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Morning Briefing Strap Line
Tue 19th May 2020 - Propel Tuesday News Briefing

Story of the Day: 

Roger Wade – we need to find a middle ground on rent: Roger Wade, chief executive and founder of Boxpark, has called on the industry and landlords to find a “middle ground” on the issue of rent. Speaking as part of Propel’s navigating the coronavirus series, Wade said: “We are in a position where we can see it from both sides of the coin. We can see it from the operator perspective, which we are to institutional landlords, and we can see it from the landlords’ perspective because we are landlords of some smaller tenants. We have got to find a middle ground. Many of our tenants were struggling to pay their rent on a monthly basis before coronavirus, so straight away we said to them during the period of closure you don’t have to pay any rent and service charge. That is easy for us to do as a relatively small, private company where I am the major shareholder and I can make that decision. Clearly, that’s different if you are a pension fund and you have millions of pensioners to take care of in terms of making sure they get an income. And I understand why it is difficult for them to offer a 100% free rent and service charge holiday during this period. So, we have to find a common ground, and I think there is a fairer middle ground.” Wade said he was concerned about “some of the rhetoric, the language we are using against landlords”. He said: “Landlords didn’t create coronavirus, operators didn’t and neither did the government, so to portion the blame or the responsibility for finding a solution on any one party I don’t think is fair. I think there is a lot of sense in what Jonathan Downey and Hospitality Union is saying, and I also understand the issue from a property perspective, and I think Kate Nicholls and UKHospitality has been doing a fantastic job of listening to both sides. We cannot unilaterally impose are own rent requirements on landlords. We haven’t really consulted with them. Many I have spoken to can’t afford to give nine-months rent free, and we have to think about their position. Yes, there are some private landlords taking advantage of the situation and I totally get that but there are also guys heading up major pension funds who have to take care of the requirements of those funds. I think what Kate is working on – bringing together some major institutional landlords, major operators, getting the opinion of Hospitality Union, involving the government – is proposing a middle ground. If we take the polar opposites, we have Hospitality Union asking for a nine-month rent free; and we’ve got a landlords union proposing, with the British Property Federation, 100% rent furlough payments paid for by the government to them during the period of lock-down. I think those are both extreme positions. The middle ground is what UKHospitality is suggesting, which is the idea that landlords get government help to actually offer a rent-free period. Maybe if landlords can take a rent reduction for nine months – say a 50% rent reduction, and maybe the government can make a 50% furlough payment initially to the landlords, and that gets tapered, as our businesses get back to normal we can contribute more to that. It is a middle ground approach.” Wade will share more of his thoughts in the video, which will be released on Tuesday (19 May). 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.

Industry News:

Wi5 founder to feature in latest The Supplier Perspective video: In the latest in Propel's video interviews with leading suppliers, Mark Wingett talks to Prask Sutton, founder and chief executive of Wi5, about taking a collaborative approach to working through the coronavirus crisis; how crisis is proving a catalyst for changing attitudes to technology in hospitality; and how operators and consumers might need to explore a Netflix/subscription-based model going forward. The video will be released on Tuesday (19 May) at 3pm.

Luke Johnson writes love letter to sector: Sector investor Luke Johnson penned a 1,200-word love letter to the sector on Monday (18 May), which Propel published exclusively. In the letter, Johnson gave a frank assessment of the challenges facing the sector but also highlighted some positives. He wrote: “Not all is gloom and doom – although quite often at the moment it feels like it. Because some premises will never reopen, and many operations will need fewer employees, the acute staff shortages across the industry should ease. This is a cruel consequence of the shutdown, but it does mean it should be easier to find skilled team members, and also existing staff ought to be keener to retain their jobs. Long term, the inequitable relationship between restaurants and property landlords will change, thanks to supply and demand. There will sadly be plenty of closed premises where the freeholders will be obliged to reduce the passing rent to secure a new tenancy. Going forwards, rents will certainly fall when leases expire. I expect there will be plenty of company voluntary arrangements and administrations by crippled businesses and the biggest losers will be landlords – either because they will have voids or rents will be cut. Either way this is unqualified good news for the hospitality sector – for too long we have been working to make landlords ever richer. They will be sharing the pain this time. The other possible silver lining to all this chaos is if we are allowed to trade properly in July and August it may be the best summer ever. It seems very likely few Brits will be able to travel abroad for their summer holidays, since they face a quarantine of two weeks on their return – and quite probably one in the country to which they are travelling. I suspect most won’t bother. But they will still want some sort of vacation, since they’ve been cooped up at home for months, and Easter holidays didn’t happen. Therefore this will be the summer of staycationing in Britain. That should mean great business for Britain’s various eating establishments, since roughly 30 million extra holidays could be taken here rather than in Spain, Italy, France, Greece and so forth. There will be no foreign tourists, but their numbers are massively outweighed but the number of us who normally travel abroad for the summer – but will be here this year.”

Congestion charge extension is ‘fatal blow’ to sector businesses in London: A “fatal blow” has been dealt to hospitality businesses in London with the decision to increase and extend the congestion charge, which will now include weekends, operators and sector businesses have said. Mayor Sadiq Khan has said the charge will temporarily increase to £15 per day and have its hours of operation extended to between 7am and 10pm daily from 22 June. The charge for driving into central London was suspended on 23 March. It was previously £11.50 while the charge only applied on weekdays, up until 6pm. David Coffer, chairman of advisory firm Coffer Corporate Leisure, told Propel the move to not only extend the charge into the evening, but also the weekend – “the most precious and busiest trading days for many businesses” was “cruel” when the sector was trying to get back on its feet. Coffer said with the government still advising people to avoid public transport, it would be effectively levying a £15 tax on anyone journeying into London to visit a theatre, restaurant, cinema, bar or club once they can reopen. He added: “The mayor has dealt a fatal blow to London’s late-night culture. I get street space for London, walking and cyclists, but many older, infirm and non-London-based visitors can’t benefit from these initiatives. I have been contacting as many operators as possible to garner support and get a lobby going to get the mayor to limit the congestion charge hours to 6pm and none at weekends, when after all there are far fewer residents and workers in the centre of London.” Erpingham House founder Louie Blake said: “Does anyone make sense of the mayor’s new measures following a bailout and with the government still advising social distancing?” Ross Kirton, head of UK leisure at Colliers International, added: “Central London and the West End in particular is rich with cultural and leisure destinations such as theatres, museums and tourist attractions, much loved by a number of generations but many of these people are now unlikely to travel on the underground train and despite driving into the city centre being an alternative method, this new additional levy will most definitely perturb visitors, so many simply won’t go into the West End at all.”

Cross-party group of MPs demand bespoke support for pub industry: A cross-party group of MPs has written to the chancellor calling for the government demanding bespoke support for the pub industry in the face of the “unique combination of challenges” created by the coronavirus crisis. Liberal Democrat MP Daisy Cooper, alongside colleagues from the Tory, Labour, SNP, Plaid Cymru and Green parties, are calling for ministers to ensure pubs – a “cornerstone of British culture” – are in a position to reopen once social distancing measures are eased. The group has urged the government scraps the £51,000 rateable value cap for pubs to allow then all to access the retail, hospitality and leisure grant fund; stop pub company landlords from charging rent to their tenants through the crisis; and extend the Coronavirus Job Retention Scheme for the hospitality sector for the duration of social distancing measures, adopting a tailored approach to taper down the scheme in line with the ability of pubs to reopen on a viable basis. Cooper, who is MP for St Albans, said: “Ministers must act urgently to support UK pubs through the coronavirus crisis, or risk leaving a gaping hole in communities across the UK and the loss of a wonderful part of our heritage. Longer term, we are calling for wholesale reform of the broken business rates system, which has been exposed as completely unfit for purpose.” 

NTIA – insurers are putting hundreds of sector businesses at risk by denying legitimate business interruption claims: The Night Time Industries Association (NTIA) has said insurers denying paying out legitimate business interruption insurance claims are putting hundreds of hospitality businesses at risk. The Financial Conduct Authority has stepped in and intends to obtain a court declaration to resolve contractual uncertainty in business interruption insurance cover. But with no date on the horizon for the case and no definite indication as to when businesses within the night-time economy will be able to reopen, many are relying on the prospect of a business interruption insurance pay-out. Despite businesses having “crystal clear clauses” within their policy wording indicating full coverage, the NTIA said several big-name insurers have refused to pay out. NTIA chief executive Michael Kill said: “We have heard countless stories where businesses have had written confirmation of cover from insurers, and then their claim has been denied later down the line. It’s our responsibility to bring the industry together and share these injustices.” 

Drinks Trade Regatta to return next year: The 30th Drinks Trade Regatta will now take place from Friday, 7 May to Sunday, 9 May next year. The brewing industry’s annual sailing event was due to take place on the Solent next month but had to be postponed due to the coronavirus pandemic. Bookings from this year’s postponed event will be carried over. Teams are asked to donate £1,000 to charity with the top three contributors able to donate a percentage (first place 50%, second 30% and third 20%) to a charity of their choice. In 2019, 18 teams took part and raised a combined £25,000 for charity. The teams depart Port Solent, Portsmouth, on a fleet of Sunsail yachts to Cowes on the Isle of Wight to compete in seven races over two days. For more information, call Sunsail account manager Terry Hunt on 02392 222 221.
Job of the day: COREcruitment is looking to speak to brand executive chefs who are interested in moving to Riyadh, Saudi. It is looking for an experienced executive chef with multi-site restaurant group experience and good knowledge of casual dining branded operations. Experience in French and Mediterranean cuisines would be ideal. The salary is circa £90,000 (full package, tax free) with the addition of family medical and flights. Anyone interested can email with their CV or profile.
COREcruitment is a Propel BeatTheVirus campaign member

Company News:

Just Eat questions whether Deliveroo’s financial decline was due to coronavirus or quality of business model in CMA submission: Just Eat has questioned whether the decline in the financial position of Deliveroo was “due to coronavirus or because of the quality of its business model”. In its submission to the Competition and Markets Authority (CMA) into Amazon’s investment in Deliveroo, Just Eat said while it does not question the very serious and perturbing nature of the covid-19 crisis, it does not believe this “creates a ‘carte blanche’ to assume permanent, irreversible negative impact on businesses, particularly those who are in the business of delivering food to people at home in circumstances that align with social distancing rules”. In its 28-page submission to the CMA, Just Eat stated: “While Deliveroo might have temporarily lost part of its supply, at the same time it also gained 3,000 new restaurants in the first weeks of the crisis alone. This should have generously compensated the loss of other restaurants. The majority of them did not perform delivery services before the coronavirus pandemic. This triggers Just Eat to question whether the decline in the financial position of Deliveroo was actually due to covid-19 or because of the quality of its business model and decision-making relating to its pricing. The CMA must therefore ascertain, with certainty, that Deliveroo's alleged dramatic drop in orders in the UK occurred as a result of the unavoidable impact of covid-19, rather than due to a failure on the part of Deliveroo to adapt effectively and grasp opportunities to service additional demand.” Just Eat also pointed out Deliveroo had forged a number of grocery partnerships that “could have (easily) offset the effect of some restaurant closures in the UK”. The submission added: “The sheer amount of new partnerships that Deliveroo has engaged in do not signal the company is in distress.” The CMA provisionally cleared the deal last month after Deliveroo warned it would have to cease operations without the cash injection. Amazon was the lead investor in Deliveroo’s $575m funding round, announced in May last year. Its stake, thought to be worth about $500m, has been frozen by the regulator as it conducts an investigation into alleged competition concerns raised by the deal. Last week Domino’s Pizza old the CMA that Amazon’s investment in Deliveroo would “result in driving small and independent food businesses out the market”.

Boparan Restaurant Group set to complete deal for Carluccio’s: Boparan Restaurant Group (BRG), the Giraffe, Ed’s Easy Diner and Slim Chickens operator, is on the verge of completing a deal for the Carluccio’s brand and 30 of its sites. The deal is expected to see the jobs of just under half of Carluccio’s 2,000 staff saved. Geoff Rowley and Phil Reynolds, partners at FRP Advisory, were appointed joint administrators of Carluccio’s at the end of March. Propel understands BRG is paying about £2m for the brand, its online shop and 30 sites. It is thought it will look to convert some of the Carluccio’s sites to its Slim Chickens brand, of which it is the master franchisee in the UK. It is thought it had been initially looking to take up to 47 of Carluccio’s 71 sites. Propel understands offers have been put forward for smaller packages and individual sites from the remaining 41 that remain with the administrators.

KFC to have 500 sites reopened by the end of this week: KFC is to have 500 sites reopened across the UK – about 50% of its restaurants – by Friday (22 May), for delivery only. The company, which has already reopened more than 100 sites for either drive-thru or delivery, reopened 16 of its restaurants for takeaway orders last week. KFC emphasised it was being careful in how it managed reopenings, with strict new rules and hygiene measures in place. KFC UK managing director Paula MacKenzie said: “This next stage allows us to continue to provide wider access to hot food for those who need it most, whether that’s key workers after a long shift or those working from home who need a quick, affordable dinner for the family. I’m hugely appreciative of our team members who have returned to work – it’s a challenging time for everyone, but we’re so glad to play our part in helping to feed the nation.” The company said the newly opened restaurants also mean it can donate more of its food to the NHS and key workers. It said: “We’ll be able to continue to deliver 10,000 meals a week in partnership with Deliveroo – to add to the 13,000 we’ve already donated.”

Corbin & King to top up staff pay to 80% this month following generosity of customers buying vouchers in advance: Jeremy King, co-founder of London restaurant operator Corbin & King, has said the “overwhelming” generosity of customers buying dining vouchers in advance means the company can pay staff 80% of their wages this month – “but unfortunately we still have a long way to go”. King asked customers earlier this month to buy vouchers to support staff and “keep redundancies to a minimum” as it could not continue topping up their pay without putting the future of the company in jeopardy. The company gives 50% of each voucher sale directly to staff to help “alleviate the desperate situation many are finding themselves in”. Some customers have chosen to donate money to staff without buying a voucher. King has written to customers to thank them for their support and included a video from employees “to give you an idea of what the support means to them”. King said: “We have already been able to cover this month’s top up on salary to the 80% level we were seeking – but unfortunately we still have a long way to go. I can’t tell you enough just how much this has meant to Chris (Corbin), myself and all the staff. It has given them such a fillip, and hope, in the most trying of circumstances. We will be forever grateful.” Customers can still buy vouchers for any amount they wish and they can be redeemed in all restaurants across the group without any time limit.

Goodbody – M&B will need to secure further waivers with debt holders: Goodbody leisure analyst Paul Ruddy has said Mitchells & Butlers (M&B) will need to agree further waivers with debt holders given pubs and restaurants will be shut until at least July. M&B said the waiver agreed with lenders to avoid a breach of its financing terms had been extended for three weeks, until 8 June. It comes after the company announced the waiver to 15 May in mid-April because the closure of its pubs and restaurants during the coronavirus might cause a breach of its financing arrangements. Ruddy said: “While it offers some respite the wavier has been granted, and at this point it appears largely technical in nature, the group will need to agree further waivers with debt holders particularly considering pubs are unlikely to reopen before 4 July.” The government has said some hospitality businesses in England could be allowed to reopen in early July if they can keep people apart to limit the spread of coronavirus.

Moto to launch click-and-collect food ordering service: Moto, the UK’s largest motorway service area operator, is launching a click-and-collect food ordering scheme at 48 of its sites. The service will include Moto’s on-site brands and will start with the company’s Burger King outlets. Customers will eventually be able to use a mobile phone to browse the menus of Moto’s food brands, select a site and pick-up time, and pay for their order. Their food will be ready at the specified time at a special collection point or it can be delivered to their vehicle. Orders will be able to be placed with multiple outlets, allowing collection times to be synchronised. The launch takes place in June with a pilot scheme at Burger King outlets, with other food brands to rapidly follow. Moto IT director Guy Latchem said: “It’s our goal to provide an exemplary service and go that extra mile, ensuring guests enjoy their experience with us. Our new click-and-collect service will help us achieve this, removing the least enjoyable part of any motorway service area – the queue – and providing guests with the smoothest of customer journeys.”

Intu seeks debt standstill as lock-down takes toll: Shopping centre operator Intu is seeking standstill agreements from its lenders as it battles for survival after a collapse in rent payments from retailers. The company said it was likely to breach its debt commitments at the end of June as the stock market turmoil and downturn in the property market made it impossible to raise new funds. It is the latest warning from the debt-laden company, which was struggling before the coronavirus crisis. Its shopping centres remain largely closed until at least 1 June, with only essential stores such as supermarkets and pharmacies allowed to open under the UK’s coronavirus restrictions. Intu said the speed of recovery once the UK emerged from the lock-down remained unclear. The company is therefore seeking standstill agreements from its creditors – whereby Intu would not have to pay back borrowings – until the end of 2021, with a pay-if-you-can interest agreement, to provide stability until the property markets settle down. It had previously secured waivers from some lenders to prevent breaches of its debt commitments until 26 June. Intu said at the start of the month it had collected 40% of the rent due by the end of March, up from 29% collected on the due date, and vowed to get tough with large well-capitalised tenants who were refusing to pay their rent, including potential legal action. “There can of course be no certainty as to whether any standstill can be achieved with all or some of the group’s creditors, or as to the terms,” Intu said.

Deep Blue to begin reopening Harry Ramsden sites: Deep Blue Restaurants, owner of the Deep Blue and Harry Ramsden brands, is to begin reopening its Harry Ramsden sites on Wednesday (20 May). The company will open the sites in Bournemouth, Brighton and Eastbourne for takeaway only. Deep Blue said teams in its seaside locations are used to dealing with large numbers during busy periods so believes these three sites are best placed to reopen since the restrictions on the public have been eased. Chief executive and founder James Low said: “We are expecting to attract a lot of people who have been looking forward to spending some quality time with their families and enjoying fish and chips on the beach. This prolonged period of isolation has been very challenging for many and we want people to enjoy their outdoor leisure activity, while adhering to the rules and respecting one another.” All three sites will have strict social distancing measures in place and sanitising stations for customers entering and leaving the store. Deep Blue has already reopened seven of its eponymous outlets for takeaway only. 

Cafe Murano and Ormer launch delivery and collect services: Michelin-starred chef Angela Hartnett has launched a delivery and collect service for her Cafe Murano brand. Operating from the group's latest restaurant to open – in Bermondsey, south east London – a selection of ready-made meals and fresh pasta dishes are on offer. There is also make-your-own risotto and pasta kits alongside produce such as salami and a selection of wine, including Hartnett’s own-label wine. Orders can be placed throughout the week. Delivery and collections are available Thursday to Sunday between 1pm and 3pm. Delivery is available within a three-mile radius of the Bermondsey Street restaurant. Meanwhile, Mayfair restaurant Ormer is to launch delivery and collection service, Ormer At Home. Available from Wednesday, 27 May, it will offer the restaurant’s high-end, seasonal British dishes alongside wine, beer, cocktails and champagne. Ormer At Home will be available Wednesday to Saturday from noon to 10pm and Sundays from noon to 7pm. Delivery will be available within a three-mile radius of the Half Moon Street restaurant through Supper and Deliveroo.

Patty & Bun extends DIY burger kit delivery nationwide: Patty & Bun, the better burger concept led by Joe Grossman, has extended delivery of its “Lockdown DIY Patty Kit” nationwide. The company, which has joined forces with its meat supplier, butcher HG Walter, was initially selling the kit within the M25. Meat and plant-based DIY kits are available. The meat-based kit 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. Meanwhile, the vegan kit has two vegan patties, four plant-based patties, rashers of “This Isn’t Bacon”, vegan cheese slices as well as the bottle of mayo and the home-made pickled and smokey onions.

Further operators sign for development at former Young’s brewery in Wandsworth: Family-owned Mai Thai Deli is to double up in Wandsworth, south London. The business is to open a 1,050 square foot site at the Ram Quarter development after agreeing a deal with developer Greenland. It adds to Mai Thai Deli’s existing site in the Southside Shopping Centre. Specialist craft beer bar Schooner – which also serves wine, spirits and a small plates menu – has taken a 20-year lease for a 1,500 square foot unit on the development’s riverside terrace on the bank of the River Wandle. They are two of four deals that Greenland has agreed at its redevelopment of the former Young’s brewery as a new leisure, workplace and residential quarter with more than 700 new homes. Visa and consular services business TLScontact is relocating its London operations to Ram Quarter, taking 16,000 square foot of office space, while men’s barber Dapper Fox is also joining the scheme. It follows a series of openings earlier this year, including neighbourhood fine dining restaurant London Stock, the second outlet for local independent cafe Story Coffee, and nursery Kido School. Backyard Cinema and MoreYoga have also launched while independent brewer Sambrook’s and bowling operator Strike are due to open later this year. Bruce Gillingham Pollard and CBRE acted for Greenland.

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