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Morning Briefing Strap Line
Wed 15th Apr 2020 - Propel Wednesday News Briefing

Story of the Day:

Peter Backman – foodservice sector losing sales to retail market at rate of about £1bn a week: The foodservice sector is losing sales to the retail market at the rate of about £1bn a week, according to industry analyst Peter Backman. He said: “After allowing for the differences in gross profit between foodservice and retail, this translates into a gain for the retail market of about £200m (perhaps slightly more) in food sales each week. This needs to be added to sales of alcohol and soft drinks that would normally be sold in pubs and that consumers are now buying from the off-trade. This is a huge shift of several hundred millions of pounds per week with implications for the supply chain – manufacturers are now producing almost exclusively for the retail market, and, as I observed last week, foodservice-focused distributors are having to find business in unusual places. The longer the lock-down persists the more these short-term developments will become baked into the foodservice supply system with implications for what happens when restrictions are finally removed, and consumers start to eat out again.” Backman also said there was “flickering signs of life” for takeaways – with peaks on Mondays but a poor showing over Easter – while delivery was “also improving somewhat”. He added: “The health care sector is, unhappily, having to supply food to increasing numbers of patients and staff (but obviously not visitors at the moment). But, other than that, there are few signs of life in the foodservice sector. The number of corporate failures, at least among the larger names, remained mercifully limited last week. For now, some sort of calm seems to have reasserted itself over the foodservice sector. But there will be rocky times ahead.”

Industry News:

Mark Wingett talks to Jonathan Lawson in latest ‘navigating the coronavirus’ video interview: Propel insights editor Mark Wingett will talk to Jonathan Lawson, chief executive of the Channel Islands-based Liberation Group, in the latest of Propel's video interviews with leading operators on how they are navigating the coronavirus crisis. Lawson talks about keeping parts of his business operational and other shuttered parts engaged, providing leadership in times of crisis, and how the pub will come back stronger. The video will be released on Wednesday (15 April). Meanwhile, readers can support independent sector journalism and get their news 12 hours early (at 7pm each night) with a Propel Premium subscription. It costs £395 plus VAT per annum for operators and £495 plus VAT for suppliers. Email to sign up.

Pub operators apply pressure on local MPs over grants issue: Pub operators and brewers are applying pressure on their local MPs over the need to extend the government’s grants scheme to all businesses, not just those with a rateable value of less than £51,000. Industry veteran David Bruce, chairman of West Berkshire Brewery, has written to business secretary Alok Sharma and his local MP Laura Farris over the grants issue and the company’s inability to secure a Coronavirus Business Interruption Loan. In the letter seen by Propel, Bruce wrote: “Since 2012, I have co-founded, among others, seven pub companies, namely The City Pub Group and the six companies trading as Mosaic Pub and Dining. Between them, they own and operate 73 pubs from Exeter to Norwich and Birmingham to Canterbury. As you know, the government has closed all on-licensed premises in the UK but is offering grants to those pubs with a rateable value of less than £51,000. Please note at The City Pub Group that 37 of its 45 pubs (82%) will not benefit from the government’s offer. Mosaic Pub and Dining – 16 of its 28 pubs (57%) will not benefit from the government’s offer. Yet more tangible proof a lot of what the government is offering (business interruption loans not being made to 99% of businesses) and now some pubs receiving grants but not others – all very unfair, as usual!” Gary Downham, founder of Essex-based pub operator Pie & Pint Inns, told Propel he had made a similar point to his local MP Mark Francois, as all of his three pubs have a rateable value of £70,000-plus. Downham said: “If we don’t get this grant help to pay our suppliers and landlords there won’t be any business out there. These grants would clear our debts and put us in a great position to carry on trading. However, when tax’s go up, which they will do to pay all of this money back, will we get a tax break, as we never received the grants?”

Downey – we need a #NationalTimeOut: London Union chief executive Jonathan Downey, who has been leading on some of the key thinking for government sector concessions, has urged the industry to get behind his #NationalTimeOut idea, which would include nine-months of national rent free, as well as a matching period of debt repayment postponement for landlords. The idea is everything gets pushed back nine months and added on to the end of the lease or the loan period as appropriate. Downey said: “The original idea was it would be government funded but then when I saw how much the Coronavirus Job Retention Scheme had cost the government and how much other sectors were suffering too, I realised we needed to come up with a solution that cost government nothing. To make up for this period of rent-free, each corresponding lease is extended by nine months so those payments aren't lost, just postponed. In order to help landlords manage this pause in income, we need to do the same push back for them on the next nine months of their loan repayments, where the debt is secured on premises benefiting from this rent postponement. Like the 12 months business rates break, it should probably be sector specific – retail, leisure and hospitality only perhaps, as the majority of businesses in these sectors have been forced to close by government action. This is the only way most hospitality businesses will get through this and be able to build back on the other side.”

Jonathan Nunn – ‘real danger for restaurant industry isn’t annihilation but coming back as it did before’: London-based food writer Jonathan Nunn has argued the real danger for the restaurant industry isn’t annihilation – but coming back as it did before. Nunn said to move forward, the industry must start by examining what it would like to save and discard what it believes “doesn’t deserve to survive”. Writing in The Guardian, he said: “Now is the time to start having honest conversations about food prices and supply chains, high rents and civic space, about which restaurants – or at least the ones that get coverage – really benefit. Our modern era has been partly defined by the rise and democratisation of the restaurant. Seventy years ago almost half of UK households never ate out and restaurants were the preserve of the rich. Today, if you live in London it’s possible to eat out or order in a taste from almost the entire world. A side effect of this is that we have become alienated from where food comes from and the work that goes into making it. But restaurants can now play a new role in redressing the balance. Many will now have to work out new business models that supplement eating at home – a model that immigrant-run restaurants are already familiar with. Over the next few months, the restaurants that are the most adaptable will find their own solutions to the crisis that focus on community and simplicity. The possibilities are both terrifying and exhilarating. We are in uncharted waters – the industry has never seen this before, and all signs point to the likelihood that restaurants as we know them aren’t coming back for a while. To move forward, we must start by examining what we would like to save about the industry, giving space to the things that nourish us and our communities, and discarding what we believe doesn’t deserve to survive. After all, the real danger the restaurant industry faces isn’t annihilation – the danger is that it comes back the same as it was before.”

Street Feast founder launches A Plate For London initiative: Dominic Cools-Lartigue, the founder of street food market concept, Street Feast, has launched a non-profit social initiative to bring food to those in need in the capital. The platform, called A Plate For London (APFL), is focused on helping three specific groups get access to groceries and hot meals – people who were in food poverty before the coronavirus pandemic; children who rely on free school meals during term time; and those who have lost their jobs and now find themselves in food poverty, as a result of the enforced lock-down. The APFL initiative works with food suppliers and independent restaurant brands, who have been forced to close their kitchens to the public during the lock-down, to put together food parcels and hot meals that are distributed to people that need them through local councils and charities. APFL has partnered with Tower Hamlets Council to feed the borough’s 15,000 school children that are eligible for free school meals during the Easter holidays and, last week, it set up five food hubs in the borough to feed more than 4,500 children. A further two hubs will be set up this week to feed a further 10,000 children, meeting the 15,000 meals target. It has also partnered with Brixton-based charity Compliments of the House and Hospitality Action. Cools-Lartigue said: “A city is nothing without its people and, right now, we need to make sure everybody in London is getting access to food, regardless of their circumstances.”

Job of the day: COREcruitment is supporting a luxury hospitality business looking to appoint a new marketing director. They will be responsible for the implementation and development of the marketing and PR plan in order to promote venues and support future business development. Strong and diverse “luxury brands” background and restaurant experiences is desirable. Broad knowledge about marketing strategies and the current UK market is essential. The salary is circa £80,000, plus benefits, and the position is based in London. Anyone interested can email with their CV or profile. 
COREcruitment is a Propel BeatTheVirus campaign member

Company News:

Carluccio’s staff to be furloughed after landmark legal ruling: Unite, the union for hospitality workers, has secured clarification the government's Coronavirus Job Retention Scheme (CJRS) can be used by companies in administration in its first legal test. Carluccio’s was placed into administration last month, casting doubt over whether its circa 2,000 staff were eligible for the scheme. Administrators were appointed to oversee the collapse of the restaurant chain on 30 March, four days after the Treasury had published details of CJRS. Three days later, it was announced companies in administration could make use of the scheme, protecting jobs for the time being. Insolvency laws mean administrators normally have to dismiss workers within 14 days of their appointment in order to avoid liability for their employment and wages, but the court’s new direction means the administrators can give more time for employees to respond to their furlough letter. The High Court has ruled administrators are able to place a company’s employees on furlough and claim for their wages under the CJRS. In the Carluccio's case the court held the administrators had validly varied employees’ contracts and they will be taken to have “adopted” the contracts when they apply for the furlough funding. This is the first litigation involving the CJRS and provides the blueprint for administrators to make use of the scheme to protect jobs during the crisis. Unite’s assistant general secretary for political and legal affairs Howard Beckett said: “Time was running out for some of our members in Carluccio’s. They faced the prospect of being dumped out of work this weekend. In taking this action, Unite has secured them some wage security. It is now essential all those Carluccio's workers who have either not received a letter or not responded to the letter from the administrator get in touch with their union, Unite, or the administrator immediately to ensure they are not dismissed and lose out on the opportunity that this court judgement has ensured. The new CJRS was put together in record time and its interaction with other areas of law – in this case insolvency law – needed to be looked at by the High Court. This important decision ensures no one is left behind in a hospitality sector reeling from the effects of the shut-down."

KFC reopens 11 restaurants for delivery, Burger King set to follow suit: KFC has reopened 11 of its restaurants across the UK for delivery – and is looking at the possibility of reopening further outlets. The company has reopened sites in Bracknell; Cardinal Park in Ipswich; Coliseum Retail Park in Enfield; Deansgate, Manchester; Great Western Retail Park and Pollokshaws Road in Glasgow; Heaton Chapel, Stockport; Hulme, Manchester; New Oscott, Birmingham; Portsmouth; and Tamworth. Propel understands Burger King is also set to follow suit and reopen a number of selected sites for delivery over the coming week, with an announcement due in a day or so. When asked if it might reopen some sites, McDonald’s told Propel it had “nothing to share at this point”. Staff at KFC are returning on an opt-in basis, and only those who can travel without the use of public transport have been asked to work. The company has implemented a number of measures to observe social distancing including placing tape on the floor to create designated working zones two metres apart and operating with just one person per station and fewer team members. The restaurants are serving a limited menu to prevent the need for team members to cross stations and staff packing orders are wearing gloves. Similar procedures have been put in place for delivery drivers with contactless payment in place. KFC said it was looking at the possibility of reopening further sites “but if we can’t do it responsibly then we won’t”. Last week KFC donated more than 3,000 meals to NHS and key workers. It has also committed to providing 100 free meals from each open restaurant every Tuesday to those on the front line A KFC spokesman said: “There’s still a need for affordable, accessible food at this time – so we want to do our part. We’ve also donated thousands of meals from all our open restaurants to those on the front line, including the NHS and key workers, in partnership with Deliveroo, and will continue to do so each week while the situation continues.”

Just Eat delivers more than one million meals to NHS workers, extends discount and working on longer-term initiative: Just Eat, the online market place for delivery, has delivered more than one million meals to NHS workers since introducing its 25% discount two weeks ago and has extended the offer for another fortnight. The company said healthcare workers have saved £1.5m collectively through the discount, with meals ranging from large group orders enough to feed a whole team, to individual dishes at the end of a long shift. In addition, Just Eat will be introducing a longer term initiative to support more people on the front line who are putting themselves at risk, in order to help others. UK managing director Andrew Kenny said: “We are proud to be making a small difference to the individuals and families of those working for our fantastic NHS. Over the past few weeks we’ve heard from many of our customers and hardworking restaurant partners, who want to join in the efforts of supporting those doing an heroic job right now. We’re working on an initiative that will enable them to do just that. With the huge strain on our front line workers set to continue for the foreseeable future, we want to show our support to the people doing an extraordinary job of keeping this country going.”

US restaurant brands give masks to staff as they step up safety procedures: US restaurant brands are giving masks to staff as they step up their coronavirus safety procedures, especially protocols at the drive-thru. McDonald’s said it plans to distribute more than 100 million non-medical grade masks to the company’s almost 14,000 restaurants. Masks will first be distributed “to areas where the use of masks is required by law, to hotspots with a high level of confirmed cases in the community, and then to the rest of the country,” the company told Nation’s Restaurant News. McDonald’s USA president Joe Erlinger announced in a tweet the company’s supply chain had sourced more than 100 million masks. Chick-fil-A has also started distributing “face masks or other face coverings” to workers in accordance with federal health recommendations. Earlier this month, the company began installing portable handwashing stations outside so drive-thru workers can wash their hands more frequently. Taco Bell and KFC, whose parent company is Yum! Brands, have also announced plans to take employee temperatures before the start of shifts and supply them with masks. Restaurants in the country have been forced to close dine-in operations and switch to drive-thru, delivery and takeaway only.

Abokado supports homeless and front line workers: Abokado, the London-based healthy eating chain, has announced how it’s looking after its “family” as well as the wider community. In an email to customers, the brand announced it has retained its entire team with all staff being placed on the government’s furlough scheme. The company also said it was in touch with employees daily by sharing stories and news, videoblogs from chief executive Mark Lilley on his “seven top tips for staying sane” and keeping everyone informed and engaged “ready for our return”. Abokado has also been working with long-term charity partner St Mungo’s to support its hostels, which care for the homeless and vulnerable. And as part of a coalition of operators, Abokado is providing up to 1,000 of its freshly prepared Pacific-inspired meals to NHS workers daily across London. Lilley told Propel: “It’s hard when you’re staring down the barrel of a crisis such as this to look out and think of others, but that’s exactly what the Abokado crew have done. It says a lot about our special culture and character.”

Stew & Oyster reopens sites for delivery and takeaway: Leeds-based bar and deli group Stew & Oyster has reopened two of its five sites to offer delivery and click-and-collect. The company has reopened its sites in the Oakwood and Boston Spa areas of the city to offer the services every Wednesday and Friday from 5pm to 8pm. The business is also asking consumers to buy a meal for the vulnerable and key workers through its online shop. The business said: “It’s only £2 and every couple of weeks we will donate the meals bought to key workers and those in need.”

Foodhub launches initiative to support takeaways staying open as it reports 33% increase in orders but 36% of premises close: Food delivery platform Foodhub has launched an initiative to help takeaways that remain open as it reported a 33% increase in orders in the past week but said 36% of outlets closed during the period. The “Takeaway the Safe Way” scheme aims to help educate and protect staff so they can continue to feel safe while operating and meeting the rise in demand. It gives free access to resources and learning materials to help them understand concepts such as contactless delivery and access to a hotline and community advice website. Foodhub chief operating officer Philip Mostyn said: “We decided to set up our hotline and resource service to support the takeaways that want to stay open so they have access to learning materials as well as support and guidance to help them feel more confident with this decision.” Foodhub has also launched its Takeaway Care Champion initiative to highlight those in the industry who are going above and beyond to continue to help people and make them smile during isolation. 

Patty & Bun’s produces lock-down kit: Patty & Bun, the better burger concept led by Joe Grossman, has joined forces with its meat supplier, butcher HG Walter, to produce “The Lockdown DIY Patty Kit”. The initiative has sold 3,000 kits in just ten days, with both businesses adapting their websites and using existing drivers and vans to facilitate the deliveries. The kit, which is available anywhere within the M25, features Patty & Bun’s HG Walter beef patties, brioche buns, a mini squeezy bottle of smokey Patty & Bun mayo, cheese slices, and the home-made pickled and smokey onions. Three different burger boxes are available four Ari Gold cheeseburgers; four Smokey Robinson; and two Ari Gold and two Smokey Robinson.

Numis – perfect time to invest in Whitbread, which has ample liquidity to withstand lock-down: Numis Securities leisure analyst Tim Barrett has said now is the perfect time to invest in Whitbread, which has ample liquidity to withstand the current lock-down while other businesses have stretched balance sheets. Issuing a ‘Buy’ note on the shares with a target price of 3,650p, Barrett said: “In short, with £1bn of undrawn revolving credit facility and circa £800m of cash on its balance sheet (pre-German acquisition of circa £300m) Whitbread has none of the liquidity constraints of competitors such as Travelodge or peers in the travel and leisure sector. It has yet to comment on exact cash-burn associated with shut-down, nor provide guidance on cost flexibility. However, we make a detailed cost assessment and conclude cash-burn in the range of £33m to £60m per month is reasonable, and possibly better. That assumes government subsidy of furloughed workers continues and Whitbread continues to pay rent as it falls due (others taking much more aggressive stance here). At that run rate, the business has several years to see it through closure. Independents have a 45% share and, in general, will not have generous headroom. Similarly, Travelodge recently announced FY19 results showing net debt/Ebitda of 6.4 times lease adjusted (and more than £100m of cash, pre-cancellations). The situation therefore seems analogous to 2009-10 when cash constraints left competitors unable to invest, allowing Whitbread to take material market share.”

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