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Morning Briefing for pub, restaurant and food wervice operators

Thu 21st May 2020 - Propel Thursday News Briefing

Story of the Day: 

Morris – delivery kitchens have moved high up the agenda: Richard Morris, chief executive of Tortilla, the Quilvest-backed fast-casual Mexican concept, has said opening more delivery kitchens has “moved high up on the agenda” for the business. Speaking as part of Propel’s navigating the coronavirus series, Morris said the company, which has reopened 11 sites over the past two weeks, was starting to look at its options in terms of how its moves further into the delivery kitchen space. He said: “Delivery kitchens have moved up very high on our agenda of things to do. We were pretty keen to move along on it anyway. We opened our first one in Crouch End three weeks before lock-down, and that was doing quite well. We have just reopened there and it has had a pretty good first week. I am sure everybody is looking at this as an opportunity – it’s low capex, you can go into lots of areas where you don’t already have a presence, and it’s a great way of testing the market. We also have a product that is a proven delivery product, so it is a no-brainer for us. We have done our first one with Editions, with Deliveroo, which has been very good. There are other opportunities out there that don’t include Deliveroo that we could do ourselves or through a third party. So, yes at the moment we are out there looking for more cloud kitchens to get open.” In terms of the sites it has reopened, Morris said the business has started with “the very good ones” and was now going to level two. He added: “These are still good locations but most of them are heavily led by students, so very little footfall. So we have opened three more this week, which takes us up to 11, and then there is probably a second tranche where we will try sites outside the south east and London, in places such as Liverpool. Then we are into the ones, which are not really our decision – things like shopping centres, where we normally wouldn’t do much delivery trade. So, the plan is to get as many open as we can, then see what happens with the train stations and shopping centres.” Morris will share more of his thoughts in the video, which will be released on Thursday (21 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:

New York Times' best-selling author Steve Martin to feature in Propel webinar on influencing decisions, persuading people and changing behaviour: Steve Martin, New York Times’ best-selling author, business columnist and visiting professor of behavioural science at Columbia University’s Graduate School of Business, will distil six decades of research in a webinar to show how hospitality operators and front line teams can influence and persuade post-covid customers in entirely ethical ways, just by understanding a few of the rules of the science of influence and persuasion. Martin will share simple experiments that yielded a 23% increase in tips in one case and a 52% uplift in dessert sales for McDonald's in South America in another. The webinar, sponsored by Yapster, will be released on Thursday (21 May) at 3pm.
Yapster is a Propel BeatTheVirus campaign member

Hospitality action group gears to challenge insurers Aviva and QBE: Hospitality businesses are set to bring legal action against insurers Aviva and QBE for refusing to honour policies relating to business interruption loses due to the coronavirus outbreak. Hospitality Insurance Group Action (HIGA) – the hospitality sector-wide action group – announced its legal advisor, Mishcon de Reya, in conjunction with counsel, Philip Edey QC, of Twenty Essex Chambers, have completed their comprehensive review of more than 500 business interruption insurance policies, submitted by applicants between 29 April and 6 May. The legal team has determined the specific coverage clauses within policies underwritten by Aviva and QBE, are those HIGA is best advised to challenge through a group claim. The relevant policy wording for Aviva is its material damage and business interruption policy. The relevant QBE policy wordings are PHOT010419 (hotel insurance policy), PLSC010419 (leisure combined), PBCC170619 (business combined insurance policy) and PNML010119 (nightclub and late-night venue policy). HIGA is now writing to all its applicants inviting only those policyholders with these insurers and specified types of policy wordings to confirm they remain interested in participating in a funded group claim. 

Operators fears’ mount about impact of delivered-in model as City Pantry reveals 379% increase in orders to staff at home: Operators’ fears are mounting about the impact delivered-in food models will have on the market place following the coronavirus outbreak. Many of the participants of a remote forum, hosted by business thinking and opinion communicator EP Business in Hospitality, believed a new era was emerging that would significantly challenge the traditional foodservice model. They said delivered-in services are set to emerge as a replacement for on-site canteens, particularly with many employees continuing to work from home. City Pantry founder Tom Squires told the forum it has seen a 379% increase in orders for deliveries to employees in their homes with 90% of its traditional customer base having closed its offices. He said partnerships within hospitality will grow and for City Pantry, conversations with traditional caterers “are growing at speed”. The forum also revealed a common consensus that collaboration between traditional competitors will increase and the industry must work together in unity to solve some of the major issues faced. EP Business in Hospitality chief executive Chris Sheppardson said: “There was a common undercurrent to the discussion that noted how nervous many people were of an exit from lock-down. The UK does seem to have developed a more fearful outlook than most other countries. It was noted in Denmark there has been a jump back with many offices seeing 80% of employees back in and canteens with restaurants open. How can we change that fear factor?”

Beer Day Britain 2020 to go ahead as virtual event: Beer Day Britain 2020, the UK’s annual national beer day, is to go ahead as a virtual event. Operators and brewers are being urged to use the occasion on 15 June to connect with their customers as the countdown to hospitality reopening hopefully begins. Jane Peyton, instigator of Beer Day Britain, is urging businesses to host online events such as pub quizzes, virtual pubs or beer and food matching if they have the channels to do so, and encourage their customers and social media followers to participate in the national “Cheers To Beer” toast at 7pm. Peyton said “We cannot have the usual party in the pub this year for Beer Day Britain but we can still meet online to celebrate our national drink and never has it been more important to unite with a drink and to say ‘Cheers to Beer’.”

Job of the day: COREcruitment is working with a well-known grab-and-go and cafe brand as it looks to diversify as a business. To expand on the company’s excellent customer reputation and internal culture, the senior management team is seeking a creative and innovative head of marketing who has strong general and digital skills. The appointed individual will also take the lead on all new projects and partnerships, raising the brand’s profile through effective PR. Anyone interested can email 
COREcruitment is a Propel BeatTheVirus campaign member

Company News:

Greggs to increase reopenings from mid-June following successful trials: Food-to-go retailer Greggs is to move to an increased number of openings from mid-June, Propel has learned. Greggs has quietly been opening up sites across its north east heartland having previously dropped plans to reopen 20 stores because of the "significant interest" it created. Bosses feared it would lead to "excessive numbers" gathering at branches. Instead, Greggs has been carrying out a series of trials with new operational safety measures, while shops remained shut to customers. But with those trials having progressed well, the company is preparing to step up its reopening programme next month. A spokesman said: “We have planned and delivered robust shop trials using our new operational safety measures and they have progressed well allowing us to now move to open an increased number of our shops from mid-June.” Greggs chief executive Roger Whiteside previously said the team had been "working hard to get up and running again" since its shops temporarily closed on 24 March. The trials are across a number of channels including delivery through Just Eat, click-and-collect, as well as walk-in customers. Whiteside added: “Colleague and customer safety continue to be the primary focus of the decisions we take as we start to reopen our shops.”

Incipio Group appoints Ed Devenport as company's first chief executive: Incipio Group has positioned itself for its next stage of growth with the appointment of co-owner Ed Devenport as chief executive. Devenport, who joined the company in January 2016, will become the company’s first chief executive since it was founded by Charlie Gardiner in 2015. The appointment follows significant growth plans for the six-strong London-based business, which in 2019 announced a £5m investment by Edition Capital as well as building its executive leadership team with the recent hires of Tom Brand as finance director and Anthony Knight as sales and marketing director. In the newly created role, Devenport will be responsible for steering Incipio Group through the next phase of its ambitious growth plans and will continue to work closely with Gardner and Incipio Group’s executive leadership team to further strengthen the company’s presence in London and across the UK. Taking a step back from day-to-day running of the business to focus on the sourcing and development of future openings, Gardiner will remain active in the company’s strategic leadership through his position on its board, alongside Edition Capital. Gardiner said: “Ed’s contribution to the success of the business over the past four years has been substantial and he has proven to be a visionary leader with an outstanding strategic and commercial awareness. I am confident his background and experience is well suited to lead the company’s next phase of growth and success.” Devenport added: “Over the past four years it has been an absolute pleasure working with Charlie. His creative instincts and vision have been integral in Incipio's success and I look forward to continuing to work closely with him. On a personal note, It is a great honour for me to lead such an amazing company and I feel particularly fortunate to be doing so when surrounded by such a talented team as the one that is at Incipio.”

Coaching Inn Group secures £2.5m CBILS funding, restarts Bakewell refurbishment project, going cashless on reopening: Coaching inn and hotel operator The Coaching Inn Group has secured £2.5m in funding from NatWest, through the government-backed Coronavirus Business Interruption Loan Scheme (CBILS), as well as restarting its pre-crisis refurbishment plans for the Rutland Arms in Bakewell, its latest acquisition. Finance director Edward Walsh said “This latest round of support from NatWest provides us with sufficient liquidity to see out the next stage of the pandemic and allows us now to focus on reopening the business as and when the easing of government restrictions allow. The furlough scheme has been a major boost for the sector and has allowed us to protect the jobs of all our employees, while CBILS now provides us the headroom to extend that support right through our supplier base, which has been fantastically supportive throughout.” As part of its “covid-19 secure” reopening proposals, the company has also confirmed it will be going cashless as it looks to minimise the risk of transmission in sites as well as launching an order and pay app to aid further contactless transactions. Chief executive Kevin Charity added “We will continue to keep hospitality at the centre of our approach and hope the social distancing measures can be kept to a minimum, but in whatever form they come we are confident our venues will be among the best placed to continue to operate.” Charity also confirmed the company was restarting its £1m refurbishment project at The Rutland Arms with a view to reopening at the end of July. The 33-bedroom hotel will see a full refurbishment of its bed stock as well as all food and beverage trading areas including the introduction of a new standalone coffee shop. The Coaching Inn Group operates 17 market town located coaching inn hotels, across 14 different counties throughout England and Wales.

Thwaites committed to ‘taking difficult and necessary decisions to preserve long-term future’: Brewer and retailer Daniel Thwaites has said it is committed to taking the difficult and necessary decisions to preserve the long-term future of the business. The company, which closed all its pubs, inns and hotels on 20 March, said preservation of cash was an “absolute priority” and as a result it had taken the decision not to pay a final dividend for the year ending 31 March 2020. Future dividends will be reviewed when normal trading levels resume. The group said it benefits from owning the freeholds of all its properties and is therefore not under pressure to pay third-party landlords rent, as “others in the industry are having to do”. However, it does have financing obligations in the form of interest payments to its funders. The company renewed its banking facilities in the first quarter of 2020 and at 31 March 2020 had net debt of £65.4m with total facilities of £82m, giving headroom of more than £16m. It said it was monitoring cash flow very closely and was also giving consideration to whether it was necessary to take advantage of one of the government-backed loan schemes as a “prudent measure to ensure it has sufficient facilities to get through the recovery period and return to normal trading levels”. Thwaites said: “The company was trading very strongly prior to this crisis and we hope to return to that level of trading in the future once our properties are allowed to open by the government. The company has been through troubled times before and has a strong asset base and an experienced management team to assist in finding a pathway through the challenging times ahead.” More than 90% of the group’s workforce are on furlough while the board and executive team have taken pay cuts of up to 30%. The company is also taking advantage of business rate exemptions across its retail properties, assisting pub tenants to claim grants and claiming grants for its managed pubs where appropriate. It is also negotiating either suspension of contracts or reduced payments with suppliers; agreeing payment deferrals with HM Revenue & Customs for VAT and PAYE; temporarily pausing deficit contributions to its defined benefit pension funds; and putting all non-essential capital expenditure on hold for the foreseeable future.

Hydes boss to retire and be succeeded by finance director: North west brewer and retailer Hydes has announced managing director Chris Hopkins is to retire after 22 years. He will be succeeded by finance director Adam Mayers, who “emerged as the strongest candidate from a selection process that attracted significant external interest”. Hopkins, who advised the business of his intention to retire last year, will leave on 1 June with Mayers taking over immediately. Hopkins said: “It feels very odd to be leaving what has always been a bustling and vibrant business at a time when it is not trading at all. However, I am pleased the company was in a robust financial position prior to the closure in March and is well set to deal with the extraordinary challenges that it currently faces. I’m confident it will reopen and thrive once again in the future.” Mayers joined Hydes in February 2009 as finance director and has been actively involved in all aspects of the business throughout his time, including the acquisition of Woodward and Falconer and the move to the new brewery site in 2012. Prior to his time with Hydes he held various financial posts in other businesses including Citi Group, Interfloor and Arthur Andersen. Mayers said: “I am delighted to be given this opportunity to lead Hydes. These are very challenging times for us all, but I feel Hydes is well placed to look forward with confidence when the pubs and brewery reopens.”

Boston Tea Party to begin reopening estate for click-and-collect and delivery: All-day casual dining cafe Boston Tea Party will begin reopening parts of its 24-strong estate from next week, Propel has learned. The company is launching a click-and-collect trial in two cafes, leading into a delivery trial with a plan to roll this out across its estate if it is successful. The trial will start next week in Bristol, at its Gloucester Road cafe, and in Birmingham, at its Harborne site. Both will start with Deliveroo and UberEats two weeks later. Looking longer term, the company said it was investing in new technology via Vita Mojo to help it roll the service out and ultimately offer order and pay at table. During lock-down, the company has also set up three volunteer kitchens . Two of these are in Bristol for The Matthew Tree charity and have made more than 5,000 meals for vulnerable people in the city. The other has been launched in Birmingham, feeding the NHS through a charity called Matt’s Mission Project.

McGinty’s Group secures future with six-figure coronavirus business loan: Aberdeen-based McGinty’s Group has secured its future thanks to a six-figure coronavirus business loan that will be used to help the business emerge from the coronavirus pandemic. With nine sites throughout Aberdeen, including McGinty’s Meal an’ Ale and The Silver Darling, McGinty’s Group employs more than 270 staff. The funding package provided by Royal Bank of Scotland has allowed the business to safeguard jobs, premises and to pay suppliers. With all sites closed, staff have been placed on the government’s furlough scheme. Thanks to the funding, bosses are committed to ensuring their roles are waiting for them when lock-down restrictions are lifted. Company directors have also boosted funds with cash injections to ensure the group is primed for a strong recovery post-covid-19. McGinty’s Group director Allan Henderson said: “Our income has been completely wiped out during this pandemic, but it’s vital to keep the cogs turning to ensure the economy, our staff and suppliers can be sheltered from its impact. We’ve banked with Royal Bank of Scotland for more than a decade and the loan was secured swiftly, allowing us to protect jobs for our team, who are the cornerstone of our business. Working together, we can ensure our business fights this battle to come back even mightier.” Since launching in 2009, The McGinty’s Group has continued to expand, most recently embarking on a new venture in the city’s former Esslemont and Macintosh department store building.

Wildwood asks diners to help shape restaurants and offer after lock-down lifts: Wildwood operator Tasty has turned to its customers as it shapes its restaurants and offer for life after lock-down. The company has launched a survey seeking diners’ input and is offering them the chance to win a £10 voucher in return. As well as asking customers how often they usually visit Wildwood, it asks them their views on dining out when restrictions are lifted and their level of concern about eating out. It asks diners how they would like to see the restaurants operate with the options of takeaway and delivery only, click-and-collect, takeaway and collection, and dine-in with strict social distancing and government guidelines adhered to. It also asks them what type of food they most want to see available and to rank seven safety measures in order of importance, including gloves being available for customers; not sharing menus with other guests; and sanitiser stations around the restaurant. The company stated: “We are really missing you and are doing everything we can to keep our brilliant team together so when we can reopen we will be able to offer you the best experience that is safe and meets our highest standards. We understand we have to change how we do things and as a valued diner we would massively appreciate your input in shaping our restaurants and our offer in the post-covid-19 world.”

Chipotle strengthens customisable menu options via app: Chipotle has strengthened the customisable menu options via its app. The company has introduced a “complete customisation” feature that allows customers to swipe on each ingredient to choose portion sizes. Options include “light”, “normal”, or “extra”. In some cases, such as with beans or rice, consumers can choose “on the side”. Chipotle is promoting the customisation ability of its app, which allows customers to have the same in-store experience. The company has offered customisation on items such as proteins, where customers can ask for double portions at an extra cost. Consumers can also split proteins by, for example, choosing half chicken and half steak. Tressie Lieberman, vice-president of digital and off-premise, told Nation’s Restaurant News that previously app users were only able to modify three ingredients to be “light” or “extra”, per order. With “complete customisation”, all ingredients can now be modified as "light" or "extra" at no additional charge, excluding proteins, guacamole and Queso Blanco. The company is promoting the hyper-customisation options available on its app through a series of TikTok videos that show “menu hacks” for making do-it-yourself nachos and a taco salad. Prior to the pandemic, digital sales accounted for 19.6% of total sales at the company. In the first quarter, digital sales grew 80.8%, reaching a record $372m. Digital sales accounted for 26.3% of total sales. The company added four million more rewards members to its app during the quarter, many of whom have been the heaviest users during the pandemic, the company previously said.

Subway lays off 150 staff in US: Subway has laid off about 150 of its US workforce, including more than 100 at its corporate headquarters. Alan Marcus, senior director of public relations, said the coronavirus pandemic had “forced us to accelerate a restructuring plan for which we had been preparing”. In additions, Marcus said Subway had reassigned some staff members “for better alignment and efficiencies”. The most recent job losses follow 300 corporate employees being let go in February as part of what the company called a “streamlining” plan. Marcus said: “Our focus remains on ensuring Subway guests continue to get great service and value at every restaurant they visit; our franchise owners, all small business owners, get the full support and tools they need to help them grow and be successful and that we strengthen our overall business performance.” Subway was among restaurant brands to offer grocery items during the coronavirus restrictions on in-store dining. More than 100 of the company’s restaurants in Southern California offered restaurant ingredients to consumers looking for a safe and fast way to obtain groceries without entering a supermarket.

Moto to reopen all Costa drive-thrus: Moto, the UK’s biggest motorway service area operator, is reopening all its Costa Coffee drive-thrus and is reopening two Costa stores at its Wetherby and Cherwell Valley sites. The move follows the reopening of two Costa drive-thrus at Toddington services on the M1, which proved the outlets could be manned and operated with social distancing measures. The drive-thru kiosks that reopened on Thursday (21 May) are Birch East (M62), Cherwell Valley (M40), Knutsford North (M6), Reading East & West (M4), Stafford North (M6) and Wetherby (A1M). The stores at Wetherby and Cherwell Valley, which will also have social distancing measure in place, will reopen on Thursday, 28 May.

Luckin Coffee receives stock market delisting notice following fraud investigations: Luckin Coffee has received a Nasdaq stock market delisting notice following its announcement of an investigation into fraud allegations culminating in the termination of the company’s chief executive Jenny Zhiya Qian and chief operating officer Jian Liu. Nasdaq cited two reasons for the delisting notice – “public interest concerns as raised by the fabricated transactions disclosed by the company” and “the company’s past failure to publicly disclose material information, citing a business model through which the previously disclosed fabricated transactions were executed”. Luckin has requested a hearing, until which time the company will remain on the stock market pending the outcome. The hearing is set to take place in the next 30 to 45 days. Luckin plans to continue its internal fraud investigations as the Nasdaq hearing pends. Luckin, which competes with Starbucks, previously said its investigation had found fabricated sales from the second quarter of last year to the fourth quarter amounted to about 2.2bn yuan (£250m). That equates to about 40% of its estimated annual sales. Luckin announced its US initial public offering in April 2019 for $571.2m or $17 per share. At the time, the company was valued at $2.9bn.

Innis & Gunn submits plans for new brewery: Scottish brewer and retailer Innis & Gunn has submitted plans for its new brewery. Located at Heriot-Watt University’s Research Park to the west of Edinburgh, it is set to be the first major brewery to be opened in the city for 150 years. Built to meet demand for Innis & Gunn’s beer, the project will create up to 30 jobs and see the company’s 45 office-based staff relocate from its head office in Edinburgh’s Randolph Crescent. The brewery will include a high-speed canning and bottling line and will enable the company to consolidate all currently outsourced production under one roof. By installing modern equipment and technology the project will reduce Innis & Gunn’s carbon footprint by up to 30%. Founder and master brewer Dougal Gunn Sharp said: “Building our own brewery will bring a raft of benefits to the business. It will allow us to take control of our currently outsourced operations, expand our team and grow our production to meet the needs of our customers. On top of that, the Heriot-Watt partnership means its International Centre for Brewing & Distilling students will gain hands-on experience across all aspects of brewing operations in a large-scale production brewery.” Earlier this year, Innis & Gunn raised £3.3m on crowdfunding platform Crowdcube towards the project.

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