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Morning Briefing for pub, restaurant and food wervice operators

Fri 23rd Jun 2023 - Friday Opinion
Subjects: Welcome to your hotel now go to the pub, letter from Detroit, sandwiches filling a gap in the market, why non-executive roles are so rewarding
Authors: Katherine Doggrell, Matthew Kirby, Glynn Davis, Ann Elliott

Welcome to your hotel now go to the pub by Katherine Doggrell 

It is accepted adult practice that if you have someone to stay for the night, you will also offer them food. Even if they are keeling on to your sofa at 3am, you’ll rustle up some toast and a coffee, and maybe an aspirin. They will be fed and watered before being released into the world.
For hotels, the industry that earns its cash from offering a place to stay, the picture is less clear. Many of us are scarred by the memories of meals eaten in echoey restaurants alone but for our increasingly grey thoughts, and food that is more fuel than pleasure, served by wraiths who appear briefly to take our order and return with the bill. Next time, we favour the tepid room service club sandwich eaten on our beds with Netflix on the iPad. 
The hotel sector, particularly in its branded, corporate form, has largely come to terms with the reality that the best food eaten in a hotel may well be the martini olives from The American Bar at The Savoy. Breakfast can sometimes be scared up – usually at an additional cost – but hotels are increasingly of the opinion that restaurant space could be more profitably used as meeting space, luggage storage or even car parking. 
In some locations, this is a sane move. If you have a hotel in the middle of Soho, you can’t compete with local restaurants. It’s better to have an informed concierge to provide dining guidance. Airbnb (other peer-to-peer platforms are available) has helped hotels along this road. After all, as the largest hospitality company on the planet, it must be doing something right. 
But, just as hotels were sliding down the slope of commoditising stays, the pandemic restrictions reminded the guest what hospitality was. Pent-up demand spewed itself all over the luxury segment, where the last vestiges of food and beverage were to be found. Guests wanted the whole holiday experience without having to wander too far from where they were lying, so hop to it.
It wasn’t – of course – just about meeting the guest’s demands. Rising costs mean hotels need more cash than they could glean by rooms alone. Ancillary revenues are back on the menu. 
One area where the sector has been looking for wisdom is in pubs. Companies such as Fuller’s have been showing hotels how it’s done for some time now, while also growing their own bed-led estates. In 2020, the group started describing itself as a pubs and hotels business, one year after spending £40m on Cotswolds Inns & Hotels.
The group, along with Marston’s and other pubs with rooms, delivers – to paraphrase Rishi Sunak – the guests’ priorities: great food and a bed you can stagger upstairs to. Hotels already have the beds, and pubs have showed them that the food need not be complicated. 
Pubs also deliver something that Airbnb used to lead the market in – community. While very few people really want to live like a local when they’re on holiday, they do want to feel they have made a connection with the area, be that through chats with the locals or picking up tips on where to find the best chips, art gallery or free public toilet. Insider knowledge makes us feel special, and the more well-known the destination is, the more travellers want to find their own unique link. There is no better place to find all this than in the pub and, as the weak pound pulls in the overseas tourists, staying in a pub is growing in popularity as a must-do Brit break. 
Back in hotels, there is much to learn. Community is important not only for guest experience, but for the sector’s survival. During the pandemic, hotels were left out of the survival plan. There was no Stay Out To Help Out. The main reason for this was their lack of collective voice. The largest branded companies are based in the US – where they were heard – but they have scant presence in the UK, certainly not when it comes to lobbying.
Hotels have also stood apart from the communities they are in. They are places for outsiders to stay and to maybe find some casual work and little more. There is no connection with those who live around them. Accor chief executive Sébastien Bazin was horrified to learn that one of his general managers couldn’t identify the local dry cleaner before launching the sadly-no-more Accor Local, which found success offering storage space for motorbike helmets – plus a latte on the side. 
Hotels were becoming bed banks. To become bankable, they must rediscover hospitality down the pub. 
Katherine Doggrell is Propel editorial consultant and founder of NewDog PR. 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 to upgrade your subscription.

Letter from Detroit by Matthew Kirby

In March 2023, we sold our 30-unit Chozen business to Chopstix. One of the benefits of the sale was it allowed me a free hand to get more involved in my love affair with Detroit. It’s a place that’s often maligned by a wide range of commentators, but I’ve had some of my best times as both a resident, and now investor, in Motor City. 
The journey started in 1992 when we open our first Mongolian Barbeque in the city. Seven years later, I moved from the UK with my family to join my US business partner and grow the business across the Mid-West. We made a lot of mistakes, and at one point it felt like my dyslexia had gotten the better of me and I had purchased Stephen Coveys the Seven Habits of an Ineffective Restaurant Owner and executed on every chapter – expand too fast, fail to research new regional markets properly and run out of money, to name but three. 
Somehow, we survived and came out the other side, successfully selling the business to a New York private equity group, Kinderhook, in 2007. Its plan was to take our 30-unit, $80m turnover business to 100-plus units and then launch an initial public offering. As our advisors at the time said: “Never underestimate the greed and ego of the buyer.” It already owned 250 Burger King restaurants and tried to apply a quick service restaurant approach to what was essentially a casual dining concept. In the process, it killed the culture and all the good people left. We took our money and ran.
In 2015, we got a call from Ford Motor Company asking us if we would be interested in opening a Ford-themed restaurant in Dearborn, Detroit – the site of Henry Ford’s first Model T factory. The business had originally opened in Henry Ford’s preferred holiday destination of Fort Myers in Florida, but Ford was keen to bring it to Detroit, so wanted to find the right operators to take the franchise. 
We visited Florida and thought the concept was great, and then found a site in Dearborn. Two years and $3m later, we opened the 13,000 square-foot Ford’s Garage Café operation. It’s been a great success, and we have just opened our second location on the north west side of Detroit. It’s only 9,000 square feet this time, but we still have more than 270 covers. This year, we will do more than $15m between the two locations, and in the US, you can still run a 29% food cost in casual dining and serve meat! Rent is $25 per square foot and no business rates, just some relatively low property taxes that are less than 0.2% of turnover. It’s like doing business in London in the 1990s.

The landlords here have a very different approach to their leaseholders. If you are going to invest in their building, they will usually help with the cost of the fit out. That’s always been the way, they want you to succeed. The government will lend you money to fit out the restaurant through the Small Business Administration. We got $1.2m towards the cost of the new store. Yes, we had to put up the Dearborn business as security and are paying 10.5%, but it’s a lot cheaper than giving away equity. Can you image the UK government providing £1m to help you build out your leasehold estate? 
On the labour front, the primary focus for US restaurant operators like us and the chains are retention and artificial intelligence. There is a recognition that recruitment will remain an issue for some time to come, so resources spent on keeping staff with a range of benefits supported by training is a primary goal. Second up is the introduction of artificial intelligence-led technology to assist with ordering and payment. Investment in these areas, both front and back-of-house, is seen as essential to reducing the number of staff required to operate the business.
The restaurant business in the US does have challenges with the potential removal of tip credit and other related payroll taxes that are being introduced, but for us, the American dream remains alive and well in Motown.
Matthew Kirby is a restaurateur and entrepreneur, who founded and sold Chozen Noodle. This article first appeared in Propel Premium.

Sandwiches filling a gap in the market by Glynn Davis

What do City firms Goldman Sachs and JP Morgan have in common with the likes of Google, IBM, Sir Martin Sorrell’s S4 Capital and Dyson? They are among a growing number of companies looking to boost the average amount of time their employees spend in the office. 
Google has just embarked on a crackdown on office attendance by scrapping fully remote working for any new employees and is looking to switch existing remote workers onto a hybrid arrangement. For current hybrid employees who are failing to attend the requisite number of days (typically three per week), there is the threat of it negatively impacting on their performance reviews.
This must bode well for developer Related Argent, which will soon be welcoming around 4,000 people into the new one million square-foot Google headquarters in King’s Cross. Their spending power across the area will give a big boost to the development’s food and beverage operators – who are already trading up on pre-covid-19 levels across King’s Cross and Coal Drops Yard. The plan is to add further food and beverage operators to the area such as the recently announced Mare Street Market.
It’s absolutely the case that working from home has reshaped the working landscape (and the commercial property market), but the direction of travel for many workers is obvious – it’s back to the office for more hours per week than they have been enjoying since covid-19 hit. When jobs were aplenty, employees had some power to determine the amount of time spent at home, but as the jobs market has become more competitive, employers are exerting more pressure.
This scenario is supported by figures from real estate investment trust Regional REIT, which has found workers now spend, on average, 4.2 days per week in its properties. Further evidence comes from property firm Argyll, which has enjoyed occupancy levels of as much as 90% across its buildings – higher than pre-pandemic and the financial crash of 2008.
This is feeding directly through to many food and beverage players such as Just Eat for Business, which has enjoyed 56% growth in office catering orders over the past year. It has been adding brands such as YO! and Coqfighter to an offer which includes Pasta Evangelists and Pizza Pilgrims. The company says the return to the office is a prominent theme in 2023.   
This back-to-the-office trend has been reflected in the sale of sandwiches. While carb-light meals and bowls containing seeds and pulses of all descriptions have been a hot food trend, we should not forget about that lunch stalwart, the sandwich. Sales are back to 85% of their £8bn pre-pandemic level, according to the British Sandwich & Food To Go Association, and the trend is looking good for the humble sandwich. 
Let’s take a step back from that humble description, because it does not tell the whole story of the sandwich right now. A growing number of operators are injecting a shot into the arm of the traditional sarnie that will no doubt ride on the back of the return-to-the-office dynamic. Leader of the pack is Max Halley, who has just branched out from his modest Finsbury Park restaurant to supply his unique spin on sandwiches to the Hippodrome casino. 
This has a nice circularity to it as the sandwich was supposedly invented as a convenient way for the Earl of Sandwich to eat without having to take a break from the gaming tables. Whereas the Earl had roast beef, Halley will be delivering his meatball bonanza panini, bacon chop BLT and prawn cocktail creation, which includes crushed prawn cocktail crisps on brioche, to today’s hungry gamblers. 
Talking of brioche, we have also seen the opening of the first permanent site for Crunch, in Spitalfields Market, with brioche-filled delights including the bulgogi steak sandwich containing Korean bulgogi beef steak, onngi kimchi, gochujang mayo and red lettuce.
Other sandwich purveyors cranking up the stakes are Sexy Buns, which opened a unit in Market Hall’s in central London, to serve the likes of a Thai chicken bun containing free range chicken, Thai red curry sauce, crispy Asian salad, coriander and spicy chilli garlic oil. And Sven-Hanson Britt earlier this year launched The Sandwich Shack from the Bar Rex unit, which sits next to Oxeye restaurant in the Embassy Gardens development. Expect to tuck into things like the pamboza, which is described as a Mexican sandwich stuffed with chorizo fried potatoes, sour cream, lettuce and guajillo chile salsa.
With the great return to the office picking up pace, more people will be able to try these glorious creations. But whether they will actually be able to stay awake long enough to do any work after consuming the likes of a bulgogi steak sandwich or a pamboza is debatable.
Glynn Davis is a leading commentator on retail trends

Why non-executive roles are so rewarding by Ann Elliott

There seems to be a point in the career of many senior executives when they start to consider a move into a non-executive career, and I am often asked how they can best make that transition. 

If I am honest, I had to be dragged kicking and screaming (almost) into my first non-executive director (NED) role.

I just wasn’t sure I had the requisite skills to go onto a board again, having run my own agency for 20 years, and having removed myself quite determinedly from a corporate life to do so. I can be impatient in meetings that drag on for too long, and sometimes too direct with my questioning. I thought some boards might be okay with that, but some might definitely not be. 

I now sit on five boards within the hospitality sector. A mix of family, private and venture capital/private equity-owned, and a mix too of business-to-consumer and business-to-business operations. I also advise a few hospitality businesses that don’t have formal board structures but want someone to regularly talk to about their thinking and ideas. This is a bit more of a counsellor role than a regulatory one – it can be quite lonely sometimes being a chief executive.

The point I am making is that the businesses I work with are all different and have varying needs and requirements. It’s not a case of “one size fits all”.

 An advisor of any sort can be really beneficial for a hospitality business, be they an operator or supplier. It doesn’t have to be a formal NED role, nor does it have to be paid. It doesn’t have to have a job description, targets or a contract. What is needed from an advisor may differ one month to the next as the business changes – the advice and support needed to navigate covid will not necessarily be the same as that needed to thrive in a cost-of-living crisis.

For a business considering the appointment of an advisor, what is imperative is knowing why they want to bring an outsider into their business to work with them in the first place. What role do they want them to play? What do they expect in terms of time, commitment, advice and guidance? How do they want them to work and contribute? Agreeing these sort of expectations is hugely important. Expectation mismatch seems to be one of the core reasons why board level advisors fail, leaving disappointed and bitter board members in their wake.

So, expectation clarity is key, as is having culture fit. I am talking largely about small and medium-sized enterprises here – it may not be as important in a public limited company business, I don’t know. Some may say, “this is business, liking one another doesn’t really matter”, and they do have a point. Personally though, I wouldn’t want to work with a group of people I don’t like, admire or get on with. Life is too short. 

Skill set is the third part of the puzzle. Does the business need a NED with specific skills – marketing, finance, HR, strategy, property – to bring to the party? Might they be expected to get involved (if so, to what level?), mentor other team members in their specialist area or lead debate? While subject matter skills may be relevant – critical, even – an advisor has to have business acumen. Confining contribution to just one particular skill area is not especially helpful to any organisation.

An advisor/NED should be something of a critical friend with an insatiable desire to help the team and the business become more successful. Every contribution should be considered in that context. They are not there to be appointed in an executive capacity, so they don’t need to be political, ruthless, aggressive or dominating but, rather, independent and objective. 

As a NED, you have to be prepared for the board to hear your views but not act on them, or at least not immediately. It is their business, not yours. You can influence, suggest and advise, but you cannot direct or demand. That’s why it’s called a non-executive role, and that’s why it’s so rewarding.
Ann Elliott (she/her) is a portfolio non-executive director and board advisor 

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