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Morning Briefing for pub, restaurant and food wervice operators

Fri 12th Jul 2013 - Friday Opinion
Subjects: The government’s consultation on pub company regulation, the tyranny of pub health, Five Guys versus Shake Shack
Authors: Kate Nichols, Paul Chase and Emily Eldershaw

Let’s not wait for the government on pub company and tenant relations by Kate Nicholls

With over 7,000 submissions made to the government’s consultation on pub companies’ relations with their lessees, a cathartic resolution to the issue which has bedevilled the sector for the best part of the last decade seems once again elusive. The debate has now shifted into the media and inevitably is polarised and over simplified.

But that does not lessen the need for a swift, decisive and definitive resolution – and it is this which has driven the Association of Licensed Multiple Retailers (ALMR) contribution to the debate. Time and time again, we have attempted to broker an honest compromise between the two extremes. From establishing a mediation process in 2008 to entering into detailed negotiations with the pub companies in 2012, we have sought consistently to ensure that the principles of fairness, flexibility and freedom to run a business are at the heart of the tied lease agreement.

And they are principles that apply to both parties. This is, at its heart, a commercial relationship and both sides have to make a decent return on their investment. The key is balance and fairness. The recent problems faced by beleaguered lessees arose because the landlords took too much money out of the business and failed to invest sufficient back into their assets. It is this that distinguishes the saints and sinners in our industry, not size or scale or trading style.

A fair share of the economic benefits arising from the operation of a tied lease is what ALMR has always sought and which we continue to believe must be delivered. And it can only be done through a tight and rigorous regulation of the rent setting process. For too long, the way in which rents have been set has been opaque, relying too heavily on subjective assumptions and too little on robust, evidence based justification. The government consultation is wrong – it is this, and not the tie which creates the potential and provides the means for abuse.

And it is this which means that both CAMRA and Ted Tuppen may be right in their claims and assertions about lessee earnings. Enterprise recently stated that 117 of its pubs were let to ALMR members who were earning profits of £50k a year. Whilst that may be a ‘decent profit’, it is only fair if the share earned by the landlord for the asset is proportionate. If it is dwarfed by the dry and wet rent – and in some cases the landlord earnings will be three to four times that – then that is hardly a partnership in the true sense of the word. Equally, the suggestion of average earnings of £10-15,000 a year may be fair when set alongside a landlord’s earnings and presented more accurately as net profit from the business as a whole.

So the ALMR’s submission to the consultation seeks to deliver a balanced, pragmatic and commercially aware solution. We support the twin principles of fairness and the tied tenant being no worse off than the free of tied tenant, but believe that the only way to deliver this without unforeseen consequences is through effective regulation of rents – transparency and justification of assumptions, provision of open market comparisons, quantification of SCORFA and a requirement to balance the share both parties earn at the end of the day – backed up with effective sanctions, penalties and independent redress when things go wrong.

The best companies have already started the process of adjusting their rents and acknowledging that they have taken too much for too long. PIRRS and PICAS are working to correct abuses within the limited framework of the self regulator regime and companies are realising the reputational risk of getting things wrong. Get it right and this can continue to be a mutually beneficial business relationship.

As an industry, we have squandered too many chances to put our own house in order. The solutions have been set out by ALMR over the past decade but not taken forward by the pub companies. The submissions may all be into government, but the die is not yet cast. Now is the time for all sides to start talking – to each other, not through media headlines – and at all levels. It is not too late for common sense to prevail in everyday commercial relations. Let’s not wait for the government to decide for us.
Kate Nicholls is strategic affairs director at the Association of Licensed Multiple Retailers

The tyranny of public health by Paul Chase

Last week I attended a symposium entitled ‘Calling Time on Binge Drinking and Alcohol-Fuelled Violence: the Changing Role of Local Authorities’. This portentous title intrigued me given that both binge-drinking and alcohol-related violence have decreased significantly over recent years. Nevertheless, there is still a problem and now that local authorities have had ‘public health’ as a responsibility devolved upon them, this will be but one aspect of it.

Before lunch there were two sensible, pragmatic presentations from police officers about their approaches to managing the night-time economy, as well as an excellent presentation from Hannah Mummery about the benefits of Purple Flag. All were agreed that partnership working between all stakeholders was an effective way forward. In the afternoon we had Eric Appleby, interim chief executive of Alcohol Concern, Henry Ashworth from the Portman Group, who was a refreshing voice of reason, and Dr Matthew Andrews from the London Health Improvement Board.

Eric’s presentation was predictably full of carefully selected problem-inflation statistics, taken completely out of context, which included references to drinking amongst 11 – 15 year-olds, alcohol-related violence and the number of people drinking above low risk guidelines. It’s not that the numbers were wrong, it’s just that he neglected to mention that all three of these indicators have fallen dramatically over the past few years – for Eric the glass is only ever half-empty! Fortunately, Henry was there to remind the audience that things were actually getting better.

And then we had Dr Matthew Andrews. The most noteworthy contribution that he made to the discussion came in the Q&A after the presentations.

Here’s the context: I asked Eric Appleby why, given his support for partnership working, Alcohol Concern had withdrawn from the voluntary Alcohol Social Responsibility Deal at the last moment. Eric was quite clear: he didn’t think the alcohol industry should be involved in formulating government alcohol policy because they were only interested in profit, not public health. When I pressed the point by asking whether it was conceivable that government would formulate road safety policy without consulting motor manufacturers, Dr Matthew Andrews interjected: “Well, would you be in favour of the government consulting drug dealers about drug policy?” Utterly astounded, I asked him if it really was his position that the chief executive of a global and legal drinks producer should be equated with a drug dealer from Columbia? He replied: “Well, OK then, what about a company that sells ‘legal highs’ on the internet – should government consult them?” So, not Pablo Escobar, but rather an internet pill-pushing spiv. No intent to demonise the alcohol industry then!

Three things occur to me about this exchange: first, it was obvious that these guys are used to preaching to the choir – they expect to be listened to with reverence, not challenged; second, the sheer absurdity of the analogies given by Dr Andrews; and third, the rejection of the drinks’ industry as a partner signifies the desire of public health advocacy groups to marginalise the drinks’ industry, and exclude it from influencing government policy. As the Portman Group’s Henry Ashworth put it: “There can’t be second class partners. If people are excluded from the dinner table they are likely to fear that they will end up on the menu – and that’s when you will encounter this kind of aggressive defensiveness.” Aggressive defensiveness? I guess he must have meant me! 

The audience, which consisted mostly of councillors, police officers and people in various roles working with homeless people and street drinkers, were clearly well-intentioned and somewhat bemused by this exchange. What was lacking from the discussion was any attempt to get from this audience what understanding of their public health role they actually had. The assumption was that the public health advocates who were on the panel were there to tell them what it should be.

When you look at the history of ‘public health’ what is clear to me is that co-opting the State to provide clean drinking water, sanitation and mass vaccination programmes to conquer communicable diseases has been an entirely benign enterprise. But it is a fundamentally different proposition to co-opt the State to engage in legislation, regulation and taxation with the intention of controlling and restricting individuals engaged in making lifestyle choices. That may, or may not be benign.

The new public health movement has alighted on ‘lifestyle diseases’ as the way to demonstrate their relevance. But drinking alcohol, smoking tobacco and eating the ‘wrong foods’ are not diseases; they are patterns of behaviour that arise out of personal choice. If the balance between sensible public health objectives and restricting freedom of choice tips too far in the direction of restriction then a kind of public health tyranny can result. This is my fear in respect of giving public health to local authorities. If you’re a smoker, a drinker or a kebab shop owner watch out!
Paul Chase is a director of CPL Training and a leading commentator on on-trade alcohol policy

Five Guys versus Shake Shack, a consumer’s perspective by Emily Eldershaw

Five Guys and Shake Shack, both American burger chains, both opened in Covent Garden last week. That is where the similarities end for me, having experienced both first hand. The two concepts are on completely different levels – and in the press the companies have been quick to downplay any rivalry.

Five Guys is America’s fastest growing restaurant chain and is said to have half the US market for posh burgers: a figure I find hard to believe when they proudly state they are a simple no frills burger and fries restaurant. Fine dining this is not! The UK flagship store is a spacious venue (when there aren’t huge queues) with plenty of places to sit and a secondary eating space downstairs. We joined the queue next to a stack of potatoes in sacks, which Five Guys proudly boasts on the wall came from Coaching Farm in The Netherlands. It’s not very environmentally friendly, considering potatoes are in season here in the UK. You can help yourself to complimentary monkey nuts while you wait, and peruse the simple menu displayed above the counter. The choice initially seems limited, but there is a great range of toppings to choose from, all of which are free of charge. My companion and I shared a simple cheeseburger with grilled mushrooms and grilled onions, a regular portion of fries and a drink. I was handed two empty cups and a receipt and told to go and wait near the collection area for my order.

We took our empty cups to the Freestyle ‘soda’ machine which boasted 100 plus choices. “Surely not” I thought, but I was wrong; every variation of every soft drink imaginable was available – Coke, Diet Coke, Diet Coke with Raspberry, Diet Coke with Cherry, Fanta, Still Fanta. Choosing our drinks was a good way to pass the time while we waited for our order! Fortunately we managed to get a booth fairly close to the counter rather than having to stand waiting to be bellowed at. This also gave us the opportunity to watch the chaos unfold. There was a lot of staff at hand, presumably in preparation for the opening week rush. But it just makes it seem really disorganised and the volume of shouting in the open prep area behind the counter is extraordinary!

Finally, amongst all the other noise, I heard a shout of “Order No. 3” and we were handed our greasy brown paper bag. Inside was a burger wrapped in foil and a regular portion of Five Guys Style fries – I can only imagine how big the large portion was! The presentation left a lot to be desired. We unwrapped our burger, which consisted of two burgers in a bun and stacks of grilled onions and ‘grilled’ mushrooms. I use inverted commas because they had the texture of a canned mushroom!

The food was fresh and the burger was tasty enough – a soft bun manages to hold together two ‘nice enough’ meat patties, to steal a term from our friends across the pond. In the words of my boss Ann Elliott: “Would I eat it naked?” – without the bun. No is the answer. I felt as if I was eating a slightly higher quality McDonald’s and at £8 for a burger I expected more.

And so to the other side of Covent Garden to visit Shake Shack. Situated in the Piazza of Covent Garden Market there is a much calmer atmosphere to this burger joint. There are three parts to Shake Shack; a small interior section where the food is being made and you place your order and then two seating areas situated within the market.

Again there is also plenty of staff, but they are waiting with a smile to greet you, hand you a menu and guide you in to place your order. We joined a short queue and made our choices, at the same time cursing that we had not bought our dog with us to sample the ‘Woof’ section of the menu!

A very happy member of staff took our order and name, and then handed us a buzzer that would go off when our food was ready. We found a table out in the market where we could hear the opera singers in the piazza below – lovely!

There was only a short wait until our buzzer went off, and we went up to the window to be greeted by name and handed a tray with our order.

I had ordered a single ShackBurger and my companion had a Shake Stack – we shared a portion of crinkle cut fries with cheddar cheese sauce and a large Fifty/Fifty (half Shack-made lemonade and half iced tea). Both burgers were served open in a simple paper wrapper, with fresh salad in a delicious soft brioche bun. My ShackBurger was a cheeseburger by any other name but quite rightly Shake Shack are proud of what they do and, as such, everything is branded. The addition of Shacksauce meant no other condiments were needed with the meaty 100% Aberdeen Angus beef.

Shake Shack UK boasts of the fact that is are using local and British produce, including rare breed pork from Cumbria and brownies from St John Bakery in London. My companion’s Shack Stack was incredible. It’s a combination of the ShackBurger and the ‘Shroom Burger. It had all the deliciousness of my burger with the addition of a large crisp fried portabello mushroom filled with melted cheese! I had serious food envy!

We were stuffed! But no visit to Shake Shack is complete without a Concrete, so I begrudgingly shared a Concrete Jungle. It was slightly melted from the heat of a British summer that has finally arrived but no less delectable. A mix of vanilla custard, marshmallow sauce, banana and peanut butter sauce – delicious!! And so that was our visit to Shake Shack almost over! As you are leaving there is a photo booth – the Snap Shack, where you and your friends can get photos taken for free.

On the whole, it was Shake Shack, hands down for me.
Emily Eldershaw is a PR and marketing executive at Elliott Marketing & PR –

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