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Morning Briefing for pub, restaurant and food wervice operators

Wed 9th Feb 2022 - Legal Briefing

Breaking away from covid – protection and innovation by Leigh Schelvis

As we head into February, it is clear we are indeed starting to learn to live with covid. The last remaining restrictions are being relaxed across all three jurisdictions in the UK, with face masks and social distancing now purely optional and some businesses returning to their offices. It feels like 2022 has officially kicked off in high spirits – although, apologies for another Ashes thrashing from Australia (you can tell that I fall on the other side of the pond in this contest!). Let us be hopeful we are starting to see the back end of the pandemic and that our sector is ready to take on the bustle of summertime trading with a shared vision of optimism and enthusiasm. 

In more recent news, we are seeing a mixture of scenarios from within the industry. We have witnessed the relationship between operators and shareholders become hostile, in turn resulting in an insolvency process. The continual issues such as the staffing crisis and shortages in the supply chain (particularly the scarcity of carbon dioxide) can make it difficult for venues to maintain high service standards. The British Institute of Innkeeping (BII) reported 55% of respondents to the “Rebuilding Your Business” February 2022 survey still have debts of more than £40,000 per pub and more than one in three businesses had no cash reserves available. Repayments and inflation were stated as having an adverse effect on them. Despite these overt struggles within the industry, the battle for financial aid from the UK government continues, led by prominent hospitality lobbyists.

At the forefront of the conversation is a request to freeze VAT and suspend business rates. The British Beer & Pub Association, UKHospitality, the Tourism Alliance and the Association of Leading Visitor Attractions have recently produced a study that emphasises the huge benefits a permanent VAT rate of 12.5% would bring to the sector. The results concluded a reduced level of VAT would create around 300,000 jobs and generate almost £8bn of additional turnover for the economy. Steven Alton, BII chief executive, said: “Essential interim support will need to be delivered to enable our members to meaningfully start their recovery, while they tackle the strategic challenges of resourcing, inflation and rebuilding long-term sustainable levels of trade.”

The boards of UK hospitality businesses will be, if not already, undertaking health checks to assess the influence the pandemic has had on their balance sheets, and there is no doubt these figures will strike mixed emotions. For some operators, this has been a delicate open-heart surgery to gain an understanding of what damage has been caused, while in other cases there will be venues needing full resuscitation by capital injection. Others are in the process of recovery and nursing the business back to full health. However, some of the sector has actually discovered a capital increase and already has the cash flowing prominently through its arteries. These companies have flourished during this turbulent period by potentially running a leaner organisation, obtaining outside investment, or innovating their business.

When dealing with the effects of covid, it is prudent that operators take measures to protect one of their most valued assets, their premises licence(s). Under the relevant legislation, a premises licence lapses immediately if the licence holder becomes insolvent or if the business is dissolved, preventing the venue from undertaking licensable activities, such as the sale of alcohol. These costly implications can not only bring about a loss of trade but also induce additional legal fees in order to rectify the issue. Whether this is an application for a whole new premises licence, resurrection procedures or the short-term solution of applying for temporary event notices, all can be quite burdensome. Should the premises licence lapse in a cumulative impact area, the operator faces even more difficulties when applying for a new licence as they face a higher risk of the application not being granted. Even if the application is successful, it may have been granted on less favourable terms (such as reduced operating hours or with more onerous conditions). Should your business be undertaking a restructuring exercise, seeking the specialist advice of experts that understand the licensing ramifications of such a process is highly recommended. 

I promise it is not all doom and gloom. The hospitality sector is buoyant and robust, and right now “post” covid we are seeing a hive of promising activity. Operators are opening further sites, acquiring new businesses, and even diversifying into other sectors. We are seeing the online businesses that thrived during lockdown now setting up physical venues as we move into a sense of normality. Operators are blending the worlds of leisure and hospitality with the popular concepts of competitive socialising and family ventures. It is exciting to see an increase of recreational activities available in venues such as virtual reality experiences, arcades, bowling alleys, e-karting and, of course, crazy golf. Even Wales and Real Madrid football player, Gareth Bale, has penetrated the market and now joint owns a bar, restaurant and mini-golf concept, which is set to open in March.

However, it is important to keep in mind that progressing, developing and innovating your business can bring forth licensing issues that need to be properly considered. You need to review whether or not a premises licence will be required for your particular type of venture, or review the current conditions contained on the licence of any premises you are looking to develop. Maybe you need to update your processes and staff training. Before embarking on such exercises, you should seek licensing advice to avoid unwanted delays to a proposed development.

With the pandemic now seemingly behind us, businesses have taken on board the lessons they learnt during the restrictions and grown with their experiences. We are seeing this sector becoming stronger, more vibrant and producing offerings that are both innovative and prosperous. I know this sector will make a collaborative effort to assist each other with bouncing back from the hardships that it has bravely combated over the past few years. Let us work together to guarantee the necessary support and encouragement that will ensure this amazing industry continues to develop and prosper. It is with a rising tide that all boats will be lifted.
Leigh Schelvis is a senior licensing solicitor at John Gaunt & Partners

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