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Morning Briefing for pub, restaurant and food wervice operators

Fri 30th Apr 2021 - Friday Opinion
Subjects: Ain’t nothing going on but the rent [consultation], attracting talent via our EVP, time to embrace multi-channel hospitality, a positive force for the industry
Authors: Robin Rowland, Ann Elliott, Katy Moses, Glynn Davis

Ain’t nothing going on but the rent [consultation] by Robin Rowland

Rent is the issue that still looms large over the whole hospitality sector with the capability to bring the whole pack of cards down, just as many businesses are being tentatively and painstakingly rebuilt. Hospitality and other commercial tenants now have less than a week left to state the case before the government’s consultation on the rent/landlord issue closes. 

For the 40% of the market that comprises smaller operators who, in all probability, haven’t been able to restructure or reach resolution with landlords, and remain imperilled by mounting and unresolved accrued rent, now is the time to make your voices heard. 

The message is simple. After what will have been 15 months of enforced closure or severely restricted trade (from March 2020 to June 2021), operators have been unable to generate revenue that would have been there in normal times and upon which rent models were built. This revenue vanished with the pandemic and as a result of state-mandated trading suspensions and restrictions. 

The idea this issue can be resolved without a government-sponsored solution is fanciful. Especially given that despite the blindingly obvious – that there has been no income, no prolonged profit-making opportunity for the hospitality sector over that period – too many landlords still expect to be paid in full. Most people have tried their best to negotiate and mitigate cost, and actually be good tenants, but there is going to have to be some intervention to force a solution because it can’t be left to the open market.

The government’s non-interventionist approach so far suggests there is something of a disconnect in what they understand about our industry; the difference between revenue and profits; an overestimation of the margins available in the sector; not understanding the fixed costs and the variable costs that come into play with changes. A good, medium-sized restaurant might make £150,000 to £200,000 of Ebitda a year if it is doing well, as a mean average, but it will be some time until we get back to these levels. Very few will be able to make money on less than 70% of normal revenue. 

Without preaching to the choir too much, there also seems to be little thought given to the fact that it also costs money to reopen sites, there is a pre-opening cost to all businesses, they have to recruit and train people, put new systems in place, there remain restrictions on occupancy and so on. It seems to me all these things are still not completely understood by the government. They need to know the marginal profit that is going to come out of the first three to six months of reopening is not going to be enough at that point to offset the rent roll.

So what is the solution we need to push? In the US, landlords have, typically, been spreading out the rent arrears over the remaining period of leases and probably losing half the arrears in the process as well. The Americans are much more pragmatic, taken a longer-term view that “yes, I want my money, but OK I will take less of it now but we’ll push it out over the remainder of the lease”. The current “Mexican stand-off” is not going to work – there needs to be a recognition of reality and the government has to bring forward a mandated solution and bring landlords to the table emulating an Australian-style model, as advocated by many including UKHospitality. This is the only solution because landlords are not going to come willingly. There has to be some sharing of the pain. There has to be recognition that landlords have bills to pay too and in order to find workable solutions, they need support, and, therefore, the banks have to come to the party.

Without a government solution there will be a significant number of well-run businesses (with great futures, pre-pandemic) that will default on their debt and have their leases terminated. Some sites will be re-leasable, others will be void with high streets left empty, jobs lost and all the energy put into furlough, government support and the effort of owners to keep their businesses alive for nothing.

For landlords that haven’t yet come to the table – the sector understands there are, of course, balance sheets that need to be looked after on both sides. But the pain of this crisis must be shared. Hospitality businesses have already borrowed huge sums to get to this point and survive. There is an opportunity here for a more meaningful relationship and to form a partnership with tenants rather than solely commercial transactions. The Australian-style model is a solution that represents a natural fairness and we need, as a sector, to make that point clearly and consistently over the coming days. This is not the time to stay quiet, because without a mandated solution a huge number of good businesses will be lost forever. 
Please take the time to respond to the call for evidence and have your voice heard here: Call for Evidence on Commercial Rents
Robin Rowland is operating partner at Trispan, former chief executive of YO! Sushi and is writing for Propel’s Friday Opinion in his role as chair of UKHospitality’s Restaurant Working Group

Attracting talent via our EVP by Ann Elliott

If someone from a different sector asked you what the Employer Value Proposition (EVP) was for our sector, what would you say? Would it be any different to what you might have said pre-covid?

Having talked to more than 25 HR directors in the sector over the past few weeks for a project for Harri, it’s obvious that all the businesses I talked to are very clear about their EVP and see it as critical to attracting and retaining talent. The EVP reflects their core values, their sense of “why?” and their purpose. It’s their anchor in many ways. It encapsulates: “Why would anyone want to work for us?”

Someone, somewhere, a long time ago, must have agreed this as an EVP for our sector? Would it have been the Sector Skills Council and does it still exist for our sector? If a sector EVP doesn’t exist but needs to be created, what should it be?

According to Workology, having a great EVP helps companies attract and retain talent, appeal to different markets, re-engage a disenchanted workforce, prioritise their HR agenda and create a strong people brand. It said: “A good EVP contains elements that appeals to different groups of employees from different cultures, age groups and functions. The most successful EVPs are derived from combining needs of key segments of the workforce to form a universal brand that is then communicated through the best channel for each segment.”

Well, as someone said to me this week, if they had to start with a back-of-house EVP pre-covid, it would have been:

• Work your socks off

• Have your time off compromised

• Work very unsocial hours

• Miss your holidays

• Work in unpleasant conditions

• Go unrecognised

• Be on minimum wage

To be honest, this probably wouldn’t be very different for a number of other teams in our sector.

So our sector’s EVP might not have been brilliant pre-covid but the pandemic has hit its reputation quite dramatically over the past 14 months or so. Our EVP is potentially even shakier now than it was pre-covid. As someone else said to me, if passing “the test of mum and dad” when their school leaver child said they want to work in hospitality was hard in 2019, its now impossible.

Our industry bodies have done a brilliant job of telling everyone how hard hit the sector has been, how many businesses are closing down, how many jobs are being lost and how unstable it is, in order to gain financial support. It has worked with the government but its impact on those who may have previously considered working in hospitality will not have been so productive. Why even risk starting a career with hospitality when its future seems so uncertain and so unpredictable?

I don’t know who will take up the mantle of developing, agreeing and promoting the EVP for our sector. It could be UKHospitality perhaps?

I passionately believe in this sector. I felt as if I had come home when I joined it after three other jobs – one in fast-moving consumer goods, one in an agency and one in food production. I still feel this way.

If I had to talk about an EVP in our sector, I would like to be able to say:

• Recognisable and measurable career paths

• Early recognition of potential

• Huge opportunities for personal growth and learning

• The potential for real responsibility at a young age

• Part of a family

• Real enjoyment and fun

• Flexibility on hours

• Options for work-life balance

• Great benefits and rewards

Hopefully, post-21 June, the sector can start to talk positively once again about how great it is as a place to work. We have lost huge numbers of employees to other sectors and to other countries. We will need them back and, hopefully, sooner rather than later. We have work to do though to keep selling the sector to future team members.
Ann Elliott is a hospitality strategist, connector and adviser

Time to embrace multi-channel hospitality by Katy Moses

One of the bonuses of lockdown number 27, or whatever we’re coming out of now, is that I decided to treat myself and Mr Katy to a restaurant meal kit once a week, every week until hospitality reopens. I’ve really enjoyed the deliveries I’ve had so far (Cote, Aktar at Home, Pasta Evangelists, Pizza Pilgrims, Hakkasan, Peach at Home, Hawksmoor – the list goes on) and as time ticks on, a new habit has been formed in the Moses household, Friday night is “meal kit night”. I don’t see that changing any time soon and I’m not alone.
Nine in ten consumers want the hospitality brands that they’ve had in their homes during lockdowns to continue offering these at-home solutions even when restrictions lift, according to new research KAM carried out in partnership with eCommerce platform Slerp.
And if they don’t already, 62% of UK adults want their favourite restaurant brands to start selling “cook-at-home” meal boxes nationwide. 
In fact, 11.5 million UK adults (22%) have ordered a cook-at-home meal box in the past 12 months, with an even larger proportion (40%) intending to purchase in the future. 
So yes, we’ve heard it all before that the at-home hospitality trend isn’t going anywhere, but what’s important to highlight is that operators will need to adapt and evolve the offer as we move quickly into a new phase of socialising. That means where consumers may have been forgiving of kinks in new delivery services during initial lockdowns, brands now really need to up their game. Competition is already pretty fierce and now is the time for operators to cement their brand as a “go to” for their target customers and/or target “dine-at-home” occasions.
The great news is that all indications point to the summer of 2021 being the “summer of socialising”, assuming restrictions allow. Fingers crossed. UK adults are so happy to finally meet up with friends and family that a larger-than-normal amount of entertaining at home is predicted; 36% said they would have friends/family over more often versus pre-pandemic.
For example, 41% of UK adults said they are planning on having picnics with friends and family, 31% are planning garden parties and 39% will invite friends and family for barbecues. To reassure all the operators reading this, 60% intend to visit a pub or restaurant too.
All this points towards a new era of hospitality, which is really now a story of two tables; operators need to think about serving their customers at two very different venues – in their pubs and restaurants, and also in their homes.
Our research suggests the next phase of at-home hospitality solutions will need to move from a purely functional transaction to an experiential one, with operators thinking beyond the food they offer and considering the total experience as well as offering solutions for different occasions. 
There is a clear demand from consumers for at-home hospitality experiences for a range of special celebrations for example, with 43% saying they would buy an at-home meal box when celebrating an adult’s birthday party at home. Some 23% say the same for Valentine’s Day and 22% for children’s birthday celebrations.
Forward-thinking operators are not only providing quality food to eat at home but offer the entire experience, including branded packaging, drinks pairings and even tableware and playlists. Operators really need to think of each at-home delivery as a gift arriving on their customer’s doorstep. It is an extension of their brand and everything about the delivery, packaging and, yes of course, the food and drink impacts how they experience the brand.
Operators need to view multi-channel hospitality as an incredibly exciting new opportunity. Over the past 14 months we’ve proven, as an industry, we are flexible and adaptable but businesses will also have to understand and execute the new logistical challenges and also different marketing challenges involved. A mindset change is just the start.
Chris Galvin, co-owner of Galvin La Chapelle and now Galvin at Home, recently talked about his experience: “We’ve become experts in logistics, deliveries and production. We need to be smart and ensure we keep the Galvin high standards.” But he also feels: “We have had the opportunity to connect directly with thousands of guests in a way we could have never before dreamt possible. The ability to bring a restaurant experience into people’s homes is something we want to continue.”
During a recent chat with JP Then, founder of Crosstown and e-commerce platform Slerp, he mentioned “the benefits of selling a dine-at-home solution direct online is clear. Not only can it help operators navigate reopening by combating no-shows and encouraging business during off peak hours, it also creates additional revenue from assets you already have. In hospitality, experience is everything. Now more than ever, you need your online offering to mirror your offline experience”.
And here lies the key. The demand for at-home hospitality solutions remains strong, that we know. But operators need to think beyond the “feed-me-now” need and more from a functional solution to an experiential one. And that includes the ordering process. Whether you’re serving your customers in your venues or in their own homes (or their gardens), experience is everything.
If you haven’t already seriously considered the potential of selling online, expanding your geographical reach, connecting with new types of customers for different occasions and taking your beloved brand directly into your customers’ own homes, it should be firmly on your to-do list for 2021. Consumers are forming new habits and multi-channel hospitality is (finally) heading their way.
Propel readers can contact me if they would like a copy of the free research by emailing
Katy Moses is managing director of KAM Media
KAM Media is a Propel BeatTheVirus campaign member

A positive force for the industry by Glynn Davis

Walking down my local high street mid-morning on Monday 12 April for the momentous day when outdoor drinking at pubs and visiting non-essential shops became possible again, it was noticeable the barbers shop had no queue outside whereas the JD Wetherspoon was a hive of activity on its modest concrete front garden.

For these drinkers, their hair could stay long for another day because it was more important to be back socialising with friends and loose nod-of-the-head acquaintances who they had probably not seen since the shutters came down on the pub some weeks before Christmas. This group will, invariably, be tarnished by many people because they, apparently, have little more to do than waste their time and their money drinking. Couldn’t they be doing something more productive you could ask?

It’s so often forgotten, or not even considered I suspect, that for these people this is the “community” thing that we all talk about. Their community is not about going down the chichi coffee shop or church but revolves around the pub. While they have been shut, many of these people will likely have been living pretty solitary existences. The pub is central to their engagement with society. Yes, they could be doing something more productive like charity work or volunteering but life’s not quite like that is it?

When I once suggested Wetherspoon’s cheap prices made it much more accessible for people to have this social element to their lives I was shot down by the counter argument that it merely supports problem drinkers. The fact they could buy much cheaper alcohol in the supermarket seemed to have been lost.

This neatly encapsulates the rather polarised view of JD Wetherspoon. Where I see it has having certain virtues, the very same points can be equally put forward as negative characteristics. Its cheap prices enable it to welcome all comers onto its premises – just like the pub is supposed to do – but, to others, this low pricing not only fuels alcoholics but must also be only possible through screwing suppliers and underpaying its employees.

According to a recent article in Bloomberg Businessweek, these low prices are also a result of JD Wetherspoon taking advantage of liberalised planning rules to convert former cinemas and banks into large-scale pubs. This also killed off competition it suggests. Might I argue that this move did a great service by resurrecting crumbling old buildings that, in turn, helped regenerate town centres. It is just this sort of thinking that we need more than ever now as we look to revitalise high streets that have been devastated by covid-19 with multiple closures of retail and hospitality businesses.

It has also been oddly suggested that JD Wetherspoon has cunningly created grid-like seating patterns to reduce the frequency of chance interactions and thereby limit sociability. I’d prefer to think this is a rather sensible way to provide the preferred environments for a broad spread of demographics, which is exactly what the Victorians did with their pubs and I thought we still held them up as the exemplar of pubs. Well, maybe, but not if you are called JD Wetherspoon. 

The company has also been a victim of its founder Tim Martin being particularly vocal on multiple fronts. What began with Brexit, continued into covid-19 – going back to the video suggesting his employees take a temporary position at Tesco. But he’s also argued positively for the industry throughout the past year when leisure and hospitality has wanted its leaders to stand up and fight for their corner.

Martin has also recently profited from flogging some shares while the company takes furlough money. Even though the two are entirely separate, it doesn’t look great to the media. Less widely reported was the £145m that is being invested in new pubs and upgrades, creating 2,000 jobs. 

Love it or loathe it, JD Wetherspoon and Tim Martin make a difference. I’m on the side of it being a positive rather than a negative force for the industry and society. Right now, its reopening will be massively welcomed by way more people than some individuals will ever be willing to accept.
Glynn Davis is a leader commentator on retail trends

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