Foundation to provide financial support to colleagues in need. The scheme will support anyone within the UK and Ireland business who is experiencing personal hardship, both through the coronavirus outbreak and in the longer term. The scheme will initially be funded by a donation of £250,000 from Domino's Pizza Group and will provide financial assistance to permanent colleagues of the group and its franchisees. The company said the fund can be “accessed by Domino's employees in times of hardship or adversity, for instance bereavement, exceptional medical needs or household emergencies”. It will be overseen by a group of trustees made up of franchisees and Domino's employees. Domino's board members, including chief executive designate Dominic Paul and recently appointed chairman Matt Shattock, will donate 20% of their net salaries to the fund for the next three months. Non-executive director Usman Nabi has pledged a contribution of £100,000 on behalf of hedge fund Browning West. The group said many Domino's Pizza Group colleagues have also expressed an interest in contributing to the fund via payroll. Paul said: “Since arriving at Domino's, I've been hugely impressed with the hard work and dedication of our colleagues. From pizza chefs and delivery drivers to the production, warehouse and distribution teams – everyone plays an important part in the national effort by feeding our communities and delivering Domino's £4m pizza giveaway for key workers. We're proud to donate £250,000 to launch the Partners Foundation to help support our people through unexpected hardship during these challenging times and beyond.”

Nando’s reopens kitchens at seven sites for NHS workers: Nando's has reopened seven of its kitchens to help feed NHS workers. The company has reopened four in London, two in Manchester and one in Dublin and workers will operate behind closed doors exclusively for NHS staff and local charities. Each restaurant will work under strict health and safety measures while maintaining social distancing, the company said. The restaurants will each aim to cook up to 250 meals a shift before delivering them. The business said it will provide up to 1,700 free meals each day for NHS staff, key workers at local hospitals and charities. Meals will be dropped off at hospitals every evening between 6pm and 9pm. Kitchen staff will also be cooking for charities linked with the company's No Chuckin' our Chicken initiative, which normally sees any spare food left at the end of the day given away. A spokeswoman said: “If this controlled reopening proves successful, then we hope to be able to continue to deliver food to our No Chuckin' Our Chicken charities and NHS teams as the trial expands." The company said there was no plans yet to offer delivery to the general public. It will be the first time the group has reopened kitchens since it shuttered its sites on 23 March following the government-mandated shutdown of restaurants, pubs and venues. 

Greene King launches virtual pub: Brewer and retailer Greene King has launched a virtual pub offering weekly quizzes, bingo and entertainment acts to promote online socialising in the community. The virtual pub, The Lock Inn, will play host to a free quiz night every Wednesday at 6pm and “rock and roll bingo” every Friday at the same time. As well as entertainment, the pub is also looking to help fight isolation and loneliness by offering a “community corner” session every week from next month. Every Thursday between 5pm and 8pm – starting from 7 May – customers can have a chat – on any topic – with the company’s customer service representatives via Messenger on the Greene King Brewery Facebook page or by tweeting the Greene King Brewery Twitter account. All of The Lock Inn events and activities will be put on for free, although Greene King is offering customers the opportunity to make a donation to the company’s charity partner, Macmillan Cancer Support. Greene King chief executive Nick Mackenzie said: “With the UK under lock-down and social distancing rules restricting interaction, we have decided to launch a virtual pub to offer events that bring the community together.”

Chipotle reports soaring digital and delivery sales in first quarter, accepts record $25m fine over foodborne illness outbreaks: Chipotle has reported soaring digital and delivery sales driven by the coronavirus crisis helped offset the impact of shuttered dine-in facilities and the company said it had enough cash and liquidity to get through the next year. Overall like-for-like sales fell 16% in March with sites forced to shut their seating areas. While in-store ordering was 75% lower at the start of April, delivery orders rose 150% and mobile pick-up orders were 120% higher. For the first quarter, digital sales rose almost 81% to $371.8m and accounted for 26.3% of total sales, compared with 19.6% of sales in the fourth quarter. Total revenue for the first quarter rose to $1.4bn, compared with $1.3bn the year before. The company is looking to reopen its dine-in areas in some sites in the coming weeks but expects employees to still wear masks and gloves, offer hand sanitiser and likely have staff dedicated to cleaning tables. Chief executive Brian Niccol said the company could reopen stores “restaurant by restaurant” as more states start to lift restrictions on business operations enacted to help slow the spread of the virus. Separately, the US Department of Justice said Chipotle would pay a record $25m to resolve criminal charges related to the company’s involvement in foodborne illness outbreaks that sickened hundreds of people between 2015 and 2018. “These payments will unfortunately hurt our liquidity a bit, but we’re ready to put this old matter behind us,” said chief financial officer John Hartung. The company has withdrawn its forecast of delivering mid-single digit percentage growth in comparable restaurant sales this year.

MeatLiquor to reopen East Dulwich site for takeaway and delivery: MeatLiquor, the Scott Collins-led concept, is to reopen its East Dulwich site on Thursday (23 April) to offer a takeaway and delivery service. The site will be open for five days a week operating at reduced hours with food available for click-and-collect and takeaway as well as through UberEats. It will serve a reduced menu of MeatLiquor’s key dishes, including its Dead Hippie burger, plus beer and wine. The company, which operates eight sites across central London as well as in Croydon, Brighton, and Leeds, said it would consider opening a couple more sites for both delivery and click-and-collect, if the East Dulwich reopening proved successful. 

McDonald’s begins conversations with franchisees as it prepares to reopen some US sites: McDonald’s has begun conversations with its franchisees as it prepares to start fully reopening some of its US sites. As some states, such as Georgia, prepare to lift restrictions, McDonald’s is stepping up efforts to keep employees and customers safe, reports Nation’s Restaurant News. McDonald’s US president Joe Erlinger said restaurants would follow local guidelines when reopening. A majority of US restaurants have remained open for drive-thru, takeaway and delivery services. McDonald’s recently launched employee temperature checks and began installing safety shields at the drive-thru and inside the cash register counter. Employees at almost 14,000 restaurants are now wearing masks. That amounts to sourcing and distributing roughly 900,000 non-surgical masks each day. Meanwhile, the company is joining nationwide efforts within the industry to feed front line workers by introducing a free daily “Thank You Meal”. Workers can obtain their free meal at the drive-thru or counter by showing their ID or being in uniform.
Heineken reports UK volume down by ‘mid-single digits’ in first quarter: Heineken has reported volumes in the UK were down “mid-single digits” in the first quarter and in March, due to record rainfall in February and the lock-down in late March. Its UK pub estate has been closed since the last week of March. Overall, consolidated beer volume was down 2.1% organically due to the impact of coronavirus. Heineken volume was up 5.0%. Heineken said it expected the impact of the coronavirus crisis to worsen in the second quarter of 2020. It also expects a hit in the second half of the year, as the impact on the economy is likely to endure even when lock-downs are lifted. The company has already secured additional financing on the debt capital market. It placed €1.4bn (£1.23bn) of five and ten-year notes in late March. Bonuses for senior managers, including the executive board and the executive team, will be cancelled in 2020. The company confirmed it will pay its planned final dividend for 2019. However, it will not provide an interim dividend after its interim results in August.

Shankly Hotel administrators to investigate how investors’ money was spent, no ‘fire sale’: Administrators of the Shankly Hotel, which was put into administration this month, said part of their role will be to investigate how investors’ money has been spent by its parent company – aparthotels developer and operator Signature Living – prior to their appointment. Joint administrator Mike Lennon, of Duff & Phelps, said: “We are aware a number of the bedroom investors have become concerned in recent months that monies due to them have not been paid, despite assurances from the company. The company is part of a wider group of companies and understanding how funds flow around the group will be central to our investigations. We have written to all known investors and will continue to communicate with them as the impact of our appointment on their position becomes clearer.” The joint administrators have also confirmed there will be no “fire sale” of the hotel. Lennon added: “The hotel itself is a quality venue and working with the lenders and investors we will be carefully considering our strategy to ensure we get the best outcome for those that are owed money. All options are under consideration to recover value for the creditors.” Henslow Trading, a lender to the group and that called in the administrators, has confirmed its support for the strategy. 

Fever-Tree reports on-trade division facing ‘extremely challenging period’ but at-home sales ‘robust’: Fever-Tree said its on-trade division has faced an “extremely challenging period” but sales of its mixers to UK homes have been “robust” despite the coronavirus pandemic. The company said its off-trade business, which supplies shops and supermarkets, saw “strong” sales in the build-up to the lock-down. Sales have continued in recent weeks “as at-home consumption has remained robust” in the face of the coronavirus outbreak. It said the group had a “solid start to the new financial year”, with sales in January and February in line with the board’s expectations. Co-founder and chief executive Tim Warrillow said: “While we will not be unaffected by the current situation, especially in the on-trade, Fever-Tree is well positioned to manage our way through this situation. Financially the group is very secure. We are debt-free, with a strong cash position.” The company said it has not furloughed any of its employees due to the pandemic. It comes as Fever-Tree reported revenue increased 10% to £260.5m for the year ending 31 December 2019, buoyed by strong growth in the US. Pre-tax profit fell 5% to £58.5m.

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