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Morning Briefing Strap Line
Fri 31st Jul 2020 - Friday Opinion
Subjects: Monopoly moves; thinking the unthinkable; no-show, no worries; and confining compliance paperwork to the recycling bin
Authors: Glynn Davis, Ann Elliott, Catherine Johnstone and David Bashford

Monopoly moves by Glynn Davis

Despite the incredible rejuvenation of the King’s Cross area of London it remains largely bereft of traditional pubs serving top-notch craft beer, apart from one that has become a firm favourite of mine – The Queen’s Head in Acton Street. Only a five-minute walk from the train station, it was in a perfect spot – surrounded by office workers, tourists staying locally, people travelling to and from the station and a few local residents – until covid-19 struck. 

Things are looking very different now for the pub and other businesses in the area. What were super-prime city centre sites near transport hubs have turned into the worst locations possible. Covid-19 has led to a dramatic turnaround in the fortune of centrally located operations compared with those positioned on high streets. Whereas brands were looking to offload their troubled high-street units and focus on urban centres, shopping malls and transport locations, few people are commuting, no-one is travelling and the impact has been massive.

Proof of the shift in fortune can be seen in the recent Harper Dennis Hobbs Vitality Index, which ranks the health of the top 1,000 retail areas. Central London and other city centre spots previously headed the list, whereas Wimbledon Village, Marlborough, Reigate, Berkhamsted, Cobham, Sherborne, Bristol Clifton and Ilkley are now at the top. The rise of more local shopping and hospitality areas is evident.

Those businesses focused on city centres are in dire trouble. City of London-based healthy food chain Tossed has gone into administration, travel foodservice provider SSP has said it may only have 20% of its locations open by the autumn as train passenger numbers are 85% lower than before the pandemic.

It is a similar story for Pret A Manger, which was going great guns as it converted central London EAT units into Veggie Prets and expanded further into New York City. Could this business be positioned any worse, I wonder? It’s hard to imagine a more shocking turnaround in fortunes. Thirty units are to close including stores in Piccadilly, Fleet Street and The Strand. How much more prime can you get than Monopoly board properties?

When I was young I used to like throwing all the Monopoly money up in the air – as you do. Covid-19 has done the same for our perceptions of what makes a prime location and we don’t know how things are going to land. At The Queen’s Head, its owner is negotiating with the landlord over rent while the pub has been closed. That’s hard enough but equally worrying is the owner is unsure whether it’s worth reopening at all. When will trade return to previous levels – if it comes back at all?

The omens aren’t good at the moment. A nearby King’s Cross pub has been open a number of weeks but daily sales have yet to exceed the amount spent on the staff payroll. This is a scenario that’s being played out around London and in many other cities.

People have argued for many years that major conurbations, particularly London, as well as shopping centres and travel hubs have been sucking in all the investment to the detriment of high streets, which have been withering away.

Covid-19 has unexpectedly provided an opportunity for high-street businesses to capitalise on the influx of trade they have enjoyed during the past four months. Whether they take it or not – and if landlords are going to help – is another matter. The Queen’s Head, and many others like it, don’t have that option at the moment.
Glynn Davis is a leading commentator on retail trends

Thinking the unthinkable by Ann Elliott

There’s a real possibility that when workers finally return to their city centre offices some time in the next 12 months they won’t go back to the five-day-a-week, office-based life. Why should they? Why would they?

Working from home balances life and work more evenly, is less stressful, cheaper, and safer than working from an office – but is it a lifestyle all workers want every day of the week? I doubt it.

Extroverts such as me, who gain their energy from being with other people, are likely to find being on their own from 9am to 6pm, five days a week, stressful, draining, boring and lonely. The kitchen can become an unhappy place when there’s no-one else in it for long periods of time. Laughing on your own to something on the radio isn’t as much fun as laughing with, or at, someone else. It’s ok having a day at home when you can wander outside to pull a few weeds in the sunshine, it’s less great when it’s dark at 4pm and the rain is horizontal.

Working in an office for three days out of five is one potential answer – and one most operators with city centre sites have become resigned to and are planning for. An office-based working life at 60% of pre-pandemic levels will have a significant impact on every element of an operator’s business. They will have to work out how to make money at 60% sales level and, if they can’t, they need to get out now.

Landlord agreements are usually the first item on the agenda and these are being negotiated quietly and effectively by operators on a three to five-year term and beyond. Turnover-based rents are being agreed because landlords also realise the post-covid world is going to be different and it’s better to work with an operator you know and trust than agreeing a new deal with someone you don’t.

Team hours, payment and rewards are usually the next negotiable. Fewer hours, less paid time off – for example, not paying for breaks – more flexible working patterns, 20% to 30% salary cuts and cross-trained teams are all on the agenda. Head office teams will be cut to the core – no slack, no ‘nice to haves’ and no offices. Flexible freelance resources will replace the employed. Infrastructure will be light and lean. Every project will be reviewed for its potential delivery to the bottom line and cancelled if unlikely to deliver.

Some of these structural changes at site level will be driven by changes in opening times and daypart trading. Pub breakfasts could be a thing of the past. Coffee shops opening beyond 6pm may not be possible, while bars could close during unprofitable afternoon shifts.

Then it’s on to the supply chain. Simplicity and focus will be key, with menus less complex and shorter, and drinks ranges rationalised. Suppliers will be culled to obtain better terms from larger volumes on a smaller range of items. Volumes will be merged between operators who would never have thought about collaborating previously to gain better, more advantageous prices.

Kitchens will be rethought. They will be more efficient in time and space, more ergonomic. Every dish will be scrutinised to ensure it’s made as effectively as possible. Waste will have to be managed better, including food left on plates by guests (about time too).

Every overhead will be challenged – lighting, gas, water, rubbish collection. Every monthly charge from ‘bottom feeders’, as Hamish Stoddart calls them, will be scrutinised. Digital implementation will be accelerated at an unforeseen and previously unknown speed. Innovation will be seen as an imperative with no time for the “we have never done it that way” kind of philosophy.

There will be less reliance on guests coming into sites and more effort made to deliver food and drink to customers. How to deliver an offer to guests has to be on the agenda and operators will have to find innovative ways to do this without massacring their margins through aggregators.

As one operator said to me: “We are thinking the unthinkable. Nothing is off the table.” If sales fall in city centres to 60% of previous levels, we all have to think the unthinkable too to make money, stay open and keep operating.
Ann Elliott is a hospitality strategist, connector and adviser

No-show, no worries by Catherine Johnstone

As July 2020 comes to an uneasy close, the hospitality sector waits for the first financial reports of like-for-like sales and profitability data before and after the dawn of covid-19.

Many operators have reported early positive results, trading at about 70% of sales capacity because of social distancing. Reports of profitability have been less frequent, with only a small number of operators reporting good conversion resulting from simplification of the business model and enhanced business efficiencies.

However, for some operators sales results have been disappointing. The rental issue shows little sign of abating and it’s only too tempting for underperforming venues to look for the next available scapegoat.

No-shows are a consistent feature of the hospitality sector and naturally cause frustration for operators. However, to project those frustrations back on to the guest is counterproductive and flies in the face of good service. Operators must focus their efforts on attracting more guests to their businesses and not driving them away.

The real cost of a no-show
Deposits don’t work in the casual dining sector – we know this and have known it for a long time. The dining experience offered to guests is, by nature, casual and so are the terms on which diners choose to visit venues.

Recent claims no-shows are costing our sector billions of pounds in lost revenue per year are unsubstantiated. If operators were suffering such significant top-line losses they would have gone out of business long ago citing no-shows as the reason.

The oft-heard complaints surrounding no-shows – restaurants in the fine-dining category excepted – point more to lost costs than lost revenue. Where there are lost costs, there are systems that can recover them.

‘I can’t forecast my sales accurately’
A good forecasting exercise uses like-for-like data to predict financial performance. In the case of no-shows, all data is like-for-like. No-shows aren’t a new phenomenon and their frequency hasn’t increased since the emergence of coronavirus.

What has changed as a result of covid-19 is the number of potential walk-ins and the ability to reallocate a no-show’s table as part of the operational flow. Only a restaurant trading at full capacity might lose potential revenue – but how many venues are experiencing this level of demand?

For the few casual restaurants that are consistently fully booked, the impact of no-shows can be absorbed through strategic overbookings and an effective waiting list.

‘No-shows cause food waste and have an impact on food cost’
The ingredients used in a casual dining menu have at least a day’s shelf life and can be used in the following trading period. In the worst-case scenario, where ingredients have gone to waste, the cost price of a no-show is negligible.

Still, there’s no need to accept even the most insignificant of losses. The average rate of no-shows in a comparable period can be used as the likely rate of no-shows in the current period. Sales and purchasing budgets that use historical data will preserve the cost of goods margins and protect the bottom line.

‘My labour cost will be too high with all these no-shows’
The labour cost leaves little room for error and overspending will cause serious harm to profitability. Being understaffed is also a recipe for disaster, resulting in poor service and having a lasting negative impact on the guest.

These concerns can be easily mitigated. Unless a business is suffering more than one waiter’s entire personal capacity in no-shows during a single trading period, the number of staff scheduled shouldn’t be affected by the number of guests failing to attend.

Additional labour tools can limit the potential cost of a no-show, such as using a standby system for additional staff and relieving staff during service should the guest count fall below par.

The psychological effect of the no-show can’t be underestimated – the sense of rejection hangs in the air – but a wounded ego has no place in the service industry.

Businesses must direct their resources towards more adaptive and responsive sales strategies. Operational leaders must provide their teams with the tools that protect cost of goods margins and systems that limit labour expenditure in line with projected sales.

On the front line, service staff deliver the guest experience that drives customer loyalty. Good leadership provides the tools for the team to succeed.

The only collective action required of our sector is to implement the full range of financial and operational tools that maximise revenue and cut expenditure without compromising on quality or passing the burden on to the guest in the form of a price hike, mandatory deposits or otherwise.

If this expertise is outside an operator’s knowledge, it must invest in external support. The rewards are immediate, the guest experience is intact and our sector will thrive despite the challenges ahead.
Catherine Johnstone is a consultant for Vigour & Vice, a management consultancy specialising in the pub, bar and restaurant sector

Confining compliance paperwork to the recycling bin by David Bashford

We have learned many things during this pandemic, one of them being the power of technology. Virtual communication has become the norm and, for most of us, our screen time has increased enormously since March. It has also enabled what was once deemed impossible to become possible – from GPs running virtual patient appointments to teachers hosting online classes. In the world of hospitality compliance, we’ve also seen a switch to the power of virtual.

As venues closed overnight and travel restrictions came into force we were challenged to find new ways to conduct audits as operators faced a host of challenges, not least making sure each venue in their estate had the correct checklists, paperwork and hygiene measures in place.

Before covid-19 we had already seen a move to automate compliance by switching to digital and going paperless. However, some hospitality operators were slow to make that leap of faith, even though they knew it would save time, centralise systems and seamlessly manage hygiene and safety standards across an estate.

Frequent excuses included being “too busy”, “too much hassle” and “this is how we’ve always done it”. However, there’s nothing like a crisis to focus the mind and bring the benefits of digital compliance to the fore. Integrated food safety and health and safety applications and e-learning are nothing new. What is new is the realisation of how important it is to have this type of software solution as much as it is to have an online order and pay app.

Compliance might not be the most exciting part of running a hospitality business but I would argue it’s one of the most important. Without the correct paperwork and robust hygiene and safety procedures, no hospitality business is going to enjoy success, even if they deliver the best experience. In the current climate this is even more relevant. Consumers and employees are looking for reassurance operators are doing everything they can to keep them safe.

Prior to covid-19 the idea of a virtual audit wouldn’t have been considered but we’ve had to evolve our services to meet the new challenges our clients face. I strongly believe site visits won’t return to previous levels and virtual is here to stay. I’m not saying there won’t be a place for ‘in real life’ audits but technology has proved robust enough to deliver effective remote safety checks. I also believe operators will move towards requiring the tools to undertake more of the checks, inspections and audits themselves.

Equally, I believe the digital transfer of compliance will soon confine piles of paperwork to where it belongs – the recycling bin. Imagine a world where the Environmental Health officer comes knocking and you aren’t scrabbling around for the paperwork. All you need is neatly hosted in the cloud that can be accessed and updated as and when required. 

Prior to covid-19, food safety and health and safety compliance was complex. That has only increased so having an integrated app that hosts everything you need to operate a fully compliant business, from reminders to checklists and from allergen controls to hygiene safety, HACCP certificates and employee training, has to be the way forward. 

We’ve seen how quickly changes to the status quo can turn our world upside down and being able to respond nimbly and effectively is vital. As people start to venture out for drinks and meals, what operators are doing to keep their customers safe has become even more important and visible. It’s no longer an option but a must!

Digitalisation is the enabler but it’s up to us as suppliers to make sure we evolve the services we offered historically to meet the future needs of our hospitality clients.
David Bashford is managing director of Food Alert

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