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Fri 1st May 2020 - Update: Prezzo, CGA survey, McDonald's, pub beer sales plummet and insurance intervention
Prezzo appoints advisors: Prezzo, the Karen Jones-led chain, has appointed advisors to consider its post-coronavirus funding options. Sky News reported Prezzo has appointed FRP Advisory, which is currently acting as administrator to Carluccio's, to explore the implications of the covid-19 crisis for its balance sheet. The move comes less than two years after Prezzo underwent a company voluntary arrangement (CVA) that saw a third of its circa 300 sites close, and a subsequent debt-for-equity swap. The TPG-backed group currently operates 180 sites under its eponymous brand, and the company said all were profitable before the coronavirus outbreak. Most of the chain's 3,000 employees have been furloughed under the Coronavirus Job Retention Scheme. A Prezzo spokeswoman told Sky News: “We entered this entirely unexpected closure after a period of strong trading, which has given us the impetus and momentum to be able to drive through to reopening. Given the continuing uncertainty around the reopening of hospitality in the UK, appointing advisers is a sensible precautionary measure to ensure we have best advice available to us as we respond to this pandemic and look forward to the important period of reopening.”

Debt enforcement moratorium top demand for sector: Securing a debt enforcement moratorium is the main business objective of bosses of Britain’s pubs, bars and restaurants, new research has revealed. With cash flow concerns topping agendas, rent has become the number one specific issue, the latest CGA Business Confidence Survey confirmed. Although immediate survival is the top priority, many operators are tentatively developing recovery plans, but with predictions of a return to vastly different and contracted market to pre-covid-19 times. The survey found market optimism had plummeted from a four-year high in February, when 60% of bosses were positive about future prospects, to just 5% now, with 89% pessimistic. While confidence in their own business was slightly higher, with 15% being optimistic, it marked a fall from 83% in February and 31% in March. Now 69% are pessimistic about their own company’s future. Rent payments and landlord agreements were picked out by 40% of business leaders as the greatest challenge currently faced, with a further 27% seeing them as a “major challenge”. Together they topped the list of business challenges, with access to loans the next big worry – with 17% seeing that as the biggest challenge and 37% a major issue. Banking relations, investor support and payments to furloughed staff were down the list. Overall, 89% of operators now support some form of debt enforcement moratorium, with an initial nine-month period the most popular option, backed by 39%, with another 23% preferring a year-long option. However, there were differences in the rent outcomes bosses were preparing for. While 28% were looking for a rent-free period and extended lease, 26% were looking to a deferral, with another 20% expecting part payment in negotiation with landlords. But when asked the question of what would be the best next measure the government could introduce to support their business, 70% went for a nine-month rent free period to December, ahead of universal business interruption insurance (favoured by 17%) or removal of the £51,000 rateable value threshold for grants (13%). Just 27% of businesses surveyed had any sites open, either for delivery (8%), grocery and food supply to the public (4%) or for NHS or community support (14%). Almost all businesses have furloughed almost all staff; 83% have furloughed more than 90% of employees and 96% more than 70% of their workforce. Three quarters (76%) with furloughed staff are not topping up wages, with 18% doing so excluding tronc. There is wide support for extending the furlough scheme, with a three-month extension after sectors reopen (backed by 36%) and a sector-by-sector extension dependent on opening (backed by 33%) the two most favoured options. Half (50%) of businesses back extending furloughing in three-month blocs, with 40% favouring a month-by-month approach. The majority (81%) of operators have already started recovery planning, with 72% having done so based on various different scenarios.

McDonald’s to reopen 15 UK sites for delivery: McDonald’s is to reopen 15 of its UK restaurants later this month for delivery only. The company, which has this week been running tests behind closed doors, will reopen the sites on Wednesday, 13 May. The restaurants involved will be announced next week as McDonald’s “works through inviting our employees back to work and supporting our delivery partners to prepare for our gradual return”. Delivery will be available via UberEats and Just Eat. Perspex screens and floor markings will be introduced in specific areas; staff will receive additional protective equipment including non-medical grade face masks; and all employees will be asked to confirm they are fit and able to work, with temperatures taken on arrival at work for every shift using contactless thermometers. It will also be introducing social distancing measures for all delivery and service partners. The restaurants will operate with a limited menu to support social distancing in kitchens, but will provide “many of our iconic favourites” including the Big Mac, Quarter Pounder with Cheese and Happy Meal alongside the majority of its drinks. The breakfast menu will not be served to start with, but the company plans to reintroduce it as “we explore ways in which to help our employees safely change over menus”. UK and Ireland chief executive Paul Pomroy said: “In March we took the decision to temporarily close our restaurants in the UK and Ireland for the safety of our employees and customers. Recently, we began working through a potential and limited reopening. As part of our reopening planning, we have been listening to customers and our employees, and we have worked closely with UK and Irish governments and trade bodies to help ensure we do this responsibly. We have deliberately taken our time, we want to get this right.” To date McDonald’s has distributed more than 400 tonnes of food to charities and food banks around the UK and Ireland and said it would continue to support communities in which it operates as sites reopen. Pomroy added: “When we return it will be different as we all adjust to this new normal. We are working hard to reopen more restaurants, but I am adamant this must be at the right pace with the well-being of our employees, suppliers and customers front of mind. Slowly, but safely we will return to towns and cities across the UK and Ireland.”

Pub beer sales plummet 40% in March: Pub beer sales collapsed by 40% in March compared with the previous year, according to new figures from the British Beer & Pub Association (BBPA). The BBPA said the stark decrease shows the immediate and devastating impact the lock-down is having on pubs. Sales in the off-trade – such as supermarkets and off-licences – were up 10.6% on the same period last year. The uplift, however, did not make up for the huge loss of beer sales in pubs, resulting in total beer sales in March down 12.7% when compared with March 2019. The BBPA said with March data showing the impact of 11 days of pub closures, April`s data will reveal the full impact of total closure with no sales in pubs at all. The trade body has already called for further financial support specifically for pubs, so they can get further cash flow while they remain closed. This includes expanding the threshold for grants to above a rateable value of £51,000 and an extension of the furlough scheme. BBPA chief executive Emma McClarkin said: “These stark figures reveal how the lock-down is having a devastating impact on our pubs. The cliff-edge impact on our sector in March, when people were told to stop going to the pub and then pubs were shut down, is clear to see. In April, beer sales for pubs will be zero. This is devastating our sector, which still has huge fixed costs to cover, far in excess of the sales revenue and financial support they are receiving from government right now.”

FCA to obtain court declaration over business interruption insurance cover: The Financial Conduct Authority has said it intends to obtain a court declaration to resolve contractual uncertainty in business interruption insurance cover. The watchdog, which said it still believes most claimants on business interruption policies do not have the right coverage to warrant a payout, is seeking a fast-track court declaration to “resolve uncertainty for many customers making claims”. It is taking key test cases to court that provide the “greatest clarity” on specific policy clauses that represent those most frequently used by insurers which have been disputed by businesses who have been rejected for a payout. The move has been welcomed by the hospitality sector, where there has been widespread concerns among businesses about the lack of clarity and certainty on business interruption insurance claims. Many have had little success and various groups have been forming as sector companies look at legal action in order to secure the payout they believe they are entitled. Trade bodies UKHospitality and the British Beer & Pub Association said there had been a severe lack of clarity around insurance and hoped the FCA announcement would “help resolve some of the uncertainty our sector faces on its insurance cover”. Meanwhile, the consortium of hospitality experts and associations that launched a crowdfunding campaign to support those who had been refused help with their business interruption insurance policies has also welcomed the move. Rob Atkinson, an in-house lawyer for Black and White Hospitality, which operates the Marco Pierre White group of franchised restaurants and manages a portfolio of hotels across the UK, said: “To have a body like the FCA add its weight behind the business interruption issue will hopefully ensure those who have taken out policies in good faith to cover themselves in a time of crisis get a resolution soon. But we still need to be ready to launch legal action if required. FCA intervention may add clarity but they have been clear that it is not intended to encompass all disputes. We must maintain the pressure from all angles and our crowdfunding campaign does just that.”

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