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Morning Briefing for pub, restaurant and food wervice operators

Fri 19th May 2023 - Friday Opinion
Subjects: Lack of authenticity is scuppering some casual dining brands, surviving the energy crises while tackling the climate challenge, the growing appeal of travel hubs, the changing and unchanging customer demands
Authors: Luke Johnson, Mark Chapman, Glynn Davis, Steven Pike

Lack of authenticity is scuppering some casual dining brands by Luke Johnson

Authenticity is an essential but elusive attribute when persuading customers to like your brand – especially in an industry such as the restaurant trade.

People don’t go out to eat just to be fed. They want to be charmed, entertained, surprised, made to feel special. They want a touch of glamour and to be spoilt for an hour or two. This is why service is such a vital part of the mix. Surroundings matter somewhat, food and drink matter a lot – but if the human element is wrong, then the whole experience fails.

Recruiting and retaining hospitality staff is a huge challenge, but more and more employees don’t work simply for the money – they want to be proud of the place they work and feel the brand they represent is genuine. This is really hard to achieve.

Similarly, if the whole package feels fake, if it lacks soul, then customers won’t return. I’m afraid the decline of Prezzo is the story of a business that was never authentic. It pretends to be an Italian offering but sells burgers, Marsala chicken, Caesar salad and sticky toffee pudding. There is lots of pizza and pasta on the menu but none of it is distinctive or a reason to go to the expense and effort of dining out. What was ever original or different about Prezzo?

The catering sector is so ferociously competitive and costs now so burdensome that forgettable, mediocre players are likely to go to the wall. If every menu item is obvious, if all the suppliers are bog standard, if the décor is a poor imitation of hundreds of other venues, then customers will see through the deception. In most locations there is always choice – and during a cost-of-living crisis, many customers would rather save money and eat at home than waste money eating a second-rate meal out.

A Financial Times journalist called me and asked if the possible collapse of Prezzo was evidence that the entire casual dining sector was in terminal disarray. I refuted this suggestion because I think there are plenty of dynamic businesses that are taking share and doing well. These restaurateurs tend to provide food and drink with a degree of integrity; they manage not replica, me-too establishments, but rather memorable and authoritative eating houses.

Almost everything in our industry can be ripped off from others – dishes, recipes, drink selection, interior designs – even staff can be poached. Unlike, say, the pharmaceutical sector, with significant patent protection for new drugs, no such barriers protect against stealing key intellectual property like menu ideas from a restaurant. And because so much is so effortless to copy, the great brands evolve – launching innovative dishes and twists that keep the customer interested.

Moreover, as every restaurant veteran knows, the business isn’t as easy as it looks. Execution is all, which means over-ambitious menu ideas and under-qualified kitchen brigades lead to disappointing meals. So many places over-promise and under-deliver. Bogus restaurants usually start with impressive sounding dishes that they can’t cook and serve properly. So often they over-complicate matters. These outlets tend to cut corners when it comes to ingredients and can’t attract and keep front and back of house staff who believe in the endeavour. So, the whole thing is exposed as something of a charade. After all, much of the entire dining out experience is theatre, and even a touch of magic. Lose that, and what remains?

I have been involved with many strong concepts over the decades, from PizzaExpress to The Ivy, Belgo to Henry J Beans, Strada to Giraffe and Gail’s. But certain other businesses I’ve backed were unsuccessful. The winners were the real thing, and in hindsight, the losers never really delivered on their promise to the patron. For example, when I chaired Gaucho, we rolled out a regional Argentinian steak brand called Cau. It was the budget version of Gaucho, and it didn’t work. The economics were poor, but it also lacked an authenticity that the original possessed. There was no passion or energy about the brand. Eventually, all branches of Cau in Britain shut.

Eating and drinking houses don’t need to be grand or expensive to delight customers. I happen to think JD Wetherspoon has kept true to its roots. It offers an excellent range of beer and cider – and spirits and wine – at unbeatable prices. Its drinks range is better value than all its competitors, and its millions of fans love its straightforward proposition. Its meals are unfussy and cheap, its pubs are unpretentious and reliable. There can be no confusion about the bargain a customer strikes at Spoons – unlike plenty of pubs, which are underinvested, overpriced, unfriendly and unsure what they stand for. No wonder quite a few are shutting.

Authenticity extends to management too. Honest bosses don’t virtue signal and pretend to be what they’re not. They don’t hide their true opinions behind meaningless jargon. Too many marketing and PR departments are forever spouting insincere stuff. Staff and customers see through the phoniness. I look on LinkedIn and see a parade of an awful lot of tosh – from how operators source obscure ingredients to their fears for the environment. You know exactly the sort of thing I mean. Quality, merit and enduring brands will outlast all the hollow businesses desperately trying to be fashionable and relevant. Hospitality is, as they say, simple, but not easy. It is about staff being professional and making customers feel welcome; about a restaurant serving tasty food and delicious drinks in warm surroundings; and charging fair prices for a good time.
Luke Johnson is a serial sector investor. This article first appeared in Propel Premium, which is sent to Premium subscribers every Friday. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription

Surviving the energy crises while tackling the climate challenge by Mark Chapman

Having spent 14 years helping hospitality operators measure, report and reduce carbon emissions, energy use has always been a good place to start. While up to 90% of our emissions are from the food and drink we serve, the compelling business case that energy provides to cut carbon and costs is a good way to engage businesses on the road to net zero.
 
Operators can recover lost profits worth up to £12,000 and ten tonnes of carbon per outlet from eliminating operational energy waste. The actions needed to survive the energy crises will also help tackle our response to the climate crises. As David Attenborough put it: “Don’t waste electricity, don’t waste paper, don’t waste food. Live the way you want to live, but just don’t waste.”
 
In hospitality, finance report energy use, procurement buy it and operations use it, but typically, no one manages it. In the past, energy costs have been controlled from buying better, and in a flat or falling energy market, that approach has been good enough. Energy costs can now account for 11% of business turnover, up from 3% before the crisis. The new reality for operators is that their ability to manage energy use is as important, while not as exciting, as their front-of-house offering.
 
Understanding and managing energy use across multiple locations, large numbers of staff, pieces of equipment with variable sales, hours and weather effects isn’t easy. Eliminating energy waste needs more than just telling people to turn the lights off. But it can be done. Combining energy analytics, engagement campaigns and ongoing coaching can support your teams to identify and eliminate the behaviours that cause wastage. Kitchen teams are trained to “be ready”, which for many means turning everything on when they open up.

The climate-conscious generation that work in hospitality have never been more willing to engage with the actions they can take to make a difference. The Zero Carbon Forum’s “Save While You Sleep” campaign to reduce energy waste from equipment left on overnight has already delivered collective savings of £1.43m and 1,243 tonnes of carbon dioxide, just from one behaviour. A well planned and resourced programme can reduce usage by up to 30%, delivering the biggest impact of any energy initiative, and can be funded from operational savings.
 
As well as operational energy waste, there are numerous opportunities to minimise energy use from reviewing the types of buildings you operate in, menu choices, opening hours, equipment and maintenance practices. Implementing best practices in all these areas can reduce usage by a further 30-50%. Menus for many operators are developed without consideration of the equipment or energy needed to produce them. Along with more plant-based dishes, engaging chefs to design menus that minimises energy use can be part of lowering the carbon impact of your food offering.
 
The Forum’s low carbon technologies action group has led the collaboration of the sectors property teams to identify the equipment and maintenance practices to minimise energy use. Through sharing best practices and experiences, operators can ensure valuable capex isn’t spent on initiatives or equipment that doesn’t work. Understanding how to assess the total cost of ownership of equipment through connecting the operational and capital costs has also enabled operators to increase the efficiency and profitability of new openings. The group’s checklist of equipment and practices for property teams ensures they don’t waste time working out what to do.
 
One of the founding purposes of the Zero Carbon Forum is that it is better, quicker and more cost effective to work out and implement the solutions to these problems together than on your own. The support we’ve provided to help our members and the industry survive the energy crises has recovered lost profits and cut our emissions to accelerate our progress to net zero. Through collaboration and the expertise of our teams, we can cut carbon and costs across every area to not just survive, but thrive in the new environment. Together at pace.
Mark Chapman is chief executive and founder of Zero Carbon Forum

The growing appeal of travel hubs by Glynn Davis

Rather sadly, my local WHSmith recently closed its doors for the last time in a move that is not particularly unusual, because the company has had a tough time on the high street over recent years and is reducing its presence in such locations. Meanwhile, its travel stores are on fire. At its recent half-year results, WHSmith reported that stores located within airports and rail stations now represent more than 70% of group sales and deliver an impressive 85% of profits.
 
Travel hubs have been a buoyant channel for retailers and foodservice companies alike for some years, and in a post-pandemic environment, their ability to deliver reliable footfall is proving to be increasingly valuable. By contrast, the relative merits of being in city centres or suburbs seems to flip-flop, reckons Ted Schama, of Shelley Sandzer, who says the reliability of transport hubs to consistently deliver serious numbers of people to your doorstep is proving extremely attractive.
 
Such has been the growth of food and beverage in travel environments that even WHSmith has expanded into this domain to complement its retail offer. Carl Cowing, chief executive of WHSmith, says: “We have made excellent progress developing our food offer. By introducing new premium third-party brands such as Crussh, YO! and M&S, and by adding more chiller space in air and rail locations, we are delivering a significant uplift in this category, with food sales up 54% versus 2019.”
 
In an uncertain world, these numbers are fuelling an increasing clamour for exposure to travel sites. Among the operators recently announcing expanded presences in airport and rail hubs are Greggs – which has just opened a unit at Cardiff airport, which it adds to its rail station units and six other air terminal locations – as well as Puccino’s, FCB Coffee, Pret A Manger, Wagamama and Vagabond wine bars. 
 
The latter opened its first travel unit in Heathrow airport last year, and such has been its success that a prime site is due to open in Gatwick later this year, along with a sister unit called South Downs that will focus on English wine. Such is the confidence in this dual Gatwick gambit that Vagabond founder Stephen Finch predicts its annual turnover at the airport will hit £15m, and he has described the Heathrow opening as a “game-changer” for the business.
 
Not surprisingly, we are seeing various newcomers to the travel scene looking for a piece of the action. These include The Breakfast Club, which has recently partnered with travel specialist SSP to open a number of units in the UK, which will begin with the brand’s first restaurant in Gatwick airport later this year. An interesting move involves Time Out Market, which is working with Lagardére Travel Retail to develop a model suitable for airports and train stations that will seek to incorporate its “best of the city” curated food offer, which echoes its model in other locations.
 
This follows the signing of a deal by Boxpark for its specially created BoxHall concept within a London Transport property, covering 17,000 square feet adjacent to Liverpool Street station, which will open this summer with 16 kitchen units and two bars. This project is part of a movement that is arguably stretching the definition of the travel hub site away from it being located within the actual concourse/terminal.
 
This is reflected in the activity of Schama, who recently placed US burger operator Shake Shack in a smaller site than it would typically take, on Argyll Street in central London, as he sold it to the company as a transport hub site due to its close proximity to Oxford Circus underground, which drives tremendous footfall to nearby roads. 
 
As work-from-home patterns remain uncertain, property markets look set to face further stress and the economic backdrop remains tough, it is likely that trading patterns will continue to be unsettled for some time in many parts of the market. Against this backdrop, the certainty at travel hubs make them increasingly attractive to a growing number of food and beverage operators. 
Glynn Davis is a leading commentator on retail trends
 

The changing and unchanging customer demands by Steven Pike

As I was perusing an article on “Top Restaurant Trends 2023”, I pondered on how exhausting it must be for operators and brand managers to keep up with it all. It feels like operators have a succession of new and challenging hoops to keep jumping through in order to please customers and keep up with constantly evolving trends and needs. 
 
Consumers want more experiential, more digital, more options to cater for more dietary requirements and more Instagrammable content, but less carbon. Additionally, due to the cost-of-living crisis, it would be great if the cost of the meal could also be cheaper.
 
It probably doesn’t come as a surprise to any operator that cost has become the top influencing factor over value when customers are choosing which venue to go to. Pre-pandemic, HGEM’s consumer research showed that the reverse was the case, and value was historically more important than cost.
 
I digress. The point I am trying to make is that it can feel overwhelming trying to tick all the boxes. That is, until you step back and look at the wider context. From our experience over 20 years of helping operators measure and improve their performance, we often find that in the quest to keep reinventing, it’s easy to lose focus on the foundations – the core standards and processes that need to be in place regardless. This is backed up by output from focus groups on popular brands, where it’s common to hear complaints about surprisingly basic expectations.
 
The key to start with is to have a core framework for the guest experience that’s being constantly reinforced through communications, training and recognition. Crucially, this framework should also articulate the “why”, so that teams understand how their actions impact the perception of the brand and the integrity of the service journey.
 
I’ve seen beautifully considered service frameworks that have high exposure through launch events and team onboarding, but which quickly drift out of consciousness when they collide with established culture. To really turn your framework into what happens consistently on all experiences, it’s important to evaluate performance – regularly and objectively – and involve teams in learning from the results. And not just by telling them how they’re doing – listening and learning is a two-way street, and we have seen in our results the close correlation between team happiness and customer satisfaction (eNPS versus NPS).
 
Measurement should involve both subjective sources (like reviews and surveys, where you capture emotions and reputation) and objective sources (such as mystery guest audits, where you capture facts and detail). And it doesn’t all have to be based on ratings – artificial intelligence models are now very good at mining opinions and sentiment from text to find patterns you may not have considered when designing your framework.
 
Another mistake we sometimes see is considering all standards and processes to be equally important. They’re not. It’s easy to see which have the biggest impact on loyalty by breaking down the net promoter score (NPS) by how guests answer certain questions in a survey. To cut a long story short, there are no real surprises. Did I feel welcome and looked after? Was the experience well paced (both food and payment)? And was my food tasty (and the right temperature)?
 
These show the biggest variation in NPS based on the answer given. Close behind, these are several measures that guests will usually only comment about when they notice something obvious – cleanliness, for example – but that have a big impact when things aren’t right. Nail these first before moving on to things that you might think are more important than guests do!
 
In summary, let’s finish with a cliché. While some customer demands are ever changing, don’t take your eyes off the demands that always stay the same. If there’s anything to take away from this Friday morning distraction, it’s the fact that service, pacing, food quality and atmosphere have been important to customers for as long as there have been restaurants and are highly unlikely to fall down the priority chain over things like “geopolitical dining”, or whether you should embrace the Pantone colour of the year (since you asked, “Viva Magenta” for 2023).
Steven Pike is managing director at hospitality guest platform HGEM

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