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Morning Briefing for pub, restaurant and food wervice operators

Fri 3rd Mar 2017 - Friday Opinion
Subjects: Beyond the gastrodome, carry on campaigning, the hydra-headed monster, and IT and marketing’s critical partnership
Authors: Glynn Davis, Tim Page, Paul Chase and Ann Elliott

Beyond the gastrodome by Glynn Davis

There is a body of unprecedentedly large skyscrapers boldly claiming positions on London’s skyline that are undoubtedly beautiful to the casual observer but, for some of their owners and developers, represent a bit of a headache. There are examples among the recently completed buildings that have few, or in one case zero, tenants.

This is the inevitable ramification of decisions that are made in a boom period but turn somewhat sour when the environment becomes a little less buoyant amid economic uncertainty that could lead to down periods. This scenario has also been reflected in the restaurant industry. While we have large buildings with empty offices there are also examples of large restaurants with a little too many empty tables.

It’s happened in the past when the massive, so-called ‘gastrodomes’ appeared. Most notable were those from Terence Conran. Although Quaglino’s is still with us it had a rough patch and his Mezzo business, which marked the peak of the build-it-big trend some 20 years ago, bit the dust before morphing into Floridita, which also ultimately disappeared. The Atlantic Bar & Grill succumbed under tougher times. Right now, there are pressures being exerted on some restaurateurs who have built big and are paying the price for their overzealous expansionary zeal.

Among them is the Burger & Lobster chain. It’s clearly not a great sign when your accountants highlight in their report the “existence of material uncertainty that may cast significant doubt on the group’s ability to continue as a going concern”. Chief among its issues have been the costs involved in opening and then closing chunky-sized restaurants outside London.

The September 2015 opening of a hefty 10,000 square foot outlet in Bath was followed by its closure only 16 months later. Clearly 240 covers in this particular city was a step too far. Likewise, the Burger & Lobster restaurants in Cardiff and the Old Bailey area of London have closed, with the admittance by management the company had grown too fast and gone too big with its outlets. There has been talk the company now prefers venues like its 60-cover flagship in London’s exclusive Mayfair.

The only problem with this is restaurants like Burger & Lobster, with well-edited menus at accessible price points, tend to require high volumes to make the model stack up – especially if they are sited in locations where the average spend on alcohol might not match that of super-affluent (and expense account-fuelled) customers in Mayfair.

It really is no surprise large sites were the company’s preferred route to growth, especially when it has been facing the inexorable rise in fresh lobster prices combined with a massive reluctance to raise prices in its restaurants. Having bravely admitted it was a “strategic mistake to open outside London”, Burger & Lobster director Georges Bukhov has said there has been a shift of focus away from UK provincial towns to major cities in the US and Asia.

Although ETM Group is on the hunt for ever larger sites – its two most recent units are its biggest to date and an 11,000 square foot bar is due to open later this year – it is keeping its presence confined to its safe heartland of London is pitching its newer sites as more wet-led venues. It is reducing its exposure to the ongoing risk of increasing ingredients costs, which represents a marked shift from the model at some of its venues where food represents a hefty 80% of sales. Meanwhile, importing ever more expensive foodstuffs (post-Brexit vote) was the reason given for the recent announcement of the imminent closure of six Jamie’s Italian restaurants.

The increasing price of raw materials and decisions on optimum venue sizes are merely two of the many parameters restaurateurs are having to juggle at the moment. While the ultimate decisions will be specific to each operator and each venue’s location, I’m pretty confident in saying the opening of gigantic food hall-sized venues is not on the agenda of many restaurateurs right now, apart from perhaps the financially suicidal and the exceedingly wealthy.
Glynn Davis is a leading commentator on retail trends

Carry on campaigning by Tim Page

As CAMRA hosted its annual Parliamentary Reception on the terrace of the House of Commons on Wednesday, we had more reasons than usual to celebrate and thank our supporters.

Just a couple of hours before the beer was poured and canapes offered, Lord Kennedy of Southwark won the vote on his amendment to the Neighbourhood Planning Bill, which removed permitted development rights for the conversion or demolition of pubs. A majority of 90 peers voted in favour of the amendment, showing how important they consider this issue to be to communities across the country.

For more than a decade CAMRA has campaigned to secure pub company reform, with a focus in recent years on planning loopholes that have allowed valued pubs to be converted to other uses or knocked flat without reference to the community.

This has been an issue not just of interest to drinkers because the industry has also struggled with the implications. Closures have been running high for some time, with CAMRA figures showing the net demise of more than 20 pubs a week for many years. A strong and vibrant pub industry is good for the economy as a whole – particularly for those who directly supply them. Uncertainty about planning protection for pubs has also created a skewed market, with operators dedicated to running vibrant pub estates priced out by acquisitive developers viewing pub properties as a soft target.

The Asset of Community Value (ACV) system is imperfect. While it offers some protection for pubs, in many cases ACV listing has created confusion, frustration and additional work for councils, pub owners and community groups alike. We know it’s unpopular with many owners, who struggle to obtain loans and mortgages because lenders discriminate against ACV-listed pubs. It has created tensions in the industry, particularly among those who don’t welcome ACV listings and become caught up with community groups and others in long and costly appeals.

Lord Kennedy’s amendment is an important step towards a fair and open planning process in which all pub owners and operators and members of the community will have a voice. The amendment was a great example of the passion CAMRA’s members have for pubs and a demonstration of how people in power can make a difference when issues within the industry affect them.

Recognising the opportunity the amendment presented to improve the planning system for everyone involved, CAMRA called for its membership to get behind the amendment. That led to more than 5,000 people contacting members of the House of Lords to express their views and encourage them to vote in favour.

Lobbying only works when it’s backed by robust arguments and evidence, so our volunteers and staff worked hard to provide case studies to peers and ministers to highlight the inequities and failings of the current system. At CAMRA we were overwhelmed by our branches, which trawled through databases of lost pubs to build our case, showing the strength of our volunteers’ dedication to the cause.

This wasn’t just about consumers, however, and CAMRA firmly believes better planning protection for pubs will benefit operators as well as drinkers. Equal protection for all pubs would mean they were no longer vulnerable to conversion or demolition without notice and consultation – which would give greater stability not only to tenants or managers of individual pubs but those entrepreneurial operators looking to build and grow multi-site estates. Confidence that pubs aren’t going to disappear overnight, in some cases quite literally, also gives security to staff and safeguards jobs.

The Kennedy amendment has the potential to reduce a great deal of tension in the industry related to ACV listings and, with it applying equally to all, will remove the need for licensees, customers, councils and industry groups to be at odds over listings.

Finally, recognition by peers of their role as cornerstones of local communities cements the place of the British pub at the heart of our communities. However, the job is only half done. It is down to us as a consumer group to keep up the pressure and ensure the House of Commons listens to the Lords and passes the Planning Bill on its third reading later this month.

We believe the industry also needs to play an equally essential part in this campaign. It needs to show a united front and join the lobbying effort in calling for the Bill to be passed, with the amendment intact. We’ll be urging our members to keep up the campaign and write to and tweet their MP to highlight pubs they have lost, pubs they want to protect and to ask they support the Bill. We’d urge everyone in the industry to do the same. 

This amendment will bring fairness and openness to the planning system when it comes to pubs, will level the playing field on the high street and, most importantly, bring benefits to drinkers and those who provide the places they enjoy drinking in.
Tim Page is CAMRA chief executive, for updates follow @CAMRA_official

The hydra-headed monster by Paul Chase

I thought I would return to the fray with a new twist on an old theme – minimum unit pricing (MUP). Readers of my articles may recall the legality of a minimum unit price for alcohol is an issue that has been batted back and forth between the Scottish government and the Scotch Whisky Association (SWA) since 2012. The Scottish courts had their say (legal); it was referred to the European Court of Justice (not legal). But the ECJ left the final decision to the Scottish courts, which needed to be convinced there was no other, less trade-restrictive way of achieving the Scottish government’s health objectives in respect of alcohol if they were to conclude it was, after all, “legal” to impose a minimum price on a unit of alcohol.

They promptly did so when the Scottish government provided them with the latest research findings from the boys and girls at Sheffield University, whose modelling forms the basis of all the claims made for this measure. So, game, set and match? Well, not quite. The SWA has appealed the Scottish court’s decision to the Supreme Court in London. They have been rather busy of late considering whether the UK government has to get parliamentary approval before triggering Article 50 of the EU treaty to take us out of the European Union. But the little matter of MUP is likely to be ruled on around June this year.

Meanwhile, the authors of the Sheffield model haven’t been sitting around twiddling their thumbs. Oh no! They’ve been modelling the effect of an MUP of 50p on alcohol-related hospital admissions and deaths in Northern Ireland. A charity called Northern Ireland Chest Heart and Stroke said raising the minimum price paid for booze would save lives, lower hospital admissions and cut the costs of crime by £20m a year. Neil Johnston from the charity said: “Alcohol sold for less than 50p a unit makes up the majority of alcohol purchased by high-risk drinkers. Work by Sheffield University shows that pushing up the price of very cheap alcohol will reduce consumption of it by high-risk drinkers and bring considerable benefits. Introducing a minimum unit price of 50p is estimated to save 63 lives a year and result in almost 2,500 fewer hospital admissions.” Very impressive, but do the figures stack up? It is informative to compare Sheffield University’s predictions for Northern Ireland with its predictions for Scotland:

• How can it be that a 50p MUP saves three fewer lives each year in Scotland than in Northern Ireland, despite the fact Scotland has 3.6 million more people than Northern Ireland? And, in terms of alcohol-related hospital admissions, nearly twice as many of these are saved in Northern Ireland despite the fact Northern Ireland’s population is only a third of Scotland’s!

• It is interesting to note that MUP as a policy has been enthusiastically and uncritically supported by Scotland, Wales and Northern Ireland, whereas in England the UK government’s view has been much more sceptical. The “healthiest” agenda tends to receive much more support by governments that are relatively new, struggling for legitimacy or relevance, and for whom embracing policies that claim to improve the “health of the nation” gives them an opportunity to promote themselves as standing up for the interests of “the people” and against those of big business – in this case Big Alcohol.

It remains to be seen whether the UK Supreme Court will risk being labelled “enemies of the people” by yet again standing up for rationality and finding against MUP. In this “fake fact” world, where an appeal to prejudice is seemingly all that is needed to identify a large constituency of support that will rise up vociferously, it seems to me we need some unelected judges who aren’t afraid to tell us the truth.
Paul Chase is a director of CPL Training and a leading commentator on on-trade health and alcohol policy

IT and marketing’s critical partnership by Ann Elliott

Last week I had the good fortune to meet up with a number of interesting and thought-provoking members of the London chapter of the International Food and Beverage Technology Association (IFBTA). As its name suggests, this is an international organisation that “promotes the use and advancement of technology within the global food and beverage industries with a focus on education, certification, standards, research and networking” and aligns with “other industry groups supporting technology-related initiatives to further the interests of the industries we serve”. Its London chapter is newly established.

I think this is a brilliant initiative. For me, however, there is one critical omission from the list of elements the IFBTA wants to focus on – marketing. Ironically, most of the conversation that evening was about how IT teams need to work much more closely with their own marketing teams to improve the effectiveness and cost efficiency of their customer marketing. This should be recognised in their mission statement.

IT departments used to be purely internally focused. They determined the laptops, phones and other digital devices the company should use. They proposed new tills, back-of-house kitchen systems and hand-held ordering devices. They agreed how business data should be collected, analysed and presented and dictated who should have access to what data and when they could have it. They rarely thought about IT in the context of the whole customer journey (with the exception of the odd loyalty scheme).

The best IT directors formed close relationships with their fellow board members, working with them for the good of the business. The worst were arrogant, closeted, remote, unhelpful and dismissive of “fluffy” marketing. In recent years there has been a significant swing away from the latter and towards the former, although the latter still exist in some organisations!

One senior chief executive told me he interviewed almost 50 IT directors in his search for the right one. He needed someone who absolutely understood the role IT should play in developing a company’s relationship with its customer base. He wanted someone who realised gathering business data was simply a process (that many could sort) and the key was translating and understanding customer data –not just business data. He needed an IT director who instinctively knew that understanding the company’s customers was the most important element of their role – and that digital would dominate consumer communications.

Marketing directors and IT directors now have to work hand-in-hand and side-by-side. It is a critical partnership. The two teams are fundamental in developing and implementing digital strategy. If they don’t develop their company’s digital objectives, strategy and plan together and support one another at the highest possible level, the company will fail to thrive. The IT department can no longer bury itself away and the marketing team can no longer ignore it. Nor can they bat problems between the two teams – they have to work collaboratively and positively.

Our work with numerous sector companies, and our commercial partners, on digital has really highlighted the need for this positive working relationship. Right now, the emphasis is on how to best analyse social media information collected via Wireless Social and how to use this in the most effective (and sensitive) way. The level of information we can collect allows for almost micro-marketing to specific individuals based on their social profiles and is a powerful tool in terms of driving footfall and loyalty. The early adopters here will have significant first-mover advantage – and that applies to operators and suppliers alike.

Luckily, the people we are talking to recognise this initiative belongs neither in the IT camp nor the marketing camp and, for it to really make the most of its potential, both teams have to be in the room and work together. I wish the IFBTA huge success in facilitating this and hope it becomes a raison d’etre for its existence as an organisation.
Elliotts is the leading integrated marketing agency in the hospitality and leisure sector –

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