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Mon 18th May 2020 - Propel Monday News Briefing

Story of the Day: 

Brasserie Bar Co chair puts forward proposal to kick-start sector: Mark Derry, executive chairman of Brasserie Bar Co, has put forward an alternative proposal to kick-start the post-lock-down restaurant and pub industry based around the idea of “bridge underwriting”. Under his plan, the government would be asked to insure the losses of pub and restaurant companies for just the period of reopening. Derry said: “If this was done, then the costs are two-thirds of furloughing; all suppliers will be paid; all landlords will be paid; the majority of employees will be retained, and the high level of skill and experience kept in the business; operations and revenues can begin rebuilding as soon as practicable; within a short period of time taxes received will be greater than subsidies paid; and the sector is given the opportunity to recover and mass unemployment is avoided.” The proposal asks government ministers to take an open mind to an idea of “bridge underwriting” – short-term financial support that provides the cheapest and quickest way to bridge the costs of the restaurant and pub industry to reset itself for the new normal of a post-covid-19 economy. Modelling that Derry has carried out across his own company shows in month one a typical site would need £25,000 to cover its losses if it makes 30% of its normal revenue. But when its VAT and PAYE contributions are accounted for, the Treasury’s net outlay would be only £11,000. Across the group’s 37 sites and head office, the taxpayer would pay a subsidy of £700,000 for the month compared with the current furlough cost of £1.1m – a 36% saving. Derry said: “The modelling indicates the government would be back in a net positive tax position by month three. And we can all enjoy the benefits of an industry contributing to the well-being and economic life of the country, and not one that is mothballed into a state of demise.”

Industry News:

‘Giving furloughed staff holiday could save industry £4bn bill it can ill-afford’: Richard Hartley, chief operating officer of S4labour, the online labour-scheduling management system from Catton Hospitality, has suggested operators should consider holiday for furloughed staff – potentially saving the industry a £4bn bill “it can ill-afford”. Hartley said: “The total cost of holiday to the industry is likely to be in the region of £5bn for furloughed hospitality staff up to the end of July. The government has confirmed you are able to request staff take holiday during the furlough period but employees need to be paid their full wage for time they are on holiday. While there is an immediate cash flow challenge to this, and no one has much spare at the moment, there is the advantage the furlough scheme will pay for 80% of this, or a proportion for higher earners. This potentially saves the industry a £4bn bill it can ill-afford.” Hartley also pointed out the scheme could further support the refresher training “needed for a workforce that hasn’t been active for more than four months” as well as for the numerous new measures that will need to be in place before reopening. Hartley said: “Employees are able to train while on furlough, as long as they are being paid the relevant National Minimum Wage/National Living Wage, effectively meaning government will support the wage bill to get our teams trained to where they need to be.”
S4labour is a Propel BeatTheVirus campaign member

Polarised consumer behaviour in China could hold clues to Brits’ eating and drinking out habits post-lock-down, says CGA: Polarised consumer behaviour in China could hold clues to how Brits will behave when it comes to eating and drinking out after lock-down, according to CGA. It has undertaken research from the epicentre of the covid-19 outbreak, speaking to 2,000 consumers from China’s most developed bar and restaurant markets, alongside Wuhan itself. The findings, undertaken in Beijing, Shanghai, Chengdu and Wuhan, show since reopening there is an almost 50/50 split between those who have been out and those that haven’t. But, of the 48% of consumers that have been back out to eat and drink, the majority have done so multiple times. As with other markets, consumers are more confident about visiting eating-out establishments. The venues that consumers feel most comfortable in visiting are mainstream and fine dining restaurants, followed by cafes and fast food outlets. At the other end of the scale nightclubs and leisure venues rank as the outlets consumers feel least confident about visiting. The research also highlighted a significant group of consumers for whom eating and drinking out continues to represent a risk and who do not plan to revisit the sector in any rush. Two-thirds of those yet to go out are also not planning to in the next month, with the risks of secondary and tertiary waves front of mind. In all, 60% of consumers said some, or all, of the venues they would typically visit had reopened post-lock-down, only to have to close again. Meanwhile, further CGA research found only 29% of Brits who usually eat out multiple times a week said they would be comfortable going out again as soon as government restrictions are lifted, compared with 22% for the adult population as a whole. For drink-led occasions, the impact appears less marked, with 37% of people who drink out multiple times a week saying they would be comfortable in resuming visits to pubs, bars and restaurant as soon as restrictions are lifted. Meanwhile, those who used to eat out at least monthly, which makes up 21% of the population, now say they will return far less frequently – highlighting the potentially lower demand within any “new normal” even among once regular customers. 

UK pubs to destroy 70 million pints of beer: As many as 70 million pints of beer from UK pubs will have to be destroyed after outlets were forced to shut, the British Beer & Pub Association (BBPA) has claimed. With pubs unable to reopen until 4 July at the earliest, the BBPA said much of the beer left in storage in pubs will be spoiled by that time. It calculated the figures based on its database of the UK’s 47,000 pubs and estimated they had on average ten taps dispensing beer each. Although the government has said the duty paid on the wasted beer can be claimed back by brewers and pubs, the BBPA said it was still an enormous task and “heart-breaking” for the industry. The BBPA said some beer had been repurposed to help other industries such as used as feed for anaerobic digesters to create organic fertiliser for farming. But the trade body highlighted the loss of beer sales caused by the lock-down and again called on increased government support for the sector, including removing the £51,000 rateable value cap for business grants; improving accessibility and eligibility for loans and deferring beer duty payments. BBPA chief executive Emma McClarkin said: “The need to destroy so much beer really shows how much our brewing and pub sectors have been affected by this crisis. We believe pubs should only open when safe to do so, but without additional support now many more of our nation’s pubs and the brewers that supply them with beer will struggle to survive closure and beyond.”

US restaurants introduce ‘coronavirus’ surcharge: Some US restaurants are adding small charges to keep up with supply chain and food costs as a result of the coronavirus pandemic. Goog’s Pub & Grub in Holland, Michigan, has decided to introduce a $1 surcharge because of rising food costs. The restaurant said its beef costs “have almost doubled” while the “already thin margins we’re operating at due to loss of alcohol sales mean we’re at a crossroads”. It added the decision was not “out of greed” but rather an attempt to “keep the lights on” while it navigated the “new normal”. Bootleggers BBQ – a casual barbecue restaurant in West Plains, Missouri – implemented a 5% surcharge, but owner Brian Staack told Restaurant Hospitality he was forced to rethink the strategy after the move went viral and he received death threats while staff were verbally abused via phone calls. As a result he made the decision to drop the surcharge and reprint new menus with raised prices on them. “Our plan was to raise or lower the percentage depending on our deliveries and invoices,” Staack said. “Since changing menu pricing and dropping the surcharge we have had an outpouring of support from our customers and community.” Kiko Japanese Steakhouse & Lounge, also in West Plains, Missouri, introduced a 5% surcharge in order to avoid having to raise menu prices. “We were hoping to adjust the charge weekly based on the prices we get from our suppliers instead of raising all of our prices across the board on our menu,” owner and managing partner Billy Yuzar told NBC Today. “We also plan on taking this surcharge off completely once all prices return to normal.”

UK hotel revpar ‘appears to have bottomed out’: UK hotel revpar declined between 80% and 90% daily in the week ending 10 May but appears to have bottomed out, according to the latest data from STR. Occupancy saw “minimal change” with Liverpool having the highest daily occupancy, at about 20%, while Edinburgh had the lowest, at circa 10%. Among the chains, “luxury” and “upper upscale” hotels saw no movement in occupancy, remaining at just 3%. The “midscale and economy” segment has occupancy above 30%, but STR said many of these hotels are accommodating front line staff that are not able to go home. Average daily rate also saw “minimal change” during the period and is still down about 35% compared with the previous year. STR director Thomas Emanuel said: “Hopefully now the only way will be up. What is also pleasing is our research shows the majority of UK consumers still intend to travel the same or more than they previously did, although this may be tempered by the proposed 14-day quarantine period the government plans to introduce.” 

Job of the day: COREcruitment is working with a reputable investor as it looks to support the expansion of a quality grocery concept. As this small business expands, the investors are keen to appoint a non-executive director to support, guide and mentor the senior executive team. The commitment will be between one and three days a month and a fee will be negotiated through the process. The ideal candidate will have extensive past retail experience, ideally in the grocery sector, as well as previous non-executive director experience. Anyone interested can contact with their profile or CV. 
COREcruitment is a Propel BeatTheVirus campaign member

Company News:

Oakman tests safety measures in bid to reopen: Oakman Inns and Restaurants, led by Peter Borg-Neal, has developed safety measures that it said could allow pubs to reopen safely this summer. The new measures include a one-way system to allow two-metre social distancing and Perspex screens around tables. The measures are being tested by Oakman at The Betsey Wynne in the village of Swanbourne in Buckinghamshire – one of 28 sites the company operates. Other measures include hand gel dispensers placed throughout the venue to enhance hygiene, and people order via an app for table service instead of at the bar. While there had previously been seating for 204 at The Betsey Wynne, this had been reduced to 146 with the social distancing measures in place. But Borg-Neal believed the measures could work as a blueprint for larger pubs and will submit the scheme for approval to the cabinet office via UKHospitality. He told Sky News: “We have to meet standards for food hygiene, health and safety and fire. Just tell us to meet the covid-19 standards and leave it to us. As far as we are concerned we have a number of pubs that can be safely opened now.” He added: “I think the general mood I am getting is people want to come back. People can't make sense of why you can't sit in a pub garden with a beer but you can go on the London Underground.” 

Pizza Hut Restaurants CMO – we’ve turned disadvantages into advantages: Kathryn Austin, chief people and marketing officer at Pizza Hut Restaurants, has said the group’s decision to keep 47 of its sites open during the coronavirus crisis has allowed it to turn disadvantages across its circa 250-strong estate into advantages. Speaking to Elliotts chief executive Ann Elliott as part of Propel’s “navigating the coronavirus” series, Austin said: “We kept 47 of our Huts open and worked with aggregators to do delivery and takeaway. It was a fact-based decision, looking at Huts where we have really big kitchens. One of the things we reflect on is some things we may have moaned about or thought were disadvantages became advantages. We have often bemoaned the size of the footprint of some of our sites, where we have got massive kitchen spaces, which are disproportionate to the front of house space. Suddenly in this situation they have become a big advantage, as you can operate from those kitchens with lots of social distancing in place and responsibly. We looked at the Huts we could do that and where the teams opted in to continue to work. We thought we could do our bit to help. We thought about finances probably fairly low down in the pecking order and looked at the Huts that just about scraped through and could cover their costs.” Austin said the business has been phasing different sales channels in over the past few weeks and was ready to try new technology when it was allowed to reopen its dine-in areas, which made up 80% to 90% of sales. She added: “For example, we started working with Just Eat for the first time recently, and have been getting back on with telephone click-and-collect. We are currently testing, with Wi5, table ordering, where you can order from your device, but you don’t need to download an app. It will be great to go live with this once we get dine-in up and running again.” Austin will share more of her thoughts in the video, which will be released on Monday (18 May). 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.

Imbiba invests in boutique hotel brand ‘House of Gods’: Imbiba, the backers of Farmer J, Vagabond and Temper, has invested an undisclosed sum into BXTR Services, a hotel services company that operates the House of Gods hotel in Edinburgh, KIP Hotel in Hackney and the Baxter Hostel in Edinburgh, Propel has learned. The investment will be used to support the expansion of the House of Gods hotel brand – a new experiential boutique hotel concept. As part of the investment, Robert Cook, the former chief executive of Malmaison and Hotel Du Vin, and the current chief executive of TGI Friday’s, joins the business as chairman. Founded by brothers Mike and Ross Baxter, the House of Gods hotel opened in September 2019 in Cowgate, Edinburgh. House of Gods is built to “immerse the customer in a world of unapologetic opulence at an affordable price point”. Mike Baxter said: “The investment will support the acquisition and development of new sites and Imbiba’s experience and guidance will prove invaluable to our continued success story.” Cook added: “After a hugely successful entry into the hospitality space in Edinburgh last year and the first unique hotel proposition in three decades to launch in the UK, this is a perfect time to launch the House of Gods roll-out. As we enter the dawn of the ‘new norm’, it is widely believed travel demand will be centred around – and at unprecedented levels – staying on these shores. With House of God’s unique design, and striking point of difference, thoughtful space creativity, and above all obsession to all detail, we believe it will become a real ‘go-to’ brand for all to escape.”

Enhanced Hospitality claims 650 jobs at risk over insurer's refusal to pay: London bar and restaurant company Enhanced Hospitality has launched legal action against Allianz, claiming its failure to pay out under business interruption insurance has put 650 jobs at risk. Enhanced Hospitality, which owns Camden live music venue Dingwalls and Soho private members club Blacks, has hired law firm Field Fisher to pursue a claim against the insurance company. Enhanced Hospitality, which also owns Shaka Zulu in Camden Market, said Allianz’s refusal to pay out could result in up to 650 redundancies. Chief executive Roger Payne told City AM: “Despite Enhanced Hospitality following many other hospitality and restaurant groups in closing to the public at the express instruction of the prime minister and in compliance with the UK government lock-down, our insurance company Allianz is refusing to recognise our claim or make an interim payment.” Simon Sloane, partner at Field Fisher, added: “By refusing to fulfil their contractual obligations in a timely manner, these insurers face legal claims from policyholders such as Enhanced Hospitality, not only for recovery of the insurance indemnity but also for significant damages claims for breach of contract.” The Financial Conduct Authority said this month it is seeking legal clarity on the inability of some customers to access compensation for disruption during the crisis. Last week, hospitality trade bodies issued a joint call to insurers to work with them to provide further support for businesses hit by the lock-down. The Hospitality Insurance Group Action was launched in April to bring claims against insurers that have refused to pay out, while The Night Time Industries Association, which represents bars and clubs across the UK, has launched legal action against Hiscox over the issue.

Blackrose aims to manage 157 new pubs by end of 2021 as it accelerates expansion plans: Blackrose, the pub management company from real estate investment company Aprirose, is to accelerate its expansion plans. The company, which currently manages 43 pubs, is aiming to increase this to 200 by the end of 2021. It is doubling its marketing workforce, as well as launching a mobile app so customers can order from their tables once pubs reopen. Managing director Daren Knipe told BDaily: “Blackrose’s strategy has not changed in the post-covid-19 world; if anything it has enabled us to accelerate our ambitions and look at our offer and customer needs in a different way. Our investors’ support means we are moving swiftly on buying new pubs and identifying and acting on new opportunities – so much so we have recruited three senior members of staff during lock-down and are looking to add two new roles to our marketing team by June.” Head of marketing Rob Young said: “We want to use this lock-down period to get ahead of our competitors, to ensure our guests have the best possible experience when we are able to welcome them back again. This means large investments in the number of sites, refurbishments of current pubs and bringing in new talent.”

Nando’s reopens five sites for click-and-collect: Nando’s has reopened five sites to offer click-and-collect, Propel has learned. Propel revealed last week the company has reopened a further 32 sites across the UK for delivery only. The business is now understood to have added click-and-collect to five of those sites for the first time since it began reopening restaurants. The sites offering click-and-collect are in Belfast, Maidstone, Sevenoaks, West Hampstead and Worcester.  Last month the company reopened seven of its kitchens to help feed NHS workers, and subsequently opened them for delivery to the wider public. It is thought the company hasn’t publicised the latest reopenings after the huge response it received regarding the initial reopened sites. It is understood the brand wanted to give these restaurants a “bit of breathing space to get up and running”.

Landlord threatens to sue Travelodge: Travelodge has been warned it could face court action if it pushes ahead with a restructuring to cut rents. Combined Property Control Group (CPCG), the landlord that brought a legal challenge against Debenhams last year, has accused the hotel chain of penalising property owners while benefiting from government support, reports The Sunday Times. Travelodge, owned by hedge funds GoldenTree Asset Management and Avenue Capital, and the investment bank Goldman Sachs, has furloughed staff and has been granted business rates relief. “The changes the government made were not meant to allow people who have pulled tens of millions a year leaving it with little cash, to plead poverty and tear up leases using strong-arm tactics,” said Ben Rose, of Cooper Rose Real Estate, representing CPCG. The landlord owns five hotels. In a letter, Travelodge has warned unless it is able to waive up to £146m in rent, it will be forced to pursue a company voluntary arrangement (CVA). Landlords have been blocked from taking legal action by the government, which has issued a temporary ban on statutory demands. CPCG said Travelodge should not pursue a CVA and a key ruling from the Debenhams case — that found tenants could not protect their best properties from being taken back by landlords in a CVA — could be a stumbling block.

KFC reopens 16 sites for takeaway: KFC, which has already reopened more than 100 sites for either drive-thru or delivery, has reopened 16 of its restaurants for takeaway orders. The restaurants open for takeaway are Blackpool, Bristol, Cardiff Gate, Crawley, Eastbourne, Enfield, Epsom, Fleet Services, Gillingham, Gorleston, Havant, Manchester Deansgate, Newhaven, Newport Pagnell, Oxley and Tooting. The company said there is a limit on the number of people allowed in the restaurant at any time. Social distancing guidance is marked on the floor and there are dedicated employees making sure the maximum customer limit is not exceeded. There are also separate queues for collection and delivery, and Perspex screens at ordering and pick-up points. A KFC spokesman said: “Delivery remains the best way to order, but for those who are already out and about, we’re glad to be able to offer a takeaway option – in a way that’s as responsible as it is convenient.”

Compass considers £1.65bn fund-raise: Contract caterer Compass Group is considering raising about £1.65bn in new equity in what could become the UK’s biggest share sale so far this year. The company is understood to be in talks with advisers about selling shares equal to about 10% of its issued capital in a fund-raising that could be announced as soon as this week, reports Bloomberg. An equity offering by Compass could beat the £1bn offering of Informa, the events manager and publisher. Compass serves 5.5 billion meals a year across 45 countries. It employs 600,000 staff, although many have been furloughed under pay schemes part-financed by governments. Its shares have fallen almost 40% this year and on Friday (15 May) closed down 16½p, or 1.5%, at £10.90, valuing the company at £17.3bn. Compass said in a statement: “We continue to evaluate the merits of a range of options that would further increase our resilience through the current situation. No decision has been made on whether to proceed with a capital raise.”

Gourmet Burger Kitchen, Bone Daddies and 200 Degrees reopen further sites: Gourmet Burger Kitchen has opened a further trio of sites in London for delivery, Propel has learned. The company’s outlets in Richmond, South Kensington and Wimbledon are offering the service via Deliveroo, Just Eat and UberEats. It comes after the company reopened East Dulwich, Norwich and West Hampstead last weekend having previously reopened its Belsize Park, Chiswick and Waterloo branches – again all for delivery. Meanwhile, London-based Japanese ramen bar concept Bone Daddies has opened another two of its sites for takeaway and delivery orders – Bond Street and High Street Kensington. The company has already reopened its Bermondsey and Old Street outlets on the same basis. Nottingham-based coffee roaster and retailer 200 Degrees has now reopened its Lincoln branch for takeaway only having trialled the offer at its outlet in Carrington Street, Nottingham, last week. Co-founder Rob Darby said because Lincoln is a large store it has plenty of space to put the required social distancing measures in place while it normally has a strong takeaway trade. He added the company was looking to grow its food options as well as potential other reopenings in due course.

House Café Company transforms Fitzrovia site into general store and launches ‘at-home’ service: House Café Company has transformed its Riding House site in Fitzrovia into a general store and has also launched an “at-home” service. The Great Titchfield Street restaurant has been converted into a pop-up butcher, deli, grocery, wine shop and hot food takeaway. It offers fresh bread, pastries, organic eggs, steaks and ready to eat meals along with fresh juice, smoothies and a curated selection of wine. The store has been specially designed to ensure social distancing measures are in place as well as safety procedures to protect staff and customers. Meanwhile, the at-home range sees restaurant dishes delivered within an eight-mile radius alongside ready to drink cocktails while a selection of groceries including organic fruit, vegetables and wine is also available. House Café Company is also behind the Loyal Tavern in Bermondsey and the Rail House Café in Victoria and is led by former Duck and Waffle chef Tom Cenci and Henry Omereye, together with founder Adam White. 

Whitbread reopens Premier Inn sites in Germany: Whitbread has begun reopening its Premier Inn hotels in Germany. The company said 14 sites were open with the remaining five to follow later this month. It added all hotels have introduced strict hygiene measures while it offering rooms at €39 a night until 20 August. 

Liverpool-based Asian street food restaurant to double up: Liverpool-based Asian street food restaurant Maggie Fu is to double up with its second site in the city. The company has agreed a deal with Grosvenor Europe for a 4,700 square foot unit at Liverpool ONE’s Hanover Street. The restaurant, which will serve as its flagship and is set across two floors, will launch once the lock-down lifts. Maggie Fu offers a range of Asian-inspired dishes including steamed buns and ramen, “big bowl” stir fry dishes, and frozen yogurt desserts. Its existing outlet is in Smithdown Road. Maggie Fu director Lee Boon said: “We have grown a very loyal following in the two years since we launched, giving us the confidence to open a flagship restaurant in a prime city centre location.” Metis Real Estate Advisors and Savills acted for Liverpool ONE while Maggie Fu dealt directly.

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