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Fri 1st May 2020 - Friday Opinion
Subjects: CBILS – the story so far, it’s good to talk, understanding the cost of our complexity will be part of survival, cutting discount dependence and supporting your team
Authors: Emma Maile, Nick Griffin, David Read, Victoria Searl and Ann Elliott

CBILS – the story so far by Emma Maile

The introduction of CBILS
When the government announced its support to businesses in the form of the Coronavirus Business Interruption Loan Scheme (CBILS), the majority of businesses within the sector saw this as vital support and set out plans for applying. However, despite the government’s narrative this would be a straightforward way of financing businesses through this uncertain time we have since learned a successful CBILS application is anything but straightforward for many businesses within the sector. 

It’s all in the detail
When looking into the detail of a CBILS application, businesses found several financial hurdles, such as the bank’s request of personal guarantees. The wording provided by the government detailing “your business has a borrowing proposal that the lender would consider viable, if not for the coronavirus pandemic” has proven particularly difficult for businesses to demonstrate sufficiently to lenders. 

Added to this, a “business in difficulty” has been defined as one that has accumulated losses greater than half of its capital, meaning any business that has significant trading losses is likely to fail the application criteria. 

Initially lenders seemed slow to get to grips with requirements, meaning significant time was spent by finance directors going backwards and forwards trying to satisfy lenders with their forecasts and projections. Given the uncertainty and number of variables, this became a full-time job for many finance directors and inevitably delayed the completion of applications. 

What happened next?
Understandably, businesses that were unsuccessful in applications were forthcoming and there was large public coverage as to the complexity, difficulties and delays. The government reacted in the following ways:
– It was clarified at an early stage no personal guarantees should be requested for loans up to £250,000. 
– The viability test was amended to clarify a business should demonstrate it was viable pre-covid-19. With the uncertainty around the financial implications of a sustained closure and the costs of reopening, this small but crucial change has meant businesses can rely on their historical results to present a viable business to lenders.
– The government also clarified CBILS was available to all businesses, meaning businesses could apply for a CBILS loan initially, as opposed to applying if a “normal, commercial” application had been declined.
– On Tuesday (28 April), the government announced the introduction of the Bounce Back Loan scheme (BBL’s), which will open on Monday (4 May). 

What are BBL’s?
Bounce Back Loans are intended to help small and medium-sized enterprises (SMEs) and range from £2,000 up to £50,000 with a cap of 25% of turnover. The government is yet to clarify what an SME is in terms of eligibility and we await further information in this regard. Applications are intended to be shorter and simpler than CBILS and the eligibility criteria is much more straightforward. The key distinction is a business’ viability is no longer dictated to be part of the criteria. Instead, the business has to have been “negatively affected by coronavirus” – something that is much easier to demonstrate, especially if the business is not trading.

In addition, the government will be backing 100% of the loan, rather than the 80% for CBILS – hopefully ensuring lenders will be more willing to lend to businesses in need.

Crucially, if a business has already been successful in a CBILS application they are not eligible for BBL’s, although if they have borrowed less than £50,000 they are able to transfer the CBILS loan into the BBL scheme.

Looking forward
UK Finance issued information on 24 April detailing the banking and finance sector had approved £2.8bn of lending to SME’s through CBILS to date, with just over half of that issued in the week to 21 April. It does therefore seem although many are still struggling to get their loans approved, there are improvements being seen in the rate of loans being issued. 

The chancellor announced on Monday (27 April) he would be looking into moving the goalposts for CBILS in terms of making the loans easier to apply for. However, we are awaiting further details in this regard.

With both lenders and businesses seeing clarifications from the government, and lenders “finding their feet” so to speak with this new type of loan, coupled with further clarifications in the pipeline, we hope to see the increasing trend of approved loans continue to ensure businesses within the sector are given the best chance possible of survival.
Emma Maile is hospitality lead at haysmacintyre
haysmacintyre is a Propel BeatTheVirus campaign member

It’s good to talk by Nick Griffin 

Failing to plan is planning to fail. I’ll repeat that for emphasis – failing to plan is planning to fail.

It’s not original, it’s nothing revelatory and every company in the country should do as a matter of course. Indeed I have very little doubt most companies have – well what else is there to do with your time? It’s all planning and then the consequent firefighting surely? Though that does make you wonder how we have seen such howlers as a “respond within five days” letter that gave no time to respond. Credit, where credit is due, the apologetic rowing back of Star, is to be applauded.

It’s not a lack of company planning that’s the problem – it’s the lack of joined-up industry thinking. Some plans are excellent in their appraisal, some rather more hair-brained. Some are viable, others more advert than advent. Nature abhors a vacuum and so do those desperately looking for a vision, a future, a way out.

I’ve always been one to seek the silver-linings. I know, no easy task right now but bear with me. We have the opportunity right now to reset. Pubco’s and landlords that have so often been seen as villains of the peace should seize the day and look to do the right thing by their tenants. Some have, some have travelled halfway and others are conspicuous in their absence. It’s not all one way traffic – tenants should look to have a dialogue with their representatives and landlords to see if in resetting the clock we can create a mutually beneficial way forward. A genuine partnership that rewards both sides. When it’s not a simple property deal, but one that involves a tie (or is benchmarked by a tied system), an obligation exists on both sides to support the integrity of the industry that is less rigid when a commercial property deal is at risk.
 
So where to start? This week several members of the Licensees Association sent me a spreadsheet their landlord had sent them requesting information. A fantastic opportunity for that company to step up to the plate and fulfil its promise of dealing with each pub on a case-by-case basis. It even titled it “Partner Support Fund”. Sadly as soon as it started to write it, it forgot about the partner bit, with the clear appearance of a fishing exercise and the aim of assessing how much of a tenant’s grant was going to be available to it over a set time, with unknown consequences to cash flow:

– Asking for information the tenant was not obliged to tell it and that the tenant will only be guessing at anyway. The pubco in question could just have easily guessed itself now it has unfurloughed its staff.
– Asking for a cash flow forecast for 12 weeks when we have no idea how long the lock-down will last and including loans as in-goings – come on! How do you seek a loan to fund a deferred debt when you can’t tell the bank how much you need (all the rent, some of the rent), and for how long you will need it and when you will be able to repay it to covenants?
– Requesting details of any insurance claim – okay I’ll show you mine if you show me yours, especially considering I pay for yours. Has any notification been made on a buildings insurance policy where the non-payment of rent is insured? If not why not? Surely the pubco must have notified its insurers of a notifiable insurable event?

But the real tragedy of this partnership letter is not so much what is included, but what has been missed. It’s this that makes it one-sided and here are some other questions that could have been asked:

–  Are you okay? We genuinely want to work with you. We do care – we will prove it. Platitudes are no longer enough.
– As we have asked you to guess what your cash flow will be like for 12 weeks, try estimating how much you think your turnover will be affected if you reopen with social distancing and how much you believe your trade will be hit. We know it’s not easy, but have a guess, after all that’s what we have asked you to do regarding your 12-week cash flow.
– And while we are at it, do you think social distancing is a possibility in your pub?
– To apply social distancing safely in your pub will you require any capital expenditure so you and your teams can work safely and your customers can enjoy your pub in an environment that doesn’t put them at risk?
– Do you think your costs will rise if you have to introduce social distancing?
– And here’s the killer – will you and your representatives work with us to help formulate a plan and a rent that is mutually acceptable to enable us all to move forward with confidence?
 
None of this is rocket science, but unless we all start pulling in the same direction we have no chance of ensuring the maximum amount of pubs possible can trade when we reach the other side. I want this to be viewed as a positive message. The landlord should have a plan beyond 12 weeks and the shortness of the surveys we have highlighted sound alarm bells to their tenants who see it solely as a rent grab – their words, not mine. Listen to what your tenants are saying. Most won’t tell you directly, they are too scared. That is where we have come to. 
 
The spreadsheet from the unnamed pubco will be repeated by others – that’s why I haven’t named them. I want landlords to understand their actions are currently causing distress to the very people they are calling partners, but they can learn the lessons, indeed they must. It’s only by working to save the industry we will achieve anything – the old dog eat dog, company versus company, landlord versus tenant is not going to work. We either solve these issues now or we kick them down the street for someone else to deal with. I know we have the talent in the industry to deal with it now, to arrive at the solutions that mean we have a vibrant pub sector, full of independent, forward-thinking entrepreneurs alongside their larger, managed house brothers and sisters.

It’s time for us to swallow our pride and personal fiefdoms and screw our courage to the sticking place. It’s good to talk. If we don’t we are planning to fail. We shouldn’t even be contemplating it.
Nick Griffin is chief executive of the Licensees Association

Understanding the cost of our complexity will be part of survival by David Read

What do Aldi, Lidl, EasyJet, Ryanair and Premier Inn all have in common? They all redefined value in the eyes of the customer – by simplifying complex operations, creating a model with both a lower price point and a higher total cash margin. 

Even closer to our home sector of foodservice, one of the most iconic brands in the world set a similar course more than 70 years ago, and went on to become one of the globe’s largest food businesses. Having failed in the movie business, Dick and Mac McDonald moved to California to operate a traditional American diner. Pretty soon they realised two key things – the biggest selling product by far was hamburgers, and many consumers seemed to have a preference for speed of delivery of the product, and a lower cost, compared with the traditional slower and more expensive table service. In 1948 they took a risk by streamlining their operations to sell only hamburgers (and a few ancillary items) at a new low cost of just 15 cents. To facilitate this, they introduced their Speedee Service System – a partially mechanised production process that took much from the early developments of lean manufacturing at the Ford Motor Co. The rest is of course history. 

At times like this we must surely start by taking a long hard look at what is value for our customer and, equally critically, what is not. As an industry I believe we rightly care greatly about choice and creativity, but rarely are the costs of these properly understood against the specific customer value they deliver. The result is all too often we build in cost, and then accept it without challenge as an everyday occurrence in our operations. This surely must change. If not now, then when?

In the period since Dick and Mac embarked on their journey, lean has become an embedded part of the competitive model in manufacturing but remains a less well understood concept in our world. It has been described as “a way to do more and more with less and less – less human effort, less assets, less time, and less space – while coming closer and closer to providing customers exactly what they want”. After all, what is a kitchen but an assembly unit that provides the final stage of the manufacturing process right beside the customer? 

Our menus are at the heart of our complexity. I’ve been in this industry for 48 years and have yet to see any menu development process being truly led by quantitative research that accurately maps consumer reaction to increases or decreases in the number of dishes on offer. I’ve seen bewildered diners struggling through menus with more than 100 dishes, and other highly successful operators with less than ten. And there’s scant evidence about the degree to which the act of changing menus regularly adds to – or subtracts from – revenue and profit. These two decisions alone have a massive impact upon the efficiency of production. If dishes are added to menus without significant consumer impact, then the additional supplier stocking/distribution costs, kitchen preparation and storage costs, labour and wastage involved are a considerable fixed cost. 

And this is before any consideration of the mix of bought-in ingredients that are fully or partly pre-made, compared with scratch cooking, and the management of waste in the production process. 

Finally, a lean approach is a dream for supply chain people. When a menu is truly optimised to deliver value then you emerge with an optimum number of dishes, ingredients, pack sizes, storage, kitchen preparation, labour, speed, space, and of course quality. The simplicity that is created provides the ultimate tool to drive value out of supply activity while still improving product availability and quality.

Or in other words “a way to do more and more with less and less – less human effort, less assets, less time, and less space – while coming closer and closer to providing customers exactly what they want”.

With the country under lock-down, we are proud to be a part of Propel’s BeatTheVirus campaign and would like to reiterate our offer of support at this difficult time. We know how incredibly hard it is for you right now. And we want to do all we practically can to help support the industry. Our sector is in a very difficult period and we are offering free advice on the above or supply matters in general to all operators, so please do call David Read, Shaun Allen or David Kelleher direct on the numbers on our website. We are here to help – www.prestige-purchasing.com
David Read is chairman of Prestige Purchasing
Prestige Purchasing is a Propel BeatTheVirus campaign member

Cutting discount dependence by Victoria Searl

Discounts have been the scourge of our sector for almost a decade. Starting as an obvious way to coax diners out, amid one of the worst financial downturns of recent times, investors’ obsession with “like-for-likes”, and customers’ increasing expectation has turned them into a necessary evil for many brands. 

But while our industry faces its toughest months ahead, shining on the horizon is the opportunity to reset – and cut our dependence on discounts once and for all. 

So, what do discounts do? 
1. They increase reach, getting your brand in front of new audiences
2. They increase conversion by pushing the undecided or unconvinced over the line, and influence the way people spend once in your venue
3. They increase frequency – bringing those customers back, hopefully more often than they would have without them 

If not discounts, what? It’s often said “it’s not what you know, but who you know”, but it’s actually a mix of both. By using the data within your businesses, we can locate the people most likely to love us, give them compelling reasons to try us – and use what we know about their behaviour to get them back again and again. 

And luckily, because as an industry we’ve so underplayed the incredible technology we have available to us, we’ve got plenty more marketing in the tank. Here are four places you should be investing your discount money: 

1. Programmatic. 
Think of a lovely big funnel. Your discounts help direct x amount of people into the top of your funnel. Of these, a percentage of people will drip through the funnel and into your venues. So it stands to reason the more people we pour into the funnel, the more will drip through to enjoy one of your seasonal specials.

To get on one of the big-volume discount sites we have to offer an equally big discount. So how do we maintain or increase that volume without discounting – programmatic.
 
Programmatic is a form of data-led automated advertising. I’m hugely simplifying the process but – we feed in our ideal customer (say those who visit coffee shops at least three times a week and have been in the SE1 postcode within the past two weeks), and programmatic helps us locate people who fit our criteria and serves them an advert, which could be on an app, a website they visit or even on a screen outside a petrol station. 

So if you think of Facebook advertising as advertising to people who fit your criteria who are on Facebook or Instagram, programmatic is able to reach people wherever they are and whatever they are doing. It’s the smartest, data-led way of dropping more people in your funnel. 

While it’s almost unheard of in casual dining, the big quick service restaurant brands and other sectors that also rely on physical footfall such as furniture retailers, are seeing impressive return on investments. Home furnishings retailer ScS used programmatic to achieve a 57% increase in store footfall during March and June 2019 compared with the same period the previous year. 

2. So we’ve run ads via programmatic and people are starting to become interested in what we do. How do we convert that interest into action? According to Andrew Nicholas, co-founder and joint chief executive of SideDish Media, Google Ads is one of the most powerful tools you can use to get someone to your site and ultimately through your doors. He said: “You’re catching customers at the point they are searching Google for a place to eat, meaning they’re already a much warmer target. That, coupled with the fact they have already seen your logo and food imagery on an ad, increases the likelihood of a successful booking exponentially. Every penny spent is tracked and measured so you know exactly how much it costs you per booking.”

3. But what if we didn’t grab them at programmatic or Google Ads stage? Well, now we unveil the classic two-pronged attack; if we haven’t compelled them to action from seeing our logo, delicious looking photo of a pizza or witty copy lines, we need to be ready for when they start to search for the thing they are interested in. For example when people are wanting to book somewhere they can take the kids, or get something vegan within a few minutes’ walk of their office. Matt Goodfield, co-founder and joint chief executive of SideDish Media argues: “Local SEO tools such as Google My Business (GMB) are key. Brandify found 77% of respondents use Google Maps to find ‘restaurants near me’. Imagine the importance of being top of Google Maps when there’s 24.9 million searches of ‘restaurants near me’ taking place every month. GMB allows you to catch potential customers who are in your area, whether looking there and then or browsing your area on maps for a later date. And it’s not enough to just have a GMB profile. Setting one up is one thing but optimising it correctly to get you to the top is another.”

4. So now we’ve lured our prospects to our website or social pages. They’re clearly interested in what we’re about, but may or may not have taken action and booked or ordered anything yet. We can use our Facebook Pixel to re-target them and remind them why they had a look at us in the first place. Just like when you look at shoes online, and they curiously appear on a web advert a little later, we can use our knowledge of their particular interest in our brand (whether that’s a visit to the menu page or time spent on our locations list), to re-target these toastie warm leads with the most relevant messaging. And we can do that as many times as it takes to turn interest into action. 

What’s the catch?

1. It will mean proper analysis, rather than a glance at the previous day’s covers every morning. Heinz knows there’s a 3.5% sales impact for every degree of temperature fluctuation (Yes, I’ve been watching “Inside the Factory”). And the gaming industry meticulously reviews web visits and conversion daily, giving it clarity on the day’s focus ahead. 

2. We’ll need a digital/data mindset within our marketing teams. So if you have a team of one, they’ll likely need support. Let the data and technology drive the marketing agenda in response to your commercial challenges, and then allow the creatives in your team to bring it to life. 

3. It will mean we have to spend time getting our data in order and sowing the seeds of our commercial objectives now to reap the rewards when restrictions start to lift. There’s no silver bullet. So start working on your digital strategy now to see the benefits in the coming months. 

But it will also mean we take huge strides forward in how we do business, and narrow the gap between hospitality and other industries. And investing even a fraction of what discounts were costing your business can generate significant, measurable returns. 

Technology and data can be daunting, but the tools available to us now, powered by the data we’re generating everyday within our businesses, are designed to not only deliver results, but to help you thrive. And that’s surely something we’ve never been more in need of now. 
Victoria Searl is an industry marketing director and founder of Data Hawks, a hospitality data consultancy that finds and joins up your data, turning it into sales, loyalty and return on investment. Email: victoria@wearedatahawks.com

Supporting your team by Ann Elliott

Trevor Watson, of Davis Coffer Lyons, ran a good webinar this week on “The future of the F&B property market” that was interesting, depressing and terrifying in equal measure. I wrote some short notes, and I know the webinar will be available as a podcast, but there was not much to uplift the soul I have to say. 

There were two comments that particularly resonated with me:

1. One contributor (CGA I think) said customers will be more likely, after the crisis, to return to brands they believed had done good things during it. This must apply to teams too. They are surely more likely to go back to their employer if they believe they have done good things for them during lock-down – more likely to move if they haven’t (assuming there are jobs of course).

2. Another said European workers may not be there to open up post-lock-down.

So every operator I know is doing something to support their teams to ensure they do have their support when they’re open including quizzes, chat rooms, daily newsletters and lots more.

I particularly like the work Super 8 restaurants (owner of Kiln, Smoking Goat and Brat), led by Brian Hannon and Ben Chapman, is doing for its team “trying to keep them alive financially, practically and emotionally and to encourage a giving back philosophy. It’s a key part of keeping our ecosystem alive – our team, our suppliers and ourselves so we can survive and thrive once more”. 

It has three parts to its team communications, including line managers speaking to every member of their team individually at the start of the week, a senior management team Skype call on Wednesday and then a Super 8 newsletter that is sent out the following Monday. Here they include ideas on: 

– What to listen to including a weekly Spotify playlist and a range of recommended Podcasts, which recently included Scottee on Francis Bacon and Soho, Letters from lockdown – Ruthie Rogers, Food On the Edge – listen to episode three on potatoes, and Unlocking Us – conversations that unlock the deeply human part of who we are.
– How to budget  – eg: “It’s important to first understand what’s going to be paid to you each period. The easiest way to do this is to take your payslips from either P7 or P8 (7 Feb and 6 March), put your tronc payslip to one side and look at your hours worked payslip. You should expect 80% of the net amount on this payslip. To work this out take the net amount and times by 0.8. Once you have worked out the above figure divide this by four and you have your weekly budget. An estimate budget for a 40-hour week is circa £220 per week.”
How to claim Universal Credit, how to understand furloughing and information on places to work such as farm work/fruit picking, all postal delivery services such as DPD/DHL and Homeless Charity Thames Reach.
– Speaking to a landlord: “It’s now a good time to have a conversation with your landlord if you haven’t already done so. Given what we looked at under budgeting, 40% of your monthly income seems like a sensible figure to set as the maximum amount of rent you are able to give to your landlord.” Brian also provides a template landlord letter (and other template letters to help his team) as well as offering a video on how to handle difficult conversations.
– How to keep well. Brian holds well-being surgeries every Thursday. 
– How to give back – Super 8  is providing 200 meals a days for NHS workers, it is involved with Chefs In Schools, which relies on donations to feed vulnerable families, sending out weekly food boxes to more than 700 families in need mostly around east London, and it supports www.cook-19.co.uk

Brian also provides his team with the opportunity to buy meat, vegetables and drink at very low prices from his suppliers.

I love the fact Brian and his senior team have really thought about the lives of those that work for them and really understand how they can help them best navigate through the current situation. It feels very real, very genuine and incredibly helpful. 
Ann Elliott is chief executive of Elliotts, the leading integrated marketing agency in the hospitality and leisure sector – www.elliottsagency.com
Elliotts is a Propel BeatTheVirus campaign member

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