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Morning Briefing Strap Line
Fri 21st Jul 2017 - Friday Opinion
Subjects: The Pubs Code a year on – why change is urgently needed, time to take away the sofa, the benefits of improving menu navigation and meeting the Brexit challenge in hospitality – an opportunity for guest experience
Authors: Mark Brown and Peter Holden, Glynn Davis, Ann Elliott and Steven Pike

The Pubs Code a year on – why change is urgently needed by Mark Brown and Peter Holden

The press has been vocal in its criticism of the Pubs Code and in particular adjudicator Paul Newby, while there has been a low take-up of the Market Rent Only (MRO) option by tied tenants. So what has gone wrong?
Bearing in mind the tortuous passage of the legislation through Parliament, the problems the Pubs Code was supposed to deal with should be a thing of the past. However, it is clear there are some serious problems with the code and its implementation, and it is not enabling tied pub tenants who want to exit the system, operated by the regulated pub-owning businesses, to do so.
There are also well-publicised concerns surrounding the proposed Heineken/Punch merger, which has focused attention on the consumer. This follows the acquisition of Spirit by Greene King and is strong evidence of a potential trend back towards vertical integration, as the biggest brewers take control of greater numbers of pubs.
The issues the late Beer Orders were intended to address, namely customer choice and competitive pricing, seem to have taken a back seat. The need to focus on the consumer is a priority and the industry must end the Pubs Code’s disruptive phase. However, the message doesn’t appear to have been unreservedly taken on board.
There can be little doubt the low numbers of tenants obtaining an MRO option is a result not only of the code’s “complex and convoluted procedures” but also the desire of certain pub-owning businesses to avoid the MRO and the reduction in net income that follows.
According to Private Eye, in his first six months the adjudicator received 121 referrals for arbitration; a high workload for one person. The adjudicator is seeking to appoint a deputy but this won’t resolve current issues quickly, if at all.
One way to reduce the number of cases would be to make it clear what the adjudicator expects of regulated businesses. Guidance needs to be added to the code and must include:
– What exactly is a product or service tie? The definition relating to product ties in the 2015 Act is inadequate. It is possible to devise mechanisms that could have the same economic effect as a product tie but fall outside the definition in the Act although, in fairness to the adjudicator, this is likely to require further legislation
– A comprehensive review of stocking agreements. The intention of the legislation is clear but some have had difficulty with the wording. Issues not dealt with by the Pubs Code include representation and branding on the exterior of premises, the number of fonts as well as their placement, availability of point-of-sale material, pricing and brand promotions (particularly sales involving reduced prices) and shelf and cabinet display space
– Clarification of the new MRO-compliant lease and whether it has to be a new lease rather than a Deed of Variation (DOV). A pub-owning business complies with the code in producing a “proposed new tenancy” but the adjudicator has to determine whether he prefers the pointlessly expensive mechanism of a new lease proposed by the pub company or the simple DOV, which clips out the tied terms from the existing tied lease. Why has Newby not issued guidance? If the answer is he does not wish to be seen to pre-determine the issue, surely he could have issued guidance before appointing a third-party industry veteran to arbitrate the issue?
– What sort of behaviours does Regulation 50 of the Pubs Code cover? The regulation states: “A pub-owning business must not subject a tied-pub tenant to any detriment on the grounds the tenant exercises, or attempts to exercise, any right under these regulations.” Does this include the pub-owning business insisting on a new lease rather than a DOV? What about some of the tactics used to “guide” the tenant to take a new tied tenancy? Sadly, we need a list of the types of manoeuvrings designed to put the tenant off in his desire to achieve MRO and for the Adjudicator to say they are unacceptable
Why not publish decisions? The answer lies in the Pubs Code itself as it requires disputes to be dealt with as arbitrations – and such awards are confidential. But why should this be? It is important for the code to be seen to be working and the need for transparency and consistency in decision-making is paramount. Some disputes are of sector-wide significance and publication of decisions – or at least anonymous publication of salient points – would reduce uncertainty and the number of disputes being referred.
Does the Pubs Code do the job?
No – and numerous changes are required to make it effective, not least the complex procedures that make it difficult to follow, including closing the large loophole that surrounds the “MRO-compliant tenancy”; an amendment to the definition of product tie; and many examples of peculiar drafting, including the section relating to gaming machines. In conclusion, there is an urgent need to revise the Pubs Code and the way the adjudicator works. The alternative is that regulation of the tie will affect more businesses beyond those currently regulated, or the tie could be abolished altogether resulting in massive disruption to the sector. While the tie has its critics, it often works well and it would be a shame to see it abolished just because some see the recent regulation as a new battle that can be won, rather than for what it is – a path that must be travelled.
Mark Brown is a partner and Peter Holden a consultant at sector law firm Freeths

Time to take away the sofa by Glynn Davis

Jam in a Jar is a small friendly bar local to me in north London that serves an appealing range of drinks – notably cocktails – and a small menu of food that’s chiefly focused on nachos and burgers. It attracts a growing number of people on a stretch of road that is gradually coming to life as newcomers move into the area. 
But what struck me about this place on my recent visit was the sofa in the middle of the room. It’s one of those worn-out Chesterfields that you frequently see in bars and pubs nowadays. There must be a factory somewhere producing these things, which have the requisite scuff marks and correct level of stuffing protruding out of random holes, because I see far too many of them.
It’s not that I’m against these big beasts of the seating world – I’ve got a decent sized leather sofa at home – it’s just that I all too often find them an unwanted fixture in many bars and pubs. The presence of one in Jam in the Jar highlighted just why I find them a bit of a pain in the backside – even when well stuffed.
The key issue is they take far too much room for the amount of people they can seat. The amount of standard seats and stools that could be fitted into the same square footage makes them a wasteful piece of furniture in all but the very biggest outlets. The waste of space is even more acute when you consider the occasions when the sofa is taken up with just two people, or even one person.
Regardless of how much space is available in the bar I find sofas particularly annoying to drink on. Unless you hold the glass in your hand (and the liquid gets warm) you have to sit forward every time you want to take a sip. It’s also a hassle to engage in conversation from a sofa. When sat alongside two other people how exactly do you converse without having to keep moving back-and-forth? Maybe we like the idea of sofas from their use in the sitcom Friends. But then of course having three people sit in a row on a sofa made their filming a much easier exercise.
Such movements are also necessary when talking to the people opposite you who are likely to be sat on seats or stools (because we all like mismatched furniture in our bars and pubs today), which places them at a different height to the sofa dwellers.
The height issue also comes into play should you decide to eat. Invariably the table is at the very same height as the sofa and so involves constantly leaning forward for each mouthful. I find this extremely uncomfortable and not exactly conducive to digesting food.
The final aspect of the sofa I’m not particularly keen on is that sat in one does make me feel rather like I’m at home. All too often pubs and bars talk about making the experience just like being at home. I’m not quite sure why this is deemed to be a good thing. Wouldn’t it be better to simply stay at home and invite my mates around – certainly the booze would be cheaper. I visit pubs and bars specifically for an experience that is very different to what I’m likely to get at home.
I can be 100% comfortable being at home because it has been made to be 100% comfortable for me and my family. Why would I have it any other way! Going to the pub and bar is not going to deliver this same level of comfort and I don’t want it to. The reasons for visiting pubs are because of the different experience I’m likely to enjoy. Replicating the home experience is not exactly high on my list of requirements.
Maybe the sofa thing works better in coffee bars rather than pubs and bars. But then I still find I’m rather partial to perching on high stools and gazing out the windows whenever I visit most coffee shops. I certainly don’t expect to find myself falling into a sofa in a coffee shop any more than I foresee myself falling for sofas in pubs any time soon.
Glynn Davis is a leading commentator on retail trends 

The benefits of improving menu navigation by Ann Elliott

I really love Sourced Market, founded by Ben O’Brien in 2007. Its philosophy, from the website, is brilliantly summarised in its own words: “Sourced Market came from Ben’s desire to create a store that offered the same quality of food you’d find in Borough Market with the convenience of a Tesco Express. Our days are spent sourcing great food and drink and working closely with passionate producers to bring the very best selection to market.”
Much as I love it though and want to buy there, I went this week and only spent about £4 on a shot of ginger and a bag of protein beetroot balls (nicer to eat than they sound). I wanted to buy more but I found it a bit overwhelming to be honest. I was hot, had walked from Euston to Marylebone, was carrying the usual overstuffed laptop and bag, needed to work, eat and drink and felt harassed. The usual. As I wandered aimlessly around not being drawn to any one thing or counter, I thought of the correlation between my experience here and my experience of eating from many menus – eg no clear navigation, journey or signing (or at least none I could see in my frazzled state).
I don’t know what I would do about that lack of navigation in a retail store as I am not a retail designer but I do know what to do on a menu. A client recently came to us and said his menu wasn’t working as well for him as he wanted it to in terms of profitability – but he didn’t know what to do. He didn’t want to change any of his items so we had to work with the dishes and pricing he gave us. We changed the layout, product groupings and design. Our work resulted in a 27% increase in his margins from the same dishes. We are now repeating this work on his other brands.
Of course, the key thing here is to format menus in a way that makes it easier and enjoyable for the customer but also makes the maximum margin for the operator. Crucially though, this process is not about driving spend per head – an objective that has to be approached with great caution. The last thing any customer wants is “bill shock”. We absolutely know those customers who experience bill shock do not come back. They subconsciously blame the restaurant for making them buy more and it makes them feel awkward and embarrassed.
When we approach navigational changes in a menu we look firstly at the brand and its positioning. With some menus, there is a disconnect between the menu and the brand that confuses customers. Getting this right is a crucial first step.
We then work with the client to understand what menu items they most want to sell and why. These products need to be positioned where customers are most likely to notice them and buy them. We know from our research where these key spots are. Just putting the right products in the right place on a menu can generate immense improvements in sales and margin – and the reverse applies. Putting the wrong product in the wrong part of the menu can dramatically damage sales.
We then group products and list them in the right order. We know the optimum products to list in a block and we know what order to list them in to generate optimum margins. Customers don’t want too many products to choose from (though McDonald's might argue with me) and they want very clear navigation when looking through the menu. Copy, font style, design and imagery all help with that navigation.
It’s a science. It delivers immediate and measurable results. And it works. If only I knew what to do in retail.
Ann Elliott is chief executive of Elliotts, the leading integrated marketing agency in the hospitality and leisure sector – 

Meeting the Brexit challenge in hospitality – an opportunity for guest experience by Steven Pike

One of the biggest challenges facing hospitality businesses over the next few years is managing the reduction in migrant workers likely to result from the Brexit fall-out. Although the specifics are still anyone’s guess, a report earlier this year by the British Hospitality Association and KPMG put the potential employment gap at 60,000 per year if immigration from the EU is too tightly controlled after the UK’s exit. This has big implications for guest experience management, which relies on a full team for consistent delivery. Where staff are overworked, it’s a huge ask to expect them to affect a positive, welcoming and relaxed service style.
So what’s the solution? With the figures showing hospitality businesses in London rely on EU nationals to fill 75% of waiting vacancies in an industry that’s known for its fast turnover of staff, a cultural shift is required to plug the gap. Hospitality businesses will need to get better at retaining staff. If they manage to achieve this (I’ll talk about how they can do this in a moment), guests benefit. You’re more likely to experience great service from staff who are invested in the organisation they work for and fully embedded in its culture. Both of these qualities develop over time and operate on a reciprocal basis. In short, as an employer, you get out what you put in.
Training that emphasises an organisation’s values and draws on experiences of staff members who’ve worked their way up from entry level to the higher echelons of management or head office should be used as inspiring examples of what’s possible (and what’s encouraged), in the business. There should be a sense of: “This is where we think you can go. Stay with us, there’s a future here.” At a micro-level, celebrating day-to-day success is key to this and should be enshrined in the running of the business, ensuring staff feel their hard work is noticed and rewarded.
Another way to add staying appeal for employees is to create a culture that offers something extra and unique – a great social experience, perks, flexibility. All of these will maximise the “stickiness” of your business as far as even casual staff are concerned. It’s easy to forget as a hospitality provider, there’s an equal challenge in marketing yourself to staff as there is to appeal to your customers. Your business needs to be somewhere staff, as well as guests, want to be. There will always be a transient nature to staffing in hospitality, but people are more likely to stick around if there are a few extra incentives.
The industry may also need to broaden its idea of what an ideal worker looks like. Although endless column inches have been devoted to how to attract and retain millennials, particularly when businesses are looking for staff who are more likely to stay on a longer-term basis, opting for a mixture of ages and life stages among staff makes sense. Enthusiasm, energy and fun – all standard customer service personality requirements – don’t have to equate to youth. Older, more experienced staff can match these traits and also have the advantage of being more likely to stay in the job, reducing training costs and inconvenience in the long term.
In a report by Swiss researchers based on German data of two million employees in 18,000 companies, the authors reference a number of studies that show an age-diverse workforce benefits from an enriched ability to approach problems from a range of perspectives. Where there’s a mixture of ages in a team, staff are also more likely to relate better to an age-diverse customer base. The latter could be great news for the guest experience. 
Steven Pike is managing director of HGEM

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