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Morning Briefing Strap Line
Fri 8th Jul 2022 - Friday Opinion

Subjects: Converting political chaos into economic order for hospitality, pricing in pubs must take a long-term view, why Grace is a true leader, covering all bases

Authors: Kate Nicholls, Elton Mouna, Ann Elliott, Sarah Travell

Converting political chaos into economic order for hospitality by Kate Nicholls

The events of the past week have seen a crisis of confidence in politics just at the time of maximum geopolitical and macroeconomic turmoil. Precisely when we need a clear and urgent strategy to get a grip of these issues – to stabilise business, consumer and investor confidence – we face a vacuum at the heart of government. These are unprecedented times. 

While the challenges facing the sector represent a perfect storm, the news that we are to have a new prime minister and an overhaul of government represents a major opportunity for our sector to press for the changes we need to get the economy moving. Hospitality is forecast to grow 3% year-on-year over the next decade.  It is double the rate of the economy as a whole, which underscores how vital hospitality is as an engine for growth and an enabler of recovery. We will deliver that message to the new government: back our recovery, we’ll rebuild resilience and generate growth, jobs, skills and the regeneration of communities across the nation. 

We know the challenges the sector faces: soaring energy bills and other inflationary headwinds diminishing margins; debt and a lack of investment fundamentally altering business models and threatening viability; severe labour shortages crippling our ability to maximise revenue and trade our way to recovery. Our recent member survey showed that half of venues had cut trading hours, reduced capacity or limited trading because of staffing issues – losing the sector £21bn in revenue and costing the chancellor more than £5bn in tax. The same survey showed that our cost of doing business was resulting in price increases to consumers – a law of diminishing returns stoking inflation further. 

We have shared this analysis and our solutions to the current crisis with ministers and officials at the highest levels of government, including No 10 and No 11. We have left them in no doubt about the areas in which we need support and action – and the consequences of inaction. The chaos at Westminster has made it difficult to make progress on key reforms. Now we can expect that to change, and UKHospitality will redouble its efforts to press for a long-term economic plan. However, the effectiveness of our efforts will be hugely bolstered by a concerted industry effort over the summer.

Over the coming weeks, Conservative MPs will be choosing a new leader who, in turn, will appoint new ministers. They will return to their constituencies over the summer recess, keen to hear from local businesses and constituents about the issues of the day. We need to ensure that support for hospitality is among their top priorities. We must convey to them how – by supporting our sector, reducing the cost of doing business, underpinning discretionary spend and addressing labour shortages – we can kickstart the recovery. Get it right, and hospitality will help accelerate the economic growth so desperately needed. Get it wrong, and a declining or contracting hospitality sector will make the cost of living and economic recession far worse.

As well as Conservative MPs, we will also need to reach out to politicians of all parties, and we will ensure our messaging is relevant to all parts of the political landscape. Over the next week, we will be preparing materials for businesses to get in touch with their local MPs to communicate our priorities – and to invite them into their premises to understand the challenges we face and the fabulous opportunities we can offer. Please ensure your business is part of this group effort.

Key objectives will be the reform of business rates with a permanent hospitality discount to boost regeneration; incentivisation of investment in training and access to people to boost productivity; and a cut in VAT to boost consumer confidence. These measures will allow us to invest, delivering levelling up and regeneration in every constituency. 

These may be amongst the most challenging and turbulent times many of us have witnessed, but by continuing to work together and sending a clear message through a strong united voice, you can be assured that your hospitality trade body will do all it can to help you navigate through them.
Kate Nicholls is chief executive of UKHospitality

Pricing in pubs must take a long-term view by Elton Mouna

Is Bill Shock a regular in your business? He has been barred from many hospitality venues, but he is the type of character who always tries to worm his way back in. Bill Shock is not a person though – Bill Shock is a feeling customers get when their bill is way higher than they expect. You can spot it a mile off: customer gets bill, winces, does a double-take, rubs eyes, pays, tells friends, posts disparaging comment on Trip Advisor and never comes back.

Some in our industry will not entertain Bill Shock. Clive Watson, for example, is certain that despite incoming costs rising on an “almost daily basis”, the City Pub Company will be cautious with their pricing. “What we don’t want to do is alienate our customers,” says Watson. And Mowgli Street Food executive chef Nisha Katona told the Today Programme: “If we start hiking our prices up mercilessly, we will not have the customers we need to keep us afloat.”

Others do not seem as reasoned, and their often ego-based temptation to pull the pricing lever is just all too strong. Despite the macro worldwide economic changes, some chase the same margin they have always achieved, because that’s the margin they have always achieved. For others, there is the ego driven determination to beat their peers’ like-for-like sales as if it is a competitive game of sport. Others make short-term pricing decisions to serve their own personal gains rather than the long-term future of their company, before moving to another company to do the same. All these examples I call ‘greedflation’.

There is another issue when it comes to making sensible and measured pricing decisions. Again, the issue lies with the people making the decisions, and these seven words they repeat every time they order food and drinks in a pub: “May I have a VAT receipt please?” Those seven words lead to pricing decision makers not being as aware as they should be of the financial impact of visiting a pub, because they are not personally financially impacted. With this in mind, I believe there is a swathe of pubs sleepwalking into a pricing structure that is neither aligned with their customers’ disposable income, or their customers’ perception of value for money.

I remember the millennium, when pubs really pushed the envelope regarding pricing, charging both huge entry fees and putting up prices in tandem. This left a bad taste in some customers’ mouths and was a moment many customers started to change their New Year’s Eve celebratory behaviours. Right now could be another period where, if we get it wrong, we will spark further detrimental changes in our customers’ eating and drinking out habits.

When I was managing director at London pub company Remarkable Pubs, I took pricing seriously – very seriously. So much so that I would personally discuss the retail selling price of every single stock keeping unit with every single general manager in order to agree a retail selling price that hit the right spot for all concerned. It was a labour-intensive process, but it was so much better than putting a formula into a spreadsheet and letting Excel make the pricing decisions. 

I completely understand there are some in our industry that have very good reason to increase prices as far as they possibly can, which I call ‘needflation’. They have staggered through the pandemic crisis and emerged from it with a tremendous weight of debt around their necks, and now face rising inflation, increasing utility costs, increased labour costs, and are destined to appear as a statistic in the next Altus Group diminishing pub numbers report if they don’t take action.

As I write this piece, the sun is shining and pubs are picking up again. Happy days. But remember, in six months’ time it will be Dry January, and any business which pulls the price lever too far now may not have considered the combined impact of Jack Frost and Bill Shock.
Elton Mouna is a hospitality commentator on Talk TV

Why Grace is a true leader by Ann Elliott

“The role of a leader is to create the vision, the plans and the drive for the company’s goals to be achieved.” So said Grace Harding, chief executive of Ocean Basket (and the first woman to run a restaurant brand in South Africa) at the Propel Multi Club Female Leaders & Entrepreneurs Conference, held last week.

Of course, we all know that leaders have to do this, but somehow Grace presented the role of leadership in a very different, compelling and thought-provoking way. I took a number of lessons away from her presentation and I am paraphrasing here, not replicating her exact words.

A leader has to create an environment in which their team want to do their best and are motivated by it to do their very best. It’s not up to the company to motivate its colleagues per se, but rather create an environment which in itself is motivating. Guiding, coaching and nurturing individuals while demonstrating real empathy is crucial. Leaders have to be able to connect.

The team must understand, and really appreciate, why they are working for a business – the role they play in delivering its higher purpose. Leaders should be telling stories consistently about their company’s vision, future and potential, so that their colleagues value the role they play in achieving it. Significantly more time should be spent telling them business stories than telling them what to do or how to do it.

So, as Grace said, the BMW mechanic repairing a customer’s car isn't just doing that. What they are doing is more than this – they are ensuring that the customer buys another BMW. It’s similar to the story about President Kennedy, who in 1962 visited NASA for the first time. During his tour of the facility, he met a janitor who was carrying a broom down the hallway. The President casually asked the janitor what he did for NASA, and the janitor replied, “I’m helping put a man on the moon”.

This isn't about numbers or targets, or rewarding individuals for hitting their objectives. It’s thanking teams for demonstrating behaviours that help the whole business thrive. Peter “Fats” Lazarides, who founded Ocean Basket in 1995 with very little capital, inspires Grace in this way all the time. He is, she says, a true futurist and visionary who doesn’t believe in conventional thinking. “Chase the dream and success will follow” is a mantra they both believe in.

This suits Grace, who is given the freedom to lead the business based on the values (and the business) they both share. He doesn’t ask about numbers, he doesn’t tell her what to do – he knows she always does the right thing by, and for, the business. Poor food and customer complaints cause both of them more anxiety than not hitting the numbers.

The brand is key to Grace. She has stayed at Ocean Basket so long because she believes there is real alignment between her and the brand, and she will not let one person hurt it in any way. It’s the brand above all else. “You have got to give a damn from the bottom of your heart,” she said. She is not tolerant of any sub performance from her colleagues

In her view of leadership, her team are her colleagues. They work as one. Team building is not a “one off, out of the office, two-day getaway”, it should be happening all the time and be part of a great relationship. The greatest gift you can give anyone, she said, is the gift of time. One-on-ones are vital in creating this relationship. “At the end of the day, we are colleagues operating in a grown-up world.”

Grace recommended A Beautiful Constraint by Adam Grant, the writings of Dan Ariely, the works of Dr Gabor Mate and attending the Brand Minds Conference, which features global thinkers, world-changers and outstanding business insights.

In summary, Grace said she had been told by Fats to “own your space, your work and your limelight”. Just such a great message for the women leaders and entrepreneurs who came to the conference. Thank you so much, Grace, for helping us do just that.
Ann Elliott is a hospitality consultant

Covering all bases by Sarah Travell

“Pivot” was, for many, a word that has been rather over used over the past two and a half years, probably as much as “unprecedented”. However, it did signify how many operators looked to overcome the challenges of lockdown to stretch their businesses, brands, concepts and offers in order to reach as many consumers through as many channels as possible. 

Entrepreneurs in the sector have always found it hard to stick to one lane when it comes to fulfilling their creative urges, and many rose to the challenge over the course of the crisis. A current argument is that the sector – especially on the food side – can be split into two: the efficient production facilities designed for off-premise consumption, and the restaurant environments designed for on-premise experience. For operators, the question is whether to straddle both channels and have different brands for different experiences, and if so, how does that impact your brand? 

The Propel Premium database of multi-site companies, sponsored by Virgate, has now grown to include 2,531 companies, which operate 65,803 sites. An additional 50 companies, which operate 323 sites between them, were added during June, and some are looking to adeptly move from channel to channel, but also from concept to concepts and cuisine to cuisine. 

We’ve seen this among our own client base, but examples in the latest Multi-Site Database, which was launched at the end of last week, include north west-based Zanna Hospitality Group, which was founded by Sax Arshad, and currently operates five venues in Manchester plus Les Deux Pizza Bar in Alderley Edge, Sienna Kitchen and Bar in Sheffield and Cafe Clo in Leicester. The business is now opening four concepts at the new Flannels department store in Liverpool. 

On the ground floor, Bacino will offer modern Italian cuisine with the all-day menu including pizza and pasta alongside aperitivo cocktails, coffee and desserts. On the sixth floor, three additional venues will open this autumn featuring a rooftop brasserie, a bar and a pan-Asian restaurant. With their own entrance to the Owen building, the sixth-floor venues will open outside of store hours. The pan-Asian restaurant will take inspiration from some of the globe’s most famous venues, with an open kitchen allowing guests to watch the chefs at work. The rooftop bar will offer cocktails alongside a curated wine and beer list, with DJs every weekend and special events planned throughout the year. The brasserie will serve brunch, small plates and classic mains, alongside cocktails, coffee and wine.

Vintage Tea & Coffee Co, meanwhile, which is the brainchild of husband-and-wife team Stephen and Charlotte Barker, is set to launch Maison Entrecôte, a Paris-inspired bistro in Cardiff’s Castle Arcade – followed by a rapid roll-out. The first site, which will be an all-day dining restaurant focused on speciality steak-frites, will take two units, totalling 2,000 square feet. A menu offering two starters and one main course at a set price will be complemented by French cocktails, beer and wine and a selection of French desserts and cheese. The plans are subject to a licensing application and, if approved, the team hopes to open in September. The family has been trading in Castle Arcade since 1982, switching from fashion retail to hospitality with Coffee Barker 12 years ago. This was followed by the Barker Tea Rooms and, more recently, the Gin & Juice and Rum & Fizz bars.

Concentrating on more British and local cuisine, the Birmingham-based About Dining restaurant group (independently owned by chef Andrew Sheridan alongside husband-and-wife team Sam and Emma Morgan) last month opened its fourth site. The company already operates three Birmingham-based restaurants – Divide, Craft and 8 – while Sheridan last year launched a French-style street food van to serve the city. The new site, Black & Green, is a 16-seater neighbourhood restaurant. Sheridan himself is heading up the weekly-changing seasonal tasting menu, which offers “a modern interpretation of British flavours, centred around local ingredients of the highest quality from micro suppliers and neighbours”.

Of course, having a multi concept approach means you are also able to pivot (that word again) to focus on one if, and when, market forces dictate. Independent restaurant and bar business GSG Hospitality owns concepts such as Bold Street Coffee, Duke Street Food & Drink Market, Salt Dog Slims, 81, Slim’s and Santa Chupitos. Founder Matt Farrell recently told Propel he believes the hot drinks market has a brighter immediate future than that of casual dining, and as a result will focus his company’s immediate attention on expanding its Bold Street Coffee concept.

He said that Bold Street Coffee is “doing great numbers” and is set to be the group’s first concept to expand outside the north west, adding: “Not all concepts will thrive under the current living climate, and you have to embrace those changes. But Bold Street Coffee is doing very well, as people change their eating and drinking habits. I think there’s an issue with the rising costs that will see the casual dining market suffer a little bit, so our focus is definitely on strengthening Bold Street Coffee as a brand.” Hopefully his bold move, and those of others to spread the risk across multi channels, will pay off. 
Sarah Travell is the founder and chief executive of Virgate, sponsor of the Propel Multi-Site Database. The database is one of the benefits Premium subscribers receive. The go-to database provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. Companies can have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email to upgrade your subscription.

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