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Morning Briefing for pub, restaurant and food wervice operators

Tue 2nd Mar 2021 - Greene King boss – businesses, jobs and livelihoods hang in the balance
Greene King boss – businesses, jobs and livelihoods hang in the balance: Greene King chief executive Nick Mackenzie has asked for more government support for the sector to save businesses, jobs and livelihoods that hang in the balance. Writing in the Daily Telegraph, he stated: “I cannot stress enough how precarious a position the entire sector is in right now. I think I speak for the industry when I say that the chancellor’s Budget this week has never been more important. Businesses, jobs and livelihoods hang in the balance. After a year of very little trade, the sector has been unable to stem its cash burn. At Greene King, one week of closure costs every pub on average £4,500 – that’s £7m a week for all our managed pubs. Our 1,000 tenants, many of whom are single-site operators running small businesses, would be facing a loss of more than £1,000 a week if we weren’t helping with 90pc reductions in rent. Yes, furlough payments and the business rates holiday have been a huge help – and no doubt the number of business closures and job losses would be off the charts without those – but the fact remains that we, like our peers, have a lot of fixed costs to cover every day and we will continue to carry these costs with no income to cover them until we are allowed to trade again in mid- May. In the last year alone, we have written off £16m of stock, and there are currently thousands of pints of beer sat in pub cellars that sadly need to be disposed of in the coming weeks. Whilst the grants announced over the weekend are very welcome, for many they will not be sufficient to cover costs let alone help to rebuild businesses saddled with additional debts and depleted cash reserves. Many larger businesses will miss out on tens of millions of pounds’ worth of support as they won’t be able to access the new grants due to state aid caps that are significantly lower than revised European Union temporary limits designed to support businesses through the pandemic. We need the government to confirm they will adopt this approach. So, this is a critical moment for the sector. The Prime Minister has set out his plan on how he wants us to reopen and when. It is now time for the chancellor to step up and provide the financial support needed to ensure we can survive and then thrive again. In addition to the new grants, we are calling for sector-specific support, including the extension of the business rates holiday and VAT cut for another year – and that needs to be extended to alcohol. It goes without saying that it is vital that the furlough scheme is extended until we can trade meaningfully again, realistically that’s the end of June at the earliest. Like much of the sector, we were depending on the job retention bonus this year after a financially crippling 12 months. Taking it away after it was promised has left a significant hole in the finances for many businesses and for us was earmarked for recruitment, training and investment. We ask the chancellor to reinstate that bonus to give the whole sector a much-needed boost, which in turn will enable us to play our part in kickstarting the UK economy and supporting jobs. And let’s not forget the country’s breweries, many of which are in dire straits. British brewing goes back centuries and is a much-loved part of our culture, and our breweries need to be supported until they can get fully back on their feet. The UK has one of the highest duty rates in Europe, 11 times that of Germany and Spain, and a cut will protect jobs and breweries. Whilst we are hopeful of a brilliant summer, the fact remains that it isn’t going to be an immediate return to normality for pubs and recovery of the sector will take much more than a few months of strong trading. The success of the vaccine rollout is amazing but some people are understandably hesitant about returning to public spaces. Our urban pubs that depend on workers and tourists will likely see a longer delay as people get used to going back into cities and towns for work and pleasure. That’s why it’s critical that we don’t face a cliff edge in financial support. The sad fact is, without this level of support from the government, we’re going to see more pub closures over the coming weeks as small and independent businesses struggle to bridge the gap between now and reopening fully in June. The number of job losses in hospitality since the start of the crisis – 650,000 by the end of last year – is heartbreaking. We are doing all we can to support our teams and they can’t wait to get back to serving customers again. The announcement that pubs will be able trade in an unrestricted way from 21 June is extremely welcome. Pubs will finally be able to go back to what they do best, connecting communities and providing the social contact we are all craving. We need the chancellor to give the support the industry requires to get us through to that day.”

EU legacy rules are blocking grants to businesses, BBPA warns: Businesses risk missing out on covid grants unless the government lifts the state aid cap on the amount of help that can be given to each firm, the Beer and Pub Association has warned. Rishi Sunak, the chancellor, is to give companies in the retail, hospitality and leisure sectors another £5bn in support to get through lockdown, but Emma McClarkin, the industry group’s chief executive, said some would be blocked from claiming it. This is a legacy of the UK’s participation in the EU state aid scheme pre-Brexit, she said, which governed the way in which governments could dish out subsidies to companies. “State aid has become a big blocker, for pubs particularly within a parent company,” said McClarkin, speaking at the CBI event. “There is a state aid cap of €800,000 (£690,000), which was raised to €3m, but the EU has raised its cap to €10m, so we are quite a way off that in the UK. There are many people who hit that cap, given the length of time now we have been closed, and it has become a major block for many of our operators.” The UK has set out plans for a new state aid regime, but, as in many other areas, has so far largely retained rules inherited from Brussels. McClarkin added that discretionary grants, dished out by councils, are often difficult to obtain. Last week The Telegraph revealed that local authorities are still sitting on £1.6bn of funds that were earmarked for struggling companies, including those in the retail or hospitality supply chain but have not been given as much support from central government as those front-line customer service firms. McClarkin suggested a name-and-shame system might prod councils into action. “Local authorities have been dealing with this with different mechanisms, different processes and different application forms, and it has been very, very slow in some areas,” she said. “There were league tables last year which ranked the efficiencies of local authorities in getting these grants to the people who desperately need them. We need to bring those back. It is really important people get access to these grants.”

Chancellor to provide £150m fund to allow communities to buy their local pub: The Sun has reported that chancellor Rishi Sunak will create a £150m fund to rescue local pubs and football clubs from closure. The chancellor will use the Budget to pledge the £150 million to help neighbourhoods take over assets loved by the community. The Sun stated: “He hopes the jumbo fund will stop a generation of local boozers and sports grounds from closing for good in the covid recession.” He said: “Pubs and sports clubs are the heart and soul of our local towns and villages – they’re the glue that keeps us together. This fund will help to ensure vital local institutions aren’t lost to those who treasure them most.” Under the plan, communities that want to club together to bid for local assets will get government cash so they can seal the deal. They can get up to £250,000 to buy struggling pubs, sports clubs, post offices, theatres and gig venues which are threatened with closure. In exceptional circumstances, communities will get up to £1m to buy a sports club or ground. The money is matched funding – so groups that raise money to buy a local asset can apply to the government to double their cash. Treasury chiefs hope this Community Ownership Fund will help covid-battered high streets bounce back after the pandemic. The four-year scheme will open for business this summer. Downing Street says it will be crucial to its levelling up agenda by giving locals the power to protect and shape their areas.

Fazenda brand acquired out of administration by existing management team: Southern Wind Group, a newly formed company headed up by the management team of the parent company behind the Fazenda brand, has acquired the bulk of the restaurant business via a pre-pack administration. Julian Pitts and Bob Maxwell of Begbies Traynor in Leeds were appointed joint administrators of City District Limited, which trades as the Fazenda Rodizio Bar & Grill alongside sister brand Picanha by Fazenda, yesterday (1 March). Southern Wind Group Ltd, which is headed up by City District Limited’s former chief executive Terence Langley and managing director Tomás Maunier, will continue to trade as ‘Fazenda’ and will retain the Leeds, Manchester, Edinburgh and Liverpool Fazenda sites, saving 243 jobs. However, Fazenda Birmingham and Picanha Chester are not included in the deal and 69 staff will be made redundant. The business said it had suffered from the impact of prolonged lockdowns and restrictions caused by covid-19, which resulted in a significant build-up of landlord and HMRC arrears which could no longer be serviced without additional funding. After a period of marketing undertaken by Begbies Traynor Group, a pre-packaged sale was agreed. The acquisition also includes the recently launched e-commerce arm of the business ‘Fazenda at Home’. Chief executive of Southern Wind Group, Langley, said: “The pandemic has meant that we have had to regroup and review to navigate the current climate as best we can and put the business in good stead in order to come back strong. We have high hopes that Fazenda will find the right place in Birmingham to operate in the near future, and we can continue on the growth path planned pre-covid.” Maunier said: “Unfortunately rent negotiations and significantly reduced cash flow has led to this difficult decision to close two of the restaurants. The hardest part is that we were unable to retain the whole team, though we are extremely proud to have secured over 200 jobs in the process. Despite the closures, we believe that the long-term future is looking bright for both the industry and the brand, and we are looking forward to resuming operations across our other sites in May.” Southern Wind Group said it will honour any gift vouchers previously issued by the Fazenda and Picanha restaurants.

Dalata Hotel Group chief executive Pat McCann to step down: Dalata Hotel Group chief executive Pat McCann has informed the board of his intention to step down following a transition period. Dermot Crowley, currently deputy chief executive, will succeed to the position of chief executive. John Hennessy, Dalata chairman, said: “Pat has been instrumental in growing Dalata, and its Clayton and Maldron brands, into a leading player in the hotel sector in Ireland and the UK. Having founded the business in 2007, he has successfully transformed Dalata, creating a listed business comprising 44 hotels, 9261 bedrooms and a pipeline of 13 new hotels with 3300 rooms. His leadership and his ability to engage our people has been critical to that success. It has been a pleasure and a privilege to work alongside him since the group’s listing in 2014, and on behalf of the board and the entire Dalata team, I would like to offer my sincere thanks to Pat and to wish him every success in the future.”

Hotel Chocolat reports sales growth despite opening restrictions: Hotel Chocolat has reported revenue up 11% to £101.9m (H1 FY20: £91.7m) in the 26 weeks to 27 December 2020. Profit before tax was up 3% to £15.5m (H1 FY20: £15.0m). UK sales grew by +12% driven by increased multichannel flexibility, with online growth more than offsetting reduction in physical retail sales caused by closures during lockdown and tier four restrictions. Angus Thirlwell, co-founder and chief executive of Hotel Chocolat, said: “The Hotel Chocolat brand stayed strong during a difficult period for all of us. We certainly kept the chocolate flowing thanks to our online capabilities and multichannel expertise. We recorded superb results in the UK, USA and Japan despite covid-19 restrictions affecting all our physical locations. We achieved sales growth during those periods when all UK physical locations were closed, demonstrating the brand’s appeal to our loyal customers, and our flexible business model. Databases of active customers grew substantially in all three markets, underpinning our confidence of growth in the years to come. In the UK, our multichannel model truly came of age, and excitingly, both Japan and the USA firmly stepped up from the ‘test and learn’ phase into ‘grow and scale’. Total brand sales, through direct-to-consumer and partner-channels combined, increased 16% year-on-year. Huge thanks go to all the Hotel Chocolat family who worked tirelessly to safely and creatively adapt the business and deliver these results. We know that we all played a role in maintaining morale and bringing happiness through chocolate in all the countries we operate in. We look forward to building the Hotel Chocolat brand further as we move closer to our goal of becoming the leading global direct-to-consumer premium chocolate brand.” 

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