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Morning Briefing for pub, restaurant and food wervice operators

Fri 4th Sep 2020 - Friday Opinion
Subjects: An acceleration of the inevitable, covid-19 has seen pubs play an even greater role in their communities, resolutions we can all make to help the industry we love, reverse the music ban
Authors: Paul Chase, Emma McClarkin, Prask Sutton, Adam Castleton

An acceleration of the inevitable by Paul Chase

What will be the long-term effects of the covid-19 pandemic on hospitality and, more generally, on our economy and society? I put this question to Philip Smith – Lord Smith of Hindhead – who is the long-serving chief executive of the Association of Conservative Clubs (ACC) and chairman of Best Bar None. His cryptic reply was: “It will lead to an acceleration of the inevitable.” We can see this happening before our eyes: the move towards a cashless society; the trend to do shopping online; virtual meetings rather than face to face; e-learning replacing face-to-face training. All these were established directions of travel, but the pandemic has accelerated the pace at which these changes are taking place. But Philip Smith was referring to something more profound than whether more of us will pay by plastic or have our groceries delivered. He was talking about sustainability. 
Let me digress for a moment. There are two elements to social change. One is the nature of change itself and the other is the velocity of change – the speed at which it happens. In his seminal book Future Shock, published in 1970, futurist Alvin Toffler discussed the consequences of too much change in too short a period of time and how this risked overwhelming people. He distinguished three stages in the development of society and production: agrarian, industrial and post-industrial. We now live in a post-industrial society in which the services sector has attained great prominence. In the UK today, only 1% of the working population are employed in agriculture, 18% in manufacturing and 81% of people work in service industries. This illustrates the scale and pace of change since 1970. 
But the production of physical goods and the provision of services do not take place in hermetically sealed silos. They are intricately inter-related. A pub, bar or restaurant provides a service but also sells a physical product. And they do so from premises – a bricks and mortar asset. The business model that governs that inter-relationship is crucial to its sustainability. And this is where I begin to see the meaning of Philip Smith’s insight about the acceleration of the inevitable. The model he adopts at ACC is sustainable because it is focused on adding value and on long-term success, not short-term extraction. Unfortunately, that cannot be said of the environment in which much of the hospitality sector operates today.
The ACC has been in existence for 123 years and Philip Smith has worked for the ACC for 33 years and been its chief executive for the past 21 of those years. Currently, some 800 clubs are members of ACC. From the outset, Smith sought to replace the brewery loans that many of his member clubs had taken out and to open his own loan book. Thus, ACC became a property company that owned or had a lien on all those clubs that were previously in thrall to their beer suppliers. In addition, he based rents on affordability and offered a range of services to support member clubs. ACC member clubs can access ACC’s preferred suppliers, but are not obliged to do so although, interestingly, they do not have a preferred drinks supplier. This is the crucial distinction between a commercial landlord and one that not only charges a property rent but mandates who you can buy your products from. It is this compulsion that fundamentally changes the power relationship between landlord and tenant from one that holds out the possibility of partnership, to one where the landlord holds all the cards.
ACC’s clubs have reopened without the prospect of a tsunami of debt from unpaid rent hanging over them. Smith takes a pragmatic approach – you can’t expect people to pay bills if they have no money coming in and what matters is the long term – the ability to trade for the next 123 years. Pubcos and commercial landlords in city centres would do well to take a leaf out of ACC’s book. Some have – Admiral Taverns comes to mind as one that has forgiven rent over the lock-down period – and there are others, but some have simply postponed rent arrears and are approaching this issue on a tenant-by-tenant basis, or simply not saying how they plan to deal with it.
I don’t want to speak in coded language here: the pubco model and the beer tie may have limped along when times were good but it’s simply not sustainable in the unprecedented circumstances in which the country now finds itself. Around 30% of pubs and bars have yet to reopen and industry experts are predicting that up to 20% of pubs will not survive the next six months. Contrast this with the position at the ACC: 95% of their clubs have now reopened, and in a recent survey of their member clubs 56% said they were confident about their future, 29% said they were very confident and only 15% said they were not very confident. 
It is well known that pubcos are highly leveraged, based on wet rents. This issue has been flagged as problematic for some time, but the disruption and uncertainty caused by the pandemic has sharpened this concern and some pubcos may well go under – an acceleration of the inevitable.
I put the “acceleration of the inevitable” insight to Nick Griffin, chief executive of the Licensees Association, and he expressed concern about the collateral damage this might cause to all those running premises and struggling to make an unsustainable situation work. Griffin referred to an urban saying whose acronym is “SRDH” – and there’s a vast amount of it poised to do so right now. Griffin has a sincere desire to find a pragmatic solution to make the market work and to find middle ground between pubcos and struggling tenants and lessees. He doesn’t want to tear down the wall in order to change the wallpaper and recognises that the long-term pub lease is a valuable asset. But the regulator has to make the pub code work and mend the market – otherwise the devastation will be huge.
Our ability to get ahead of the curve can mitigate the damage arising from the changes that are coming. But real partnership working and a willingness by everyone to take a share of the hit is key to survival. If that willingness isn’t forthcoming, then the “future shock” that is almost upon us will be devastating.
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health

Covid-19 has seen pubs play an even greater role in their communities by Emma McClarkin

It’s two months to the day since pubs reopened on 4 July, following 15 weeks of forced closure during the covid-19 lock-down. Having now all enjoyed that first, glorious pint of draught beer back in our local –and a classic pub dinner or two as part of the Eat Out To Help Out scheme – it certainly feels like normality is starting to return to our pubs and life as a whole. 
After months of not being able to see loved ones and friends, our pubs are back to what they do best – bringing us together under one roof in a safe environment. If we are being honest, after months of being cooped up in the same house with family, getting out to the pub and socialising with others is probably what many of us missed the most in lock-down. 
The local pub has always been the place that brings us together. A place to talk, a place to sit and think, a place to meet others – along with playing a vital role in tackling loneliness. As life returns to a semblance of normality once more, our pubs are again doing what they have done for centuries – bringing us back together as the heart of the community.
Having to close during lock-down has been tough, not just for the industry but also for those who rely so much on their pub. But this didn’t stop our pubs from continuing to provide vital support and services to the villages, towns and cities they operate in. In fact, inspiring pubs and publicans played a greater role in their communities than ever before by adapting services to become shops and take-away deliveries, as sometimes the only public convenience for miles for some of our most vulnerable citizens.
The start of the lock-down for pubs on 20 March immediately saw a reaction from our locals to continue to serve their communities in innovative ways despite being closed. When Mother’s Day on 22 March became an early covid-19 casualty, pubs across the UK stepped up. Places such as The Cross Keys in Newbold Coleorton, Leicestershire, and The Old White Bear in Keighley, Yorkshire, delivered all their Mother’s Day lunches and dinners from their pub kitchens to their communities instead. Others, like Brawn’s Den in Durham and The Myrtle Tavern in Leeds, donated all the food they had planned to serve to local food banks and vulnerable residents instead who were unable to shop for themselves.
As the lock-down went on, pubs continued to support their communities, all while facing severe uncertainty over their futures. In the middle of the crisis, pubs played an active role in supporting the NHS and staff on the front line in the fight against covid-19. Many pubs, such as The Plough & Harrow in Leytonstone and Lesters in Margate, donated food and drinks for NHS staff and other key workers to enjoy both on and off shift. Several others, including Greene King’s and Shepherd Neame’s managed pub operations, offered free car parking and accommodation to key workers and NHS staff during the crisis. One pub, The Clifton Arms in Blackburn, raised more than £400 in just half an hour to supply care packages to NHS staff at their local hospital and those in isolation in the local community who were unable to leave home. 
As life – and our pubs – steadily start the journey back to business as usual, they are reopening to a new normal. At the British Beer & Pub Association we have seen our members tackle this new way of life head-on, going above and beyond to make their customers feel safe, meaning they can return to their role of bringing communities together. But they are far from out of the woods yet and face a long road to recovery. Trade is down and consumer confidence still has some way to go to return to what it was like prior to the lock-down.
It would be easy to forget the vital support pubs have provided during the covid-19 lock-down to so many. But we cannot, and must not, ignore their incredible efforts, and now government needs to continue to support them in return. Granted, some very important support has been provided by government, recognising the vital role pubs continue to play in supporting the economy and local communities. Without further support now though, it would all be for nothing.
An important step as we approach the Autumn Budget should be to cut beer duty, and I urge anyone who supports local pubs and brewers to visit and sign the petition urging the Government to support Britain’s pubs and breweries in their recovery. Doing so will help ensure the great British pub can continue to serve our communities for generations to come. 
Emma McClarkin is chief executive of the British Beer & Pub Association

Resolutions we can all make to help the industry we love by Prask Sutton

We’re entering uncharted waters. Furlough coming to an end means consumers are preparing to tighten their belts and businesses are concerned about their wage bills. There’s mixed opinion on whether Eat Out To Help Out (EOTHO) will see customers continue to frequent pubs, bars and restaurants for their meals or if it means a return to a culture of heavy discounting not commercially viable for many. What’s more, as we enter the colder months of winter, how much harder will it be to abide by social distancing without being able to make the most of outdoor seating areas? 
But before you stop reading, I promise this isn’t a ‘doom and gloom’ piece. You see, I feel September brings with it a big dose of optimism (which we all need right now). Most people would say new year is the time for change and developing new habits, others might say spring with its metaphor of growth and new beginnings. For me, it’s September. If you think about it, ever since we first started school, it’s been drilled into us that September is a time for newness; new term, new uniform, new pencil case… so perhaps we, as the hospitality industry, should embrace this and use this time before the end of the year to reset.
We’ve all learnt lessons recently so let’s use this to make just two mid-year resolutions, one personally and one professionally, which collectively could play a part in reviving the industry we all love so much.
Personal resolution – I will support both independent and big brand hospitality venues
While Twitter may be awash with “good riddance” comments when big brands are forced to close their doors, we in the industry are not so glib. We know the faces behind the “corporate giants”, we know that these places are providing much-needed jobs and security to a good majority of those 1.8 million people employed in hospitality. While some may celebrate their demise, the fact is missed that these businesses are people’s lifelines. The closure of a chain isn’t an “up yours to capitalism”, but instead means at least five or six households who are losing an income. Equally, smaller independent operators act as hubs of their local communities, providing jobs and careers. They welcomed back customers through EOTHO, but don’t all have the luxury of extending with their own hard-earned money and will need us all to continue to visit them, share reviews and keep coming back for their great atmosphere and service. 

Professional resolution – I will plan ahead to proactively take on challenges
To remain open, the industry has had to adapt, finding ways to enable social distancing and removing physical menus. With colder months ahead there’ll be a need to plan for staff shortages as come the usual winter coughs and colds, we'll need to err on the side of caution. Having a mobile order-and-pay solution has gone from a “nice to have” to an absolute necessity. Operators need to offer “pick-up” and “order to table” brilliantly, while maintaining social distancing, and crucially, keep costs down more than ever. With Bolton and Trafford becoming the latest towns to fall victim to further lockdown measures, new restrictions pose a very real threat. A mobile order-and-pay solution can help you quickly, cheaply and efficiently adapt to pick-up if needed, help maintain social distancing between staff and customers and free up your teams to focus on the hospitality element of their jobs – ensuring a great service and experience by removing the, let’s face it, boring transactional element of paying a bill. With the hospitality industry now taking a leap into the e-commerce revolution, customers will embrace the speed and efficiency that tech brings them, and operators will rely on suppliers they can trust, on a financial model that suits their businesses. 
So if I can urge you to do just two things this September, it’s to put plans in place to embrace the winter months ready for the Christmas rush ahead. And, as people who love this industry, we must make an effort to change out of our “work from home sweat pants” and make that trip to the office to support what used to be our regular haunt. We should go to our local high street for lunch instead of creating something from questionable leftovers from the back of the fridge. We now, more than ever, must give back to the industry we love, and play our part in continuing its recovery. 
Prask Sutton is founder and chief executive of Wi5

Reverse the music ban by Adam Castleton

On Friday, 14 August, the Scottish government made the ludicrous decision to ban hospitality businesses from playing background music in their premises, concerned that it could cause people to raise their voices and lean in to talk to each other, increasing the potential of spreading coronavirus through aerosol transmission.
Restaurateurs and hoteliers in Scotland have since called the ban a “kiss of death” for the atmosphere in their businesses, saying that such a “blanket” ban is ridiculous.
Meanwhile, the Scottish Beer & Pub Association (SBPA) has reported a 20% drop in takings across the sector since the music ban came in. It says it will create more devastation throughout the sector and result in many pub closures and job losses.
The background music ban is, of course, well intentioned. But it assumes that all operators are irresponsible, and as SBPA chief executive Emma McClarkin rightly points out, it could actually have the opposite of its desired effect, causing customers to lean in and whisper to talk more privately. 
Then there is the dramatic impact it will have on the atmosphere. With no music to create an ambience, the atmosphere is being ripped out of pubs, restaurants, cafes and hotels, in many cases, creating an awkward and soulless experience that will discourage many people from venturing out.
I recall a particularly uncomfortable visit to a popular Italian restaurant years ago, where the music system was broken. In the half-filled room, we awkwardly ate our meals, unusually aware that everyone could hear our every word (as well as every awkward silence). The lack of background ambience turned what should have been a sociable experience into something purely functional – an experience that I associate with the brand to this very day.
Without music, there is a significant gap in the customer experience. Many hospitality spaces will feel colder, quieter and much less relaxing. The success of the sector’s recovery will be based on these early customer experiences – unnecessary speed bumps are very unwelcome at this critical time.
A better approach
The hospitality sector has been hit incredibly hard, but fortunately things are starting to look up. Boosted by the Eat Out To Help Out scheme, Startle’s Mind The Gap research shows the number of people who have visited a restaurant in the UK since lock-down ended tripled in August (31.4% compared with 10.4% in July). 
With customers returning, we’re back to setting first impressions, which is as much a risk as it is an opportunity. It’s not just about getting through these early weeks by making customers feel safe; it’s about creating out-of-home experiences that drives customer behaviours long into the future. If the experience is too clinical and uncomfortable, the wider industry will not see the return footfall they need to thrive as customers will simply retreat back into their homes.
For operators that use background music effectively to help create a great atmosphere, the ban on music will be disastrous. They should, instead, be trusted to use music appropriately and sensitively, as they are trusted with food safety and the sale of alcohol.
The vast majority of operators have demonstrated their ability to react and adapt to operate safely. An outright ban on the use of music is an oddly extreme measure that removes a key opportunity to relax customers and give them the enjoyable experience they have been missing.
Startle’s Mind The Gap research shows that 45.1% of pub-goers and 37% of restaurant goers find the atmosphere less relaxing than before lockdown. Furthermore, 54.6% of pub-goers and 45.2% of restaurant-goers don’t think the experience is as fun as before. These are significant customer experience gaps that background music and covid-safe entertainment can help to fill.
The proven impact of music
Music is an extremely powerful medium that influences how we feel and behave. The harmonicity, rhythmicity and turbulence of music can have a surprising impact on the brain, endocrine and autonomic nervous systems of those listening. Harnessing the science of music can be a valuable tool for aiding the recovery of hospitality businesses during this challenging time.
At Startle, we use a scientific model for our music profiling that predicts, with 95% accuracy, the neurophysiological effect every song will have on consumers. This helps us to orchestrate the atmospheres we’re helping to create with a great degree of accuracy. 
For example, using playlists made up of songs proven to elicit feelings of “relaxation” and “calmness” could be really effective at putting customers at ease during this period of uncertainty, not only improving how much customers enjoy their hospitality experiences, but increasing their likelihood to recommend and come again.
Similarly, designing playlists with tracks that are scientifically proven to have low activation can encourage people to take their time, not only extending dwell-time to drive additional spend, but also helping them to be more forgiving towards longer wait times.
There are employees to think about too, who, let’s face it, have had a tough ride too. Removing music from venues will be a travesty to many of them – a sap of motivation and reduced sense of familiarity that music can bring in stressful times.
There is no “one-size-fits-all” approach to music but, with the right guidance, operators across all types of hospitality businesses can apply music in a safe and effective way and should be allowed to do so.
I sincerely hope the Scottish government comes to its senses and reverses the ban on background music and instead affords the industry the trust that it deserves to set lasting customer impressions, and secure the jobs and wellbeing of the millions of people in the hospitality food chain.
Adam Castleton is chief executive of Startle 

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