A friend of mine recently opened a creperie. She’s working long, hard hours getting the new business off the ground but, as Meatloaf sang, there’s something she won’t do for that – in her case, stand behind the counter. “I just can’t smile the whole time,” she says, terrified that with the first, “cheer up love, it might never happen” she’ll reply, “it just did – you came in,” bringing a promising small enterprise crashing to the ground. So she’ll stick to the prep and the books back-of-house.

My friend is not an unusually grumpy person, but hospitality makes high demands of customer-facing staff. Whether they’re popping in for a galette (my friend’s speciality) or ordering a pint at the bar, people expect the person serving them to exhibit unblemished contentment. As any good operator knows, the first thing you look for in a potential recruit is a ready smile.

There may be exceptions. Publican Norman Balon built a career on being rude to customers who ventured into the Coach & Horses in London’s Soho. But there must have been mornings when even he woke up, threw the curtains wide on a sunshiny day and was brimmed with bonhomie. Before he was ready to open the pub doors, he would have to drag down his mood and put on a miserable face.

For most bar staff, though, it’s the opposite. The cheeriest person, someone who genuinely likes making people happy, must have days when they don’t feel like it. When perhaps something has happened to make them sad or worried. That would be life. But we expect them to brush that aside and bring out that smile and do it again and again, shift after shift.

Years ago, I was invited to sample some new training a bar operator had introduced to help its staff overcome those times when the smile struggles to surface. I found myself in a one-to-one session with a professional actor who had previously played a character in Emmerdale and would go on to take some fairly good roles in films.

He explained how actors face a similar challenge to bar staff, having to perform to the same level night after night in the theatre as though they’re doing it for the first time – as they are, as far as the audience is concerned. I was told to imagine I had a well of energy within me, and with each acting exercise I would have to drop an imaginary bucket into the well to draw up the necessary energy, going deeper and deeper each time.

What a palaver. Yet bar staff often do compare their job to stepping on to a stage and performing for an audience. They draw their energy from the positive reactions of their customers, from making them happy. Which makes them happy, too. It’s a virtuous smiling circle, but what if the circle breaks?

I did a case study for the Licensed Trade Charity (LTC), interviewing a woman who was once the star of the show at the pub where she worked. Everyone loved her. She made them laugh, she made them feel good. But as time went on, anxiety set in. As the next shift approached, she would worry that this time she may not be up to it. The smile might not be ready and the whole illusion would collapse.

A drink helped ease the worry and encourage the smile. Then a few drinks. Before long, she could only perform drunk. Her problem started to consume her. Fortunately, the LTC was there to help her get her life back, but she was clearly not fully recovered when we met. I hope she’s okay now.

Anyway, the good thing is there’s a growing awareness of these pressures on hospitality workers. The young people who work behind bars now are less reluctant to talk about their mental health, and there is open discussion about the challenges. Beer writer Emma Inch is launching a new podcast series that will delve into mental health in the brewing and pub industries, while Stephanie Shuttleworth, an experienced bar worker based in Manchester, is researching a psychology PhD that goes very deep into these matters. 

I’ve had only a glimpse, but part of it is about how social support, feeling part of a team, can ease the stresses faced by hospitality staff – but that can bring other pressures from managers. Personally, I think that being in a trade union can be crucial in providing support independent of management, and I’m pleased to see progress in unionising the sector. Until that glorious day, though, it’s down to operators to appreciate the business benefits of being aware of the melancholy underbelly that might lie beneath the ready smile.

Is anyone still lending? This is something I’ve heard, read and been asked many times since the mini-Budget of late 2022. It’s a fair question. Back in early 2022, it felt like the worst of the covid pandemic was behind us and there was a feeling of renewed, albeit cautious, optimism, which was echoed in the financial performance of the customers we work with.

In the weeks and months that followed, it became apparent that more challenges were on the horizon. Russia’s invasion of Ukraine caused a spike in fuel and energy prices, staffing issues persisted and food inflation rose. Oh, and the not insignificant matter of the Bank of England base rate rising on a monthly basis.

I liken the impact on the sector caused by covid to someone grabbing your head and pushing it into a bath full of water. Last year gave some early relief and operators were able to come up for air – temporarily – until being thrust back into the bath with the latest set of challenges. Businesses and entrepreneurs that have navigated their way through the last three years have my utmost admiration and respect.

Anyway, back to the original question. In short, yes, but it’s different, and I’ll tell you why. Typically, a lender will assess a loan request by calculating the affordability and debt capacity contained within the profits and losses, i.e. is there sufficient operating profit to meet loan and interest payments and provide some headroom?  

They will then stress-test the proposal by loading the interest rate to a much higher level to factor in possible future rate rises. As long as a business can meet its obligations without headroom or necessarily meeting covenant, it’s fine as this is a stressed scenario, so something has happened to either the business, economy or both. In such cases, meeting loan payment obligations is enough and enables borrower and lender time to work through the situation.

The current challenge is that the stressed rate is now the pay rate. What this means is the debt capacity is significantly lower than it was 12-15 months ago, which has caused a cash gap in either acquisitions or re-finances because the amount of debt that can be raised is generally much lower. Furthermore, lenders are tending to prefer “vanilla” transactions – that is to say those with straightforward characteristics rather than those that may demonstrate somewhat risker profiles.

The result is unless a business or owner has access to liquidity to bridge the gap, a transaction is unlikely to happen. Add in the fact that most operators have understandably adopted a more cautious approach to growth over the last six to seven months, so market activity has also significantly softened.

While it is still possible to obtain senior debt, the market is definitely thinner as many lenders have opted to withdraw until conditions improve, or just focus on existing customers – a pattern we’ve seen pretty much since the start of the pandemic. This gap is where the challenger banks have tended to step in to provide a genuine alternative to the high street.  

My advice for any business looking to seek bank finance is to ensure they prepare a full financial pack incorporating historic performance, current trading data and forecasts that include a profit and loss, balance sheet and cash flow statement. The key to all of this, however, is the underlying assumptions that underpin these future numbers. 

Giving an insight into how you will achieve these numbers is a vital part of the assessment process, and a lender that understands the sector will know what to expect to see in terms of the KPIs for a pub, restaurant or hotel and the nuances of each. For example, the differing gross profit margins, or sales-to-wage ratios, of a wet-led pub versus a food-led outlet.

Despite an outlook of more base rate increases in the summer, albeit with the consensus being we’re close to the top of the curve, we’ve definitely seen an increase in “noise” and enquiries over the past few weeks. This is echoed by our friends in the agency and valuation community, so the hope is the second half of year is when some of the pent-up demand is released. 

To conclude, lending is still very much available, but be realistic about how much you can borrow and ensure you are presenting your business in the best possible way through a comprehensive information pack.

The UK is “ripe for franchising”. So said Paul Reynish, global chief executive of Gong Cha, the fast-growing bubble tea brand, earlier this month as he put forward why his business could grow to 500 sites here. Reynish is not alone in believing that franchising is having a “bit of a moment” here, with a number of brands, both home-grown and from overseas, putting increasing resources behind what is a popular vehicle for investment, if the right rollout partners can be found. 

The Propel Premium database of multi-site companies has now grown to include 2,853 companies, which operate 68,641 sites. An additional 21 companies, which operate 144 sites between them, were added during May 2023, many of which are taking the franchise route to grow their market share and presence. 

Halal fast food company Chicken Cottage is planning 20 new openings over the next two years. Recent openings in Watford, Edmonton, Teddington and Longsight brought the brand’s store count to 51 since being founded in 1994. It now has an “ambitious plan to significantly expand its footprint across the country” and “cement its reputation as a leading player in the British fast-food industry”. 

Newer entrants to the UK market include Korean cuisine concept StickBug, which was founded in the Canadian west coast city of Vancouver by Doug Williamson and Jung Moon. It is set to launch in the UK, with a target of 100 sites here by 2032. Sites in Twickenham, Richmond and Wimbledon are set to open first. It projects more than a third of its 100 targeted UK sites will be in Greater London but plans to expand to all areas of Britain through a franchise model.

Meanwhile, burger franchise concept Burger & Sauce recently opened its 13th site – and sixth in Birmingham. The site, at the junction of Oak Tree Lane and Bristol Road in Selley Oak, has been opened by a new franchisee. The concept, founded by Saad Masood during the pandemic, is aiming to reach 20 sites by the end of 2023. Its pipeline includes sites in Wolverhampton, Sheldon, Coventry, Liverpool and Sheffield, plus two more Birmingham locations, in Acocks Green and Longbridge.

Likewise Belgian fries concept Awesome Chips, which was set up in 2015 by founder Roni Dalal, serving fresh hand-cut chips. The business currently has sites in Leicester, Wood Green in London, and the Bullring Shopping Centre in Birmingham. It has now launched as a franchise model as it looks to expand the brand across the UK and Europe.

As has been seen with the likes Pret A Manger and Itsu, established franchisees are now looking to evolve their portfolio of brands, with the likes of Chopstix, Slim Chickens and Wendy’s all attractive new entrants into the franchise market, with brands such as Marugame Udon and Popeyes set to follow. 

JRK Restaurants, which is a franchisee for Slim Chickens along the south coast of England, has recently also added Wendy’s to its franchise stable. The business, which has so far opened four Slim Chickens sites – in Bournemouth, Brighton, Crawley and Southampton – is on track to open its first Wendy’s sites, in Guildford and Portsmouth. It is thought JRK is planning to open more than 25 units in the next three years across the UK with the different brands it represents. 

It is not only food-led brands that are ramping up their exposure to the franchise market. The team behind crazy golf concept Putt Putt Noodle is offering “the right franchisees” more than £1m in funding contributions for five “prime retail” sites, set to open this year, according to Propel. We Do Play, which is also behind trampolining brand Flip Out, is also now focusing its expansion of Putt Putt Noodle on the north west. Its debut site opened in Norwich in December 2021, followed by its second and third sites, in Poole and Telford, earlier this month. Locations in Bedford, Basingstoke, Colchester and central London are also among those in the pipeline. It has also partnered with You Me Sushi, the London restaurant and takeaway concept, which is also expanding through franchising, to lead the food offering at its venues.

However, amongst all this growth, a note of caution was provided this month when international pizza delivery brand Papa John’s made a shift in its strategy for its UK business. The brand acquired restaurants previously operated by the M25 division of Drake Food Service International, and subsequently formed a portfolio of company-owned sites. The new corporate-owned restaurant portfolio comprises 91 sites across London and other parts of the UK. It represents a shift in thinking for the pizza brand, which has traditionally let franchisees run all the restaurants in its international markets, of which (with more than 500 sites) the UK is the biggest. 

The company said it sees opportunities to implement “operating model enhancements” including revenue management capabilities, product and technological innovation and operational efficiencies, to improve sales and restaurant-level profitability. The move comes with sales and profits having been declining here of late for the business. It also highlights that for all the ambitious expansion targets set out by those on their franchise journeys, picking the right brand and partners remains paramount.