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Morning Briefing Strap Line
Fri 3rd Aug 2018 - Friday Opinion
Subjects: To be or not to be, shuffling for shelf space, general managers make or break and big menus are a thing of the past
Authors: Chris Edger, Glynn Davis, Ann Elliott and Nick Huker

To be or not to be by Chris Edger

Is it better to be a single-branded organisation (SBO) or a multi-branded organisation (MBO) within the pub, bar and restaurant sector? This is a question I am frequently asked by students and executives on my multi-unit leadership programmes, which I have been running for almost a decade at our high-performance university academy. It is a difficult question to answer! 

There are innumerable examples of category-killing SBOs – McDonald’s, Pret A Manger, Domino’s, JD Wetherspoon, Nando’s, Wagamama – that seem to prove SBOs provide a more effective path to strategic success. On the other hand, several pub companies – forced to leverage historic assets in differing demographic locations – have proved more than capable of evolving into outstanding multi-branded or format organisations (current exemplars include Stonegate Pub Company, Fuller’s, Young’s and Marston’s). But what measures of success can we apply to resolve the debate once and for all and what lessons can business leaders take on board when deciding to pursue an SBO or MBO path to growth? 

Academics have identified a tight range of measures and characteristics that are fundamental to successful service-based SBOs. Leonard Berry in his seminal article Cultivating Service Brand Equity argues all strong service brands have the following four features – they dare to be different; determine their own fame (provide a valuable market offer that focuses on unserved market needs); make an emotional connection with consumers; and are successful at internalising the brand’s key attributes for service providers. 

In his best-selling book Creating Powerful Brands, Leslie de Chernatony highlights three fundamental pre-requisites for service brand success – a focused position (ruthless clarity about what the brand stands for); consistency (of product quality and experience); and values (unified and inspirational internal belief systems that bind the brand together). Clearly category-killing SBOs such as Wetherspoon and Nando’s incorporate and over-index on all these features and failing SBOs (several notable casual dining examples in the UK) lack them! But is it possible for MBOs to craft and maintain these essential pre-requisites of success given their more complex, ambiguous and diffuse organisational structures and forms?

Executives generally justify their MBO structures in three ways. First, they will bolt on assets or create new formats, claiming such additions create greater economies of scale through leveraging pre-existing support/IT infrastructure, greater buying power and collective knowledge transfer. Second, they will argue creating an MBO structure will increase their levels of portfolio optimisation (their ability to provide the “right offer for the right occasion in the right place” and create an organisational entity that can run several assets in proximal locations). Third, they will justify an MBO structure along the lines of corporate resilience (a spread of branded formats addressing different consumer segments reduces risk; one brand/format compensating for another during economic/demographic fluctuations). 

The problem with MBOs, however, is they often run into serious problems because their formats converge, becoming insufficiently differentiated. Why? Management becomes distracted by fixing sub-optimal “lagging assets”, senior leadership becomes too detached from the founding DNA of their multiple brands, front-line operators become despondent over their diluted identity and focus, and disappointed or disapproving customers abandon the brand in droves!

So how can MBOs flourish? I would point to three things successful MBOs do: 

Market separation – to maintain their brands’ identity, personality and evolution they create structures where there is complete separation between their differing consumer-facing offers. Individual brands/formats are protected from homogenisation in MBOs through separate structures, where the operators and teams can address their market segment with clarity and energy. Marketing, branding, recruitment, product development and design aren’t shared, they are owned by the brand. Distinctive, committed tribes are created with a sense of real meaning, purpose and identity. 

Decision-making autonomy – leaders of brands within MBOs sit under a corporate technocratic structure that often enjoys nothing more than tinkering and interfering with its “branded toys”. Unsuccessful MBOs have corporate centres that meddle, interfere and slow things down. Successful MBOs act more as holding companies, providing capital and expertise as and when required. They trust the decision-making capabilities of their brand leaders – experts within their respective domains – to craft, evolve and lead their businesses to outperform their respective competitive set. Ownership, accountability and agility are strengthened by devolved decision-making powers to the individual brand leaders within MBOs. 

In-brand succession – one of the fallacies of MBO structures is the notion such configurations enable best-practice knowledge and talent transfer, strengthening the overall corporate entity. The reality is that having created strong brands/formats with powerful tribal identities, the individual brands themselves are the best breeding grounds for succession and knowledge transfer. People who have grown up with and “lived” the brand are far more likely to intuitively understand what its customers crave and expend more discretionary effort to ensure its prosperity and success. Often – as shown through multiple engagement survey results – people who work for individual brands within MBOs express far greater levels of loyalty to their respective brands than their overarching corporate entity. Focusing on developing and progressing people within individual brands rather than trying to propagate futile cross-brand talent transference is a far more important function for successful MBOs.

In summary, the debate over whether it is better to aspire to the status of category-killing SBOs such as Wetherspoon and Nando’s or optimal MBOs such as Stonegate and Marston’s is one that will continue to rage in my classroom! As this article argues, there are best practice features and common pitfalls that apply to both models. For most organisations, however, it is not a matter of choice, their structure is probably cast in stone – more through an accident of history and naked opportunism than rational planning. The real exam question might actually be how SBOs and MBOs should leverage the strategic assets and capabilities they currently have to carve out sustainable competitive advantage in the turbulent times ahead! This is a question that will merit further analysis and discussion. 
Professor Chris Edger is a leadership author, speaker and coach and author of Inspirational Leadership with Tony Hughes

Shuffling for shelf space By Glynn Davis

Defining exactly what constitutes craft beer is proving a tough task. Can it only be produced by small breweries, is it about the quality of the ingredients or the ownership structure? Perhaps it is all these things? What it’s also about is the philosophy of the owners and founders, which is again difficult to define.

Needless to say, there is an ongoing argument about the definition of craft within the beer industry and among drinkers. One of the main areas of discontent among the more vocal parties is the ownership issue. The most recent battle – fought out aggressively on social media – has been over the stake Heineken took in Beavertown Brewery.

This London-based operation seems to have been a lightning rod for the incursion of big brewers into the craft beer industry. Various bar owners, bottle shops, drinkers and social media malcontents have vented their spleen and vowed to never drink Beavertown’s beers again or stock them in their bars or shops.

The high-profile and near rock-star credentials of Beavertown owner Logan Plant – one of the leaders behind craft beer’s charge across the capital – put him in the cross hairs of those dishing out the vitriol when he took funding from Heineken to help grow his business.

Whether his decision is to be castigated or applauded depends on where you stand in the debate but what we can say is those who have taken a stand either way are in a major minority. The reality is the vast majority of drinkers are apathetic or oblivious to the finer details of the craft beer industry.

The primary reason the likes of Beavertown, Camden Town, BrewDog and a growing legion of others have taken funding from the big brewers, or organisations linked to them, is they want to increase distribution. Most of this involves securing listings with major retailers such as the big four supermarkets. It’s not about them saturating bars and pubs with their beer, it’s more about getting shelf space in Tesco, Sainsbury’s, Asda, Morrison’s and Waitrose.

The top ten best-selling craft beers in the UK on-trade says a lot about the loyalties and the thinking of most consumers. The list includes BrewDog Punk IPA, Guinness’ Hop House 13, Camden Town Hells lager and Goose Island IPA, which all have ties in some form or another to the big brewers.

What is particularly interesting is on-trade sales of these and all other craft beers is tiny. In totality, craft beer sales amounted to a modest £136m for the year to March 2018, according to research company IRI, although this admittedly represents a healthy year-on-year leap of 92%.

I’d argue the likes of Beavertown moving into the retail area is good for craft beer drinkers because these operators offer a much more interesting alternative to incumbents on the supermarket shelves including old dogs such as Stella, Foster’s and John Smith’s. By applying the Darwinian principle, this shift of focus by bigger craft brewers such as Beavertown towards the on-trade retail market might free some space in pubs and bars for the smaller breweries moving up the ranks behind them.

Rather worrying, though, is the growth of craft beer in the on-trade during the past year has been achieved from the sizeable 16.2% of retail shelf space it has been assigned within the beer category, even though it accounts for only 4.2% of overall on-trade beer sales. This is serious underachievement.

While the supermarkets undoubtedly gain kudos from stocking an interesting beer list they are far from a benign force and it is questionable whether they will be willing to let this poor rate of sale continue. This situation is leading to many cans and bottles of craft beer sitting on the shelves well beyond their best-before dates.

The arguments about brewers’ ownership structures pales into insignificance when compared with a situation where the industry’s future is, to an increasing extent, in the hands of the major grocers. They are not the slightest bit interested in brewery ownerships – it’s more important to them that the bottles and cans they are supplied have barcodes printed on them.
Glynn Davis is a leading commentator on retail trends

General managers make or break you by Ann Elliott

I have had lots of conversations this week about the role of the general manager, particularly when times are tough.

I believe a general manager makes or breaks a pub or restaurant irrelevant of the brand offering – not “can” make or break but “does” make or break. We have been given numerous local marketing briefs where we know the problem is not the local market or the brand’s marketing but the manager themselves. There is no point implementing activity where the manager is weak, it’s like pouring water into a bucket with holes in it – more water doesn’t block the holes.

Some operators I know, faced with like-for-like sales decline in July due to the weather, have taken the operations back to basics. One chief executive I know has just spent three months talking in-depth to every one of his general managers and their teams to ensure he is giving them every possible chance of success in the current climate.

He wanted to know if his general managers were happy, had the tools required to carry out their jobs and if company processes freed them or tied them down? He also asked whether the company was doing things that made no sense to them that should be stopped or changed? Did they feel empowered (and skilled enough) to drive sales locally? Were their ideas really listened to, developed and implemented? Was there anything else they needed from him or his team to help them and their team do the best possible job?

Others I know have questioned the general manager job description and changed it to align more with the reality of what they have to do on a day-to-day basis rather than what head office thinks they should be doing.

General manager job satisfaction rarely seems to correspond with rewards and benefits (though many do respond to league tables, incentives and competitions that inspire them and are well thought through) but derive from clarity of purpose, a strong vision, intelligent empowerment and outstanding communication

Great general managers are at the centre of everything to do with their site and everything revolves around them – if they lose it, the restaurant loses it. They have to liaise with all head office functions and their business development manager to ensure core levels of support. They need to recruit, train, motivate and inspire their teams – back and front of house – while embodying company culture and behaviour. They need to be the face of the brand with the customer in all dayparts, for all occasions and for core business along with functions and events. Good general managers know their competitors and their communities well – they have to keep many plates spinning.

They also have to do an amazing job of being invisible but being present. Customers can sense if a restaurant is under control or not – although they don’t need the general manager to check back on every table on every shift – as can team members. The pass is watched, customer behaviour is observed, the floor is managed – it all works.

Great general managers have awesome emotional intelligence and an ability to be fair, direct, honest and considerate with those they want to inspire and those they want to lose. They take ownership and accountability and tend to have a “we win, no excuses” mindset. They are decisive and make things happen. Most, to misquote Kipling, keep their heads when all about them are losing theirs, trust themselves when all men doubt them, can wait and not be tired of waiting, don’t deal in lies, don’t give way to hating – nor look too good nor talk too wise.

A great general manager is worth their weight in gold. Their role in success can never be undervalued.
Ann Elliott is chief executive of Elliotts, the leading integrated marketing agency in the hospitality and leisure sector – www.elliottsagency.com

Big menus are a thing of the past by Nick Huker

By definition, the word “niche” doesn’t exactly scream variety. However, recent restaurant trends would suggest otherwise.

When dining out, consumers are spoilt for choice. There is a whole range of eateries available, all with a large selection of food to choose from – it’s like putting a child in a toy shop. Choosing where and what to eat can become a hassle. This is why niche menus have become increasingly popular and more prevalent in the hospitality industry. They offer consumers an opportunity to pick a particular food and the variety comes into play when it can be served several different ways.

This love of variety is supported by research carried out by Preoday in 2018. Asking consumers to identify what they look for in a food venue, it found a great menu (91%) was vital. Diving deeper, it was revealed more than half (57%) consider variety the most appealing aspect of a menu.

Seemingly contrary to this, niche restaurants in London that serve different versions of a single menu item have been growing in popularity. Channel 4 show Tricks Of The Restaurant Trade recently told viewers that in 2015 alone, one in ten London restaurants that opened focused on niche items – and this trend is continuing to increase. Now curious customers can sample menus that focus purely on the likes of cereal, cheese toasties or potatoes.

How does this make sense? Arguably it makes a lot of sense if you think of the single-product trend as a creative way of offering variety to diners. While the focus is on one food type, the consumer is offered more interpretations of that food than they could hope for anywhere else.

Take The Potato Project for example, a baked potato business in Soho with a mission to show potatoes can pair with something other than baked beans. Items on the menu include autumn wild mushrooms with spinach, blue cheese and truffle oil; and sweet potato Malaysian vegetable curry with sour cream and sesame seeds. Interestingly, next door you’ll find another single-food restaurant concept, Meltroom, which focuses on grilled-cheese sandwiches.

The concept of niche menus gives consumers the variety they want and allows food operators to up their game by sticking to a dish and doing it really well. However, there are many benefits for the operators too. In many cases, offering a pared-down menu will make stock-purchasing more affordable. Less diversity on the menu should mean fewer ingredients. That affordability can also be passed on to the customer – after all, customers like attractive pricing.

A simple menu is also easier for operators to manage in terms of preparation. With fewer ingredients, greater efficiency can be applied to production. If there is one dish, this can be used as a staple and the extras added for variety. For example, The Potato Project can cook the jackets in bulk and extras such as mushrooms or sour cream quickly added after. This means dishes can be turned out at speed, tables can be served quickly and collection queues can be kept short. All these things count among the most important elements of the dining experience for modern consumers.

If you manage a foodservice business and you’re looking for a way to attract fresh custom, why not consider a menu refresh? Focus on your strengths on the menu, identify which of your dishes are the most popular with consumers and can be diverse enough to be varied. By simplifying ingredients – while still offering variety and diversity on the menu – you could generate cost savings and boost revenue through higher customer turnover. Just remember, if you’re going to offer your food via online or mobile ordering, focus on creating an attractive digital menu, sticking to the rules of menu psychology to nudge your customers to spend how you want them to.
Nick Huker is chief executive of ordering technology provider Preoday

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