Propel Quarterly Autumn 2018

Page 1



www.propelhospitality. com


ISSUE 24 • AUTUMN 2018


Denmark v Wales Sunday 9 September, 5pm

England v Spain Saturday 8 September, 7.45pm

Scotland v Albania Monday 10 September, 7.45pm

International Golf Ryder Cup Friday 28 - Sunday 30 September All 3 days exclusively live

Autumn Internationals England v South Africa Saturday 3 November, 3pm

England v Japan Saturday 17 November, 3pm

England v New Zealand Saturday 10 November, 3pm

England v Australia Saturday 24, November, 3pm

Plus, huge live games from the Premier League, EFL, SPFL and Carabao Cup, including: Tottenham v Liverpool Saturday 15 September, 12.30pm

Arsenal v Everton Sunday 23 September, 1.30pm

Liverpool v Man City Sunday 7 October, 4.30pm

Chelsea v Man Utd Saturday 20 October, 12.30pm

Call 08444 881 129 or visit Sky Sports requires a Sky subscription, equipment and installation. Scheduling may be subject to change. Further terms apply. Calls to Sky cost 7p per minute plus your provider’s access charge. Correct at time of print: 20/08/2018.

uarterly The essential information resource for pub, restaurant & foodservice operators

Who Adairs wins ... Rosa’s Thai Cafe managing director Gavin Adair talks exclusively to Propel about its plans following TriSpan’s takeover

Inside: Emerging seafood trends Uncovering a brand’s DNA Hurrah for the hipsters Biting into the Big Apple Safeguarding the industry Chesterford's James Lipscombe Call off Christmas! Conference highlights


ISSUE 24 • AUTUMN 2018


Cover and contents pictures of Gavin Adair by Alex Maguire


29 06

Contents 06

Chip off the old block


Sea change


Bubbling to the top


Survival of the fittest


Taking Rosa’s to the next level


Déjà vu


The heat is on


Hurrah for the hipsters


Call off Christmas!


Safeguarding the industry’s economic contribution

Glynn Davis interviews Chesterford Group managing director James Lipscombe

John Porter reveals emerging seafood trends as Brexit makes waves

Martin Cooper looks at opportunities for operators as soft drinks sales rise

Ian Dunstall looks at key trends in the eating out sector

Rosa’s Thai Cafe managing director Gavin Adair talks to Martin Cooper about retaining authenticity as the company expands

Cyril Lavenant looks at whether current consumer behaviour is pointing towards a recession

Highlights from Propel’s summer conference

Glynn Davis says the young dudes who revived Hackney’s fortunes could save more London pubs

Public Health England is out of control, argues Paul Chase

UKHospitality chief executive Kate Nicholls calls for business tax reform




Wise words


Biting into the Big Apple


Uncovering a brand’s DNA


Opinion leaders


To be or not to be

Published by Propel Hospitality Unit 26, Graylands Estate, Langhurstwood Road, Horsham, West Sussex RH12 4QD

Director Jo Charity T: 01444 810304 E:

Managing Director Paul Charity T: 07899 984814 E:

Partnerships Director Jill Harrington T: 01444 810306 E:

Managing Editor Paul Bishop T: 01444 817690 E:

Events Co-ordinator Anne Steele T: 01444 817691 E:

Deputy Editor Martin Cooper T: 01444 817689 E:

Design & Production Jonathan Taylor T: 01403 256614 E:


Sage advice from speakers at Propel’s Finance Conference

James Hacon’s highlights from Propel and UKHospitality’s New York study tour

Ann Elliott looks at who and what defines a brand

RM&I hears from talented leaders in the sector

Chris Edger reveals lessons for leaders when deciding their business’ growth path Contributors Emily Chambers, David Charlton, Paul Chase, Martin Cooper, Glynn Davis, Ian Dunstall, Chris Edger, Ann Elliott, Sophie Evans, James Hacon, Cyril Lavenant, Jessica Mason, Kate Nicholls, John Porter, Claire Small, Oliver Taylor Printing and Distribution Bishops Printers, Walton Road Farlington, Portsmouth PO6 1TR



©Propel Hospitality Ltd. 2018


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James Lipscombe, managing director of The Chesterford Group, which operates 42 fish and chip shops in the UK, tells Glynn Davis changing palates mean the nation’s favourite dish will never go out of fashion


he fact burgers and chicken are among millennials’ favourite fast food items is of no concern to the owner of the UK’s largest fish and chip shop chain – because he has evidence people acquire a taste for the country’s most iconic dish as they get older. James Lipscombe, managing director of The Chesterford Group (TCG), which operates 42 fish and chip shops in the UK, says: “From their mid-30s, we definitely see a change in what people eat. We can see it in the data. Younger people are the burger and chicken buyers but they move on to fish and chips as they get older – their palates change.” If this sounds fanciful, many of family-owned TCG’s customers have grown up eating at its sites and the company has witnessed first hand how their tastes evolve. Lipscombe’s family is steeped in fish and chip frying – his great-grandfather opened their first shop in Romford, Essex, in 1923. Although the venue closed some years later, Lipscombe’s grandfather reignited the family’s taste for the nation’s favourite dish when he opened a unit in the same area in 1952 – and it is still part of the TCG business today.

“From their mid-30s, we definitely see a change in what people eat. We can see it in the data. Younger people are the burger and chicken buyers but they move on to fish and chips as they get older – their palates change”

Fishnchickn Although TCG is predominantly a fish and chip operation, the company made a “radical” move in 1971 by creating the Fishnchickn



brand to capitalise on the growing appetite for chicken while retaining fish at the heart of the business. Having built the brand into 22 outlets, the strategy now is to gradually rebrand them as Churchill’s over the next few years – a brand created in 2012 as an immediately identifiable British concept. Lipscombe says: “From a marketing and advertising point of view, Fishnchickn was hard to create assets around. It was difficult to turn it into a credible brand and it is not international.” The company will look to take its brands abroad some time in the future and with Churchill’s, TCG has looked to create a branded consumer experience that is modern 21st century. Lipscombe says: “We want a customer experience that can sit alongside any contemporary food brand. We’ve provenance – with the story being told in the outlets – and this combines with ▲


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“The real trick is how you scale fish and chips – it’s very regional. To a certain degree companies have found it difficult to create a truly cookie-cutter approach. It’s not simple – many have tried and failed”

technology for click and collect, through the Preoday app and Deliveroo.” What this doesn’t mean, though, is a relegation of the chicken side of the menu as Lipscombe acknowledges the business sells a lot of poultry including southern-fried chicken, nuggets and spit-roasted birds, which are complemented by a premium burger offer. He says: “We will keep these products on as it opens the business up to younger demographics. They start on the burgers and chicken and move on to our fish and chips.” The three Bankers fish and chip takeaway sites TCG runs in Brighton won’t be affected by any move to a single brand and they will retain their recognisable branding. Neither will any branding move affect the group’s overall strategy, which has been based on gradually acquiring empty retail units. TCG has acquired existing businesses in the past but Lipscombe says there has been a move away from this because it can be “difficult to make changes to these units”. He says: “You are buying goodwill and if you try to change the model it is often too much for the customers to deal with. It makes it difficult so we’re now looking more at vacant units and in the current climate we’ve got good opportunities. Providing we execute the business model, we could be successful.” TCG could also look at food courts in the future but for now Lipscombe believes the rents are too high as he “sticks religiously” to a model where rent and rates don’t move above 10% of sales. Particularly helpful to the group’s plan is the flexibility of the model it employs where units


TCG vital statistics 1923

when the Lipscombe family opened its first fish and chip shop – in Romford

JAMES LIPSCOMBE Majority shareholder


Portions of chips sold per week


Customers served per week


Sausages sold per week

MEDIUM COD AND CHIPS Most popular dish

£9 to £12 Average spend


can be takeaway only or a mixed model with assisted service – with a footprint that can go from 850 square feet up to 3,000 square feet. He says: “The right model can be flexed to the individual location, which is secondary high streets and neighbourhood shopping centres. Some units see 60% of sales eaten in, while for others it is 60% takeaway. We set up shop accordingly.” Another advantageous part of the model is the predictability of trading. He adds: “It’s boringly consistent. With our loyal customer base I know what the shops will take before I even get up in the morning – and we get lowdigit growth year on year.”

Positive prospects Although TCG’s tactics don’t present the prospect of radical growth, Lipscombe paints the fish and chip sector as having “positive prospects” and he questions why private equity has yet to dip its toe into the sector. He says: “I would have expected somebody to have seen it and gone for it. It’s not glamorous – but it has the consistency.” One problem that might make fish and chips a less attractive prospect for private equity is a regional difference in consumer tastes. Saveloys are popular in the south, while haddock is a big-seller in the north and certain regions prefer their cod skinless. All these subtle nuances add complexity to the model. Lipscombe says: “The real trick is how you scale fish and chips – it’s very regional. To a certain degree companies have found it difficult to create a truly cookie-cutter approach. It’s not simple – many have tried and failed.” ▲


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“Customer experience is also critical to the success of the business. Staff training is taken very seriously and the ethos of the business is instilled in each new outlet”

This has led to a fragmented fish and chip market, with no major players. Even though the number of outlets has been rising, this has failed to fuel the growth of a truly nationwide chain. The nearest is TCG. Lipscombe says: “We have 42 outlets – and we’re the biggest!” Risk Capital Partners chairman Luke Johnson told me some time ago he understood the difficulties that surround scaling a fish and chip shop business but saw nothing insurmountable. He said at the time: “There is an in-built feeling of fish and chips being cheap – but cod is expensive. It’s also smelly and messy to cook but it’s not been done by the right people so it probably could work as a national chain.” Lipscombe’s approach to growth is to keep the business within south east England, where changes in customer tastes aren’t too profound and where there is “massive potential with such a focused geographic strategy”.

Growth prospects The company’s most recent opening was in Ruislip, with openings lined up in Milton Keynes and Eastbourne. What also helps TCG’s growth prospects are its concise menus. While recognising businesses have to move with the trends – as evidenced by the introduction of meat-free items such as a veggie burger and Linda McCartney’s scampi – Lipscombe says the company “really has to compete on having the best fish and chips”. He adds: “We can try to be everything to everybody with a good product mix but we have to remember what we are. You can try to sell far too many things but we’ve a simple offer that’s done well.” He has also had to deal with the current trend for healthier foods with the accompanying perception fish are chips are particularly bad for you. Lipscombe says compared with pizza, and Indian and Chinese dishes, fish and chips stack up favourably



in the health stakes and when the company introduced chicken salad, it failed to gain traction. Pricing is also pitched competitively – although there are slight variations between stores – with half a chicken and chips for £5.95 and a Monday meal deal that includes pie and chips for £3.95. Customer experience is also critical to the success of the business. Staff training is taken very seriously and the ethos of the business is instilled in each new outlet. Managers of the new sites are promoted up from other TCG venues and a premier team is brought in to run the new units in their early phase. Lipscombe says: “We get it 100% right in the first six weeks by having a crack team parachuted in. They train the local employees before moving out and leaving them to it. This involves the team travelling lots.” Consumers in the south east won’t have to travel far to find their nearest Churchill’s fish and chip shop judging by the company’s solid foundations for growth. Whether they choose fish and chips or chicken when they arrive will simply be a matter of age.

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John Porter reveals emerging trends in the seafood sector and says Brexit looks likely to make more waves


or an industry that accounts for less than 0.5% of gross domestic product, the UK’s fishing industry has undoubtedly been punching above its weight in political terms since the 2016 referendum on EU membership. In coastal areas, which have seen revenue from and employment in fishing both decline, the issue was said to be a deciding factor in many people’s decision to vote “Leave”. “Taking back control” of Britain’s waters has become a mantra for pro-Brexit politicians including environment secretary Michael Gove, who published the Sustainable Fisheries For Future Generations white paper in July, which set out the government’s planned approach to fisheries when the transition period ends in 2020. Gove declared: “Leaving the EU creates a sea of opportunity for our fishing industry. Outside the Common Fisheries Policy we can take back control of our waters and revitalise our coastal communities. We will be able to put in place our own systems, becoming a world leader in managing our resources while protecting the marine environment.” Perish the thought we would ever take a minister of state at anything less than their word. However, some in the fishing industry who were already concerned the UK agreed to fully abide by the Common Fisheries Policy during the transition period, fear further trade-offs down the line. Among them is Chris Neve, a fishing industry veteran who has been involved with quota and sustainability issues for decades. He says: “I think our government will use fishing as a bargaining chip to try to get something out of the EU. I think we’ll end up with the same fishing deal for many years to come. For many European politicians their fishing industry is far more important to them than ours is to our politicians – and it’s always been that way.”


Fish in foodservice ●

British consumers spent about £3.4bn on eating seafood out of home in 2017, an increase of 6.1% on the previous year

Fried fish dominates the commercial foodservice market but items such as fish cakes, fish sandwiches and shellfish – including mussels, prawns and scampi – have increased

The top five seafood species on menus are prawns, salmon, cod, tuna and crab

On any given day there are more than 100 species of fish and shellfish available to buy from regional fish markets and suppliers in the UK

Source: Seafish


He makes the point the majority of fish and seafood caught in UK waters goes abroad, mainly because other countries value a more diverse range of species and will pay more than UK buyers. Suppliers to the UK eating out market have to compete at the daily markets and deal with a greater recognition in the restaurant and pub sector that fish is now a far higher quality, premium product than it was when boats spent weeks at a time at sea. Neve says: “The quality of fish we get today is far superior. Most of the boats are doing very short trips, just two days at sea, and the fish we get is absolutely tip-top.” Neve has a better handle on the eating out market than many in the fishing industry. His family business, D&M Seafoods, is named after his sons and co-directors Daniel and Matthew, while one of its best customers is Lancashirebased Seafood Pub Company, where managing director Joycelyn Neve also calls Chris “dad”. The connections don’t end there. When Seafood Pub Company set up shop in 2010, its first chairman was Andrew McLean, founder of Devonshire Pub Company. With McLean now in a property role and identifying new sites for Seafood Pub Company, the role of chairman has passed to another pub trade veteran – Brunning & Price co-founder Graham Price. McLean and Price are both former customers of Neve. Jocelyn Neve says: “I grew up surrounded by fabulous produce. Before I could reach the sink I’d be stood on a chair cleaning mussels or scallops. Then I worked through university in kitchens, putting the food I’d grown up with on plates.” Seafood Pub Company currently operates 11 sites, with plans for further expansion once a current round of refurbishment is complete. As the name suggests, fresh fish and seafood is at the heart of its offer. Jocelyn Neve says: “Our concept is built ▲


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around market fish of the day on the menu and the specials board. It’s this direct link that makes the business special. This morning, for example, my brother texted me a picture of a 50-kilo halibut at 3.30am. I was able to post the picture on the staff Facebook page, tell them it was coming from Shetland and which boat caught it. The fish was in the pubs later that day.” By the evening, the chef in each pub would have devised their own way to serve that halibut. Each pub will typically have ten portions of each fish or seafood special on offer on weekdays, while at the weekend each pub might want 20 or 30 portions. Jocelyn Neve says: “We want the boards to change every day so we’ll use it up – when it’s gone, it’s gone. Having the story is our point of difference. For the guest to know which boat the fish was caught by is great. We print the menu in-house every day and, with the ‘market fish section’, less is more. If there’s only two market fish portions on today, that’s it, but it will be the very best quality. Then at the weekend we ramp it up.” The group also buys from local inshore boats, which means species such as skate are on the menu all year round. Almost all fish served by the group is caught in UK waters. Joycelyn Neve says: “The only things not UK-caught are tuna, swordfish and wild tiger prawns – the warm water stuff. It’s maybe 2% of what we sell.” However, persuading UK customers to eat

“Having the story is our point of difference. For the guest to know which boat the fish was caught in is great” Seafood Pub Company managing director Joycelyn Neve

a broader range of species, often cited as why more of the nation’s fish fail to appear in the eating out market, is not the biggest challenge. She adds: “It’s not so much the species but as soon as you get into items such as oysters, which are on all the menus, the raw element can put people off. Proper seafood fans are the ones who want oysters – there are people who come in especially for them. But I think people like to try something they haven’t had before. We operate food-led destination pubs and that’s what they’re coming to us for, although it might be different on the high street in a wet-led operation. We’ve also got a lot of offal on the menu – calves liver always sells well. The foodie crowd coming in want a point of difference.” Gross profit (GP) can be a challenge in a market where prices can fluctuate dramatically. Joycelyn Neve says: “We’re really struggling with crab at the moment, it’s been going up £2 a kilo every two weeks and then last week there wasn’t any. It’s all going to China. That’s a concern. Devilled crab starter is one of our signature dishes but we may have to look at that. “You can only pass so much of the cost on to the customer and, if it gets to a silly price, we simply won’t have it in. If someone wants to pre-order something, for example lobster, we may advise them to wait a few weeks if we think price and quality will get better. We want everyone to go away thinking they’ve had fantastic value so we work with what’s in season and what’s good and absorb the cost where we can.”

Fewer choices For a business that takes a more generalist menu approach, the challenges of serving seafood are different. At the award-winning Ye Old Sun Inn in Colton, North Yorkshire, coowner and chef Ashley McCarthy works with two fish suppliers but believes choice has reduced because the price customers are prepared to pay has failed to keep pace with market prices. He says: “The variety going back ten years was far better. Now we always seem to get offered the same stuff – hake or salmon – and salmon is stupid in price even for the farmed product. It always comes back to the mundane things and I don’t know whether that’s because its gets shipped over to the continent, which I know a lot does, and likewise perhaps down to the capital. In the north, unless you’re paying premium prices, which we’re struggling to do, we’re getting squeezed out of the market because of the cost. When we can have species such as plaice, sea trout and king scallops on the menu, we’re selling it.” A king scallop starter will sell for about £9 at Ye Old Sun Inn. McCarthy says: “We always work on 70% GP but we do lose it on something like that. However, it’s not a big-volume dish anyway so we can afford to lose a bit of GP. I’d rather see it sell out than waste any. We’ll then move on to another dish, such as squid, where we can get a 72% GP and make it back. “For a main course special, we work on a minimum of 12 portions depending on the price. If an item such as John Dory is on over the weekend and we get a good price, we ▲ AUTUMN 2018 PROPEL QUARTERLY


Feature might double that to 24 because we know it’s going to sell. For a John Dory main course you’re looking at about £24 on the menu, depending on the garnish.” Confidence is key in persuading customers to broaden their seafood repertoire, says McCarthy. He adds: “People know our food is fresh. They may try something with us they won’t try with somebody else, which is good when it comes to putting the more unusual fish on the menu.” As with many operators, fish and chips is by far the biggest-selling seafood dish on the menu at Ye Old Sun Inn. McCarthy says: “It is always haddock. In the early days we played about with different types of fish but always reverted to haddock for fish and chips on our core pub menu. Even now it’s one of our bestselling dishes, with the larger potion the biggest seller by a long way.” Regarding portion sizes, he adds: “Fish suppliers will never give you a set price so the weight fluctuates depending on what price it comes in at. We adjust the portion sizes slightly because the menus are printed, so we’re restricted.”

A sprinkle of Salt Other operators can make a virtue out of diversity. One of the main aims of Seafood Restaurant of the Year, which is awarded by industry body Seafish, is to recognise the creative use of seafood and under-used species. That is certainly the case with The Salt Room, the Brighton restaurant that won the award in 2017. Owned by Raz Helalat, the business is part of a three-strong group of restaurants that includes sites in Brighton and London trading as The Coal Shed. The Salt Room menu is built around a Josper oven, which is used to grill fresh produce over charcoal including a daily “whole market fish” to share alongside daily changing specials. This enables the kitchen team, led by group head chef Dave Mothersill, to make the most of availability. Mothersill says: “Our consumers are definitely more into provenance – they want to know what they’re eating. That’s great for us and great for our front-of-house team. London is different, you have a lot of business lunches and customers don’t always engage, but in Brighton they want to know everything, where it comes from and how the chef prepared it. Regular customers are about 15% to 20% of trade at the Brighton sites and they look for the specials because they want to try something new. “We used to serve a lot of sea bass but following the latest guidance that has changed. We want to be as sustainable as possible so we currently sell a lot of Cornish monkfish. Everything we buy comes in whole and we prepare it ourselves. When something unusual comes in, everyone in the kitchen gathers round to see how to prepare it. We cook most things simply on the grill or over coal and serve it with seasonal vegetables.” Laky Zervudachi, director of sustainability at foodservice fish supplier Direct Seafoods, sees a mixed picture across the sector in terms of operators embracing ocean diversity. The cost sector, as well as


major pub and restaurant groups, have come on board in no small measure because they recognise the potential downside if they are deemed by “name and shame” campaigns not to be meeting their corporate social responsibility obligations. Zervudachi says: “There’s a growing band of chefs taking note of what the Marine Conservation Society is saying by taking The Salt Room group head fish off the menu that hasn’t got a good chef Dave Mothersill sustainability rating and trying to promote not only sustainability but provenance. There are a number of factors playing into that, including media coverage of the social ethics behind the use of some species.” He also believes operators will have to become less picky when it comes to choosing wild-caught fish over farmed species. He adds: “Aquaculture is going to play such an important part in terms of protein production. There are still cowboys out there but that’s why you should use certification as your backstop. It’s much easier to audit a farm, whereas in the wild it’s more problematic.” Even against the backdrop of a market where consumers are expected to remain cautious for some time when it comes to spending on eating out, Zervudachi sees only one way for the UK to make better use of its marine harvest. He says: “We have to be prepared to pay a little more. The reason a lot of fish is exported is because in France, Italy and Spain they’ll pay more for our high-quality catch.” One way to square this circle, says Seafish trade marketing manager Andy Gray, is to broaden the menu beyond classics such as fish and chips, tuna salad and prawn cocktail and spotlight species and recipes consumers are less confident about preparing at home. Gray says: “With an increasing variety of seafood readily available to chefs and Emerging customers becoming more interested in trying trends include: something new or different, there is a great Fish sandwiches such as Maine opportunity for such products to make up lobster rolls and Louisiana-style street as much as 35% to 50% of standard mixed food sandwiches with blackened fish menus across starter and main courses. “While many consumers are reticent Cajun shrimp and crawfish balls about buying seafood to prepare and Warm and spicy Middle Eastern and cook at home, it’s often a main menu Hispanic flavours choice for many when they decide to eat Bold flavours such as tequila out of home – trusting a chef will expertly and lime sauce, bourbon glaze prepare and serve an excellent seafood and spicy, ethnic-flavoured dining experience. Operators can act on this by mayonnaise ensuring there’s a good variety of seafood on their menu.”

“Regular customers are about 15% to 20% of trade at the Brighton sites and they will look for the specials because they want to try something new”



Bubbling to the top With younger generations turning their backs on alcohol but prepared to spend more on a premium product, getting mixers and serves right is a huge opportunity for operators, writes Martin Cooper


he rising trend for younger generations to cut down their alcohol intake or abstain entirely presents new opportunities for the soft drinks sector. One in five adults abstain from alcohol, while almost one-quarter of under-24s in the UK now choose not to drink alcohol at all. Those same generations are also prepared to spend more on premium products. The CGA Alcohol Sales Tracker revealed consumers are increasingly opting to drink at premium bars and managed pubs, often combining their visits with dining. CGA classifies 35% of the out-of-home drinking market as premium. However, these outlets now account for 47% of all sales by value and are gaining market share each year. Russell Goldman, commercial director, licensed and foodservice at Britvic, says: “Offering a great experience should focus around ensuring you have the range of low and no-alcohol drinks guests are increasingly looking for. The outlets that do this

“More people are turning to premium-quality drinks and social media is having an impact, with people looking for trendy products they can photograph and share with friends on Instagram and Facebook” CCEP trade communications manager Amy Burgess

well – offering the right product, served in the right way and at the right time – will be the ones that succeed in this increasingly competitive market place.” In the main, these trends are being driven by the ubiquitous presence of social media. On the one hand, social media users don’t want a photograph of them rolling round worse for wear from alcohol posted on Facebook or Twitter for the world (especially parents and the boss) to see. However, premiumisation is often driven by Instagram and the more “Instagrammable” a product, the more positive influence it can have on sales – and it’s all free advertising and publicity. Who can argue with that? Amy Burgess, trade communications manager at Coca-Cola European Partners (CCEP), says: “More people are turning to premium-quality drinks and social media is having an impact, with people looking for trendy products they can photograph and share with friends on Instagram and Facebook.” Instagram is the favourite app for millennials, with 18 to 35-year-olds spending the equivalent of five days a year browsing food images. Almost a third of people say they avoid a restaurant that has a weak Instagram presence. Burgess says: “Social media is very popular with cocktail drinkers and the go-to tool for young adults looking for new drinks and venues to try. For licensees, social media is a great way to reach new audiences and encourage visits by promoting special offers, events and menu items. ‘Instagram-able’ food and drink is a huge trend. It has led operators to think differently about the way they present their food and drink and even the decor of their restaurant or outlet as they strive to provide a ‘picture-perfect’ experience consumers will not only return to but publicise on their social media channels.”

Wealth in health The rise in soft drinks sales goes hand in hand with an increasing quest by consumers for healthier options in both food and drink in the market place. Healthy lifestyles are transforming the way consumers eat out, according to the third Future Shock report produced by CGA Peach and UKHospitality. Three in five out-of-home diners said they proactively try to lead a healthy lifestyle. Research showing falling alcohol consumption and rising demand for soft ▲



Feature drinks highlights the need to cater for healthconscious consumers, especially those who live in towns and cities. Ed Jones, senior customer marketing manager for Vimto Out of Home, says: “With consumers becoming increasingly healthconscious, demand for premium, natural and great-tasting drinks are on the rise, especially with female urbanites.”

Food pairing Big opportunities also lie in pairing soft drinks with food. Figures from Britvic estimate the eating out market in the UK was worth £87.9bn in 2017 and is forecast to be worth £89.3bn in 2018, a growth of 1.5%. Goldman says: “The staff and menu are key elements to any outlet and these are often the most effective way to communicate recommendations or advice on particular pairings to guests. Figures show more than twothirds (71%) of guests would order something different if they were made aware of it. “Menus can be a great way of inspiring guests to try something new by offering flavour descriptors to products supported by attractive imagery that can more subtly link appropriate matches or directly link different dishes and drinks through recommendations. One-third of guests say a simple description of a drink will inspire them to order so communicating food and drink pairings on the menu is key. But don’t forget your staff – 64% of guests state they would order a drink if recommended by staff – so training them to be knowledgeable on the pairings so they are comfortable and confident in making suggestions to guests is really important too.”

Mixers The popularity of gin seems to know no bounds. More than 50 million bottles were served in the UK in 2017, while 49 distilleries opened across the country during the year. This “ginaissance” makes the range of mixers you stock of the utmost importance. Fentimans, the family owned, botanically brewed drinks company, recently launched two flavoured tonics – Pink Rhubarb and Oriental Yuzu Tonic – to capitalise on the growing

“We are seeing an increasing number of consumers experimenting with different flavour combinations” Fentimans marketing director Andrew Jackson

popularity of consumers seeking to upgrade their classic G&T. Rhubarb has surged in popularity as a standalone ingredient and as a flavour in premium spirits, especially gin. Fentimans has developed its Oriental Tonic using Japanese fruit yuzu, which has three times the Vitamin C found in a lemon. The company has also extended its Valencian Orange Tonic Water range, which is aimed at mixing with London dry and citrus-heavy gins. Fentimans marketing director Andrew Jackson says: “We are seeing an increasing number of consumers experimenting with different flavour combinations. With a continued focus on innovation and leading the introduction of new flavours to the category, we have high hopes for this launch.”

Rum time Rum is another spirit on the rise, with sales up 11% last year and no signs of its popularity slowing. Rum sales tipped the £1bn sales mark for the first time last year, a milestone gin sales achieved in 2016. A key factor in the increasing popularity of rum has been a rise in the number of rums on the market that cater for an appetite for new flavours and experiences. The premiumisation trend has also been key to growth, with sales of premium rum growing 15.1%. Burgess says: “Consumers are drawn to rum because of its rich history and may want to opt for a mixer that also has a strong heritage. Few mixes are as iconic as rum and coke.”

Cocktails Cocktails offer another major opportunity when it comes to soft drinks sales. The craze shows no sign of slowing, with a quarter of cocktail drinkers enjoying the drink at pubs and bars at AUTUMN 2018 PROPEL QUARTERLY



least once a month. CGA’s Mixed Drinks Report reveals the value of on-trade cocktail sales jumped 7.5% year-on-year in the first quarter of 2018 – outpacing a 4% increase in the wider spirits market. An estimated 8.7 million British consumers now enjoy cocktails when drinking out of home. Aperitifs such as aperol spritz are becoming increasingly popular in bars, pubs and restaurants, with more than two-fifths (42%) of cocktail drinkers likely to enjoy a cocktail before a meal, while sparkling cocktails are another big growth area. Burgess says: “The cocktail drinker is keen to explore, with almost half being the first to try new products in their peer group. The cocktail scene is changing fast, driven by new trends and flavours. Aperol spritz and espresso martini are two options proving increasingly popular in outlets across the country. In years to come, we predict eclectic mixes will find their way on to the market, catering to an open-minded consumer seeking new flavour experiences.” Jones says: “Frozen cocktails have been a huge trend for 2018, with more consumers than ever looking for refreshing cocktails in record time. We are already serving more than 40 million cups of frozen drink every year, now we’re seeing demand from restaurants and bars rocket. With high margins and consistency of serve, it’s perfect for high-footfall operations in particular. Mocktails offer another opportunity. Burgess says: “Mocktails are becoming an increasingly popular non-alcoholic option as young adults look for a more indulgent soft drink creating a great opportunity to increase sales. With almost a third of people claiming they would consider ordering a mocktail if offered, they represent a significant opportunity.”

Top tips for serving soft drinks Add a garnish: Consumers are willing to pay more for premium, especially if the drink is served in the right glass with the right amount of ice and garnishes. Differentiate between children and adults: The rapid rise of adult-orientated soft drinks hinges on its point of difference with children’s drinks. If you want to drive purchase of zeroalcohol drinks, give the carefully designed, mature and premium products pride of place. Stock a range of flavours: Packaging can be a powerful tool but consumers will only return if they can find a flavour they enjoy. Unfortunately, there’s no sure-fire way to predict changing tastes so, as an operator, your best bet is variety. But don’t overdo it – customers don’t respond well to too much choice.


Serves My eyes were opened to the important link between how a drink is served and its apparent consumer value at the Britvic Soft Drinks Review. A dirty-looking glass with a plastic swizzle stick would have me grumbling at paying more than 90p for it. However, present the same drink in an eye-catching glass with the right garnishes, ice and stirrers and I’d probably shell out four or five times that amount without grumbling – even taking into account my notoriously short arms and long pockets. A little theatre can really boost the margins. Stylish packaging can also be the difference between whether someone buys your drink or that of a competitor.


of the out-of-home drinking market is classified as premium

Jones says: “Consumers are willing to pay more for premium, especially if the drink is served in the right glass with the right amount of ice and garnishes.” Burgess adds: “From creating colourful cocktails and serves with unique garnishes to putting thought into selecting crockery and cutlery for their venue, consistent attention to detail is key to helping operators maximise the ‘Instagram-able’ trend. They can also make the most of this by stocking a wide range of bottled soft drinks and mixers that appeal to consumers and which they’ll want to showcase on social media.

Festive thoughts I know, don’t mention Christmas – but it’s the biggest opportunity of all, right? Goldman says: “It’s easy to forget the 20% of adults who don’t drink alcohol. That’s a huge number of people who won’t be interested in any of the alcoholic drinks you’re promoting over the period. Offering an attractive and relevant range of drinks to these guests is a great way to add more coins to your coffers over the festive season. It could be the difference between missing out on a second drinks purchase or losing an entire group of guests to a competitor.” Christmas is also a great time for selling cocktails. Be At One, the specialist cocktail bar group recently bought by Stonegate Pub Company, reported a record festive trading period last year, with like-for-like sales up 12.6% during December and total sales breaking the £5m mark for the first time. During that period, the group sold 500,000 cocktails across its 33 sites. Jones says: “Customers usually seek drinks that are that bit more special during the festive season so premium products often perform best as the year draws to a close. This rise in demand for premium extends far beyond alcoholic drinks. In fact, the soft drinks category has been growing steadily for some time, with premium soft drinks in particular now seeing distribution rise by 34% year-on-year.”






Survival of the fittest Ian Dunstall looks at some key trends that will have a significant impact on the evolution of the eating out sector


ospitality sector brands may think they have enough on their plate managing current economic pressures and adjusting to the impact of short-term trends such as digital transformation, health trends, regulation and the impact of food delivery growth. But looking to the future there are some key trends that will have a significant impact on the evolution of the eating out sector. Three recent third-party forecasts on the international eating out market have hinted at some of the key challenges ahead: ● The world’s population is shifting to urban areas – seven out of ten people will be city dwellers by 2050 (100 years ago only 20% of the population lived in urban areas) ● Global food delivery will grow ten-fold in next the 12 years to a $365bn business by 2030 ● A study forecasts 30% of all shopping malls in the US will close during the next ten years The trends implied in these forecasts will have a significant ongoing impact on location strategy and consumer needs in the eating out sector. The population shift into urban centres is clearly visible in the UK, with massive inner-city population expansion in recent years – especially in northern and Midlands cities such as Liverpool, Manchester, Birmingham, Leeds and Sheffield. The growth in city centre living is down to young people. Some are students, whose numbers grew with the expansion of university education, but the appeal of city centres for young, single professionals is the main growth factor. Investment in new urban regeneration, the appeal and availability of higher-income professional employment, and a desire to avoid the cost and inconvenience of commuting has all contributed to this growth. This young population will have a relatively high disposable income, busy lives and a desire for socialising outside their small urban dwellings. Given these needs, it is easy to understand why street food arenas are becoming so popular – they offer craft products in social and experiential locations – likewise the growing appeal and relevance of “competitive socialising” concepts such as


“The more secondary retail locations are losing their appeal fastest and this especially challenges the role of casual dining concepts in these locations” darts and table tennis venues. Equally clear to comprehend is the relevance of delivery to this market. Deliveroo intends to disrupt the eating out market and become the definitive food company – I even read of its ambitious goal to feed people three times a day. While delivery is growing rapidly, growth is relatively restricted by the comparatively high spend for consumers of ordering home delivery food versus cooking at home or using supermarket ready-meals. But the delivery industry is investing in technological innovation to significantly reduce the cost of both food production and delivery – and the more they close the gap between the cost of home meal preparation and delivery food, the greater the market share opportunity.



of the world’s population is shifting to urban areas (100 years ago only 20% of the population lived in urban areas)


Restaurant brands face the dilemma of balancing the incremental sales opportunity of partnering with the delivery companies with the associated commission costs. The impact of delivery company sales on restaurant economics will become a greater challenge in the future as delivery companies develop high-tech, low-cost production and delivery solutions to bring costs and prices down to challenge athome meal consumption. Moving to retail centres, we all know the shift to online shopping is having an impact on shopping centre footfall – but it is also having an impact on restaurant sales in the high street and retail parks. The trends are becoming clear – the more secondary retail locations are losing their appeal fastest and this especially challenges the role of casual dining concepts in these locations. The demand for “eating on the move” with reduced shopper footfall is fast declining so ▲

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these concepts need to achieve stronger destination appeal or risk the locations becoming increasingly uneconomic. Stronger retail centres will survive and ultimately prosper. The role of retail stores will become more experiential, becoming locations for brands to physically connect with consumers and showcase their products – even if the ultimate purchase decision is made online. These “brand experience” retail centres will demand a similar elevation of the partner hospitality brands to further enhance the quality of the shopper’s overall retail visit. It is interesting to observe a recent renaissance of the pub. After 40 years of outlet decline, perhaps the sector is rebasing to a sustainable level. In recent times pubs have benefited from the shortterm demand of hot weather and the World Cup. Some of the cost pressures may be having less of an impact on pubs, especially property costs and labour. More importantly they have survived the turmoil of social transformation and the decline of habitual community drinking caused by the smoking ban, comparatively high drinks pricing and an increase in home entertainment. Now pubs are enjoying renewed relevance – with a growing range of craft products and an informality well suited to guest needs for sociability and experience. We are now seeing renewed relevance and development of pubs – not only as drinking concepts but also as location venues for a range of quality dining brands, from White Brasserie to Miller & Carter. The quick service sectors have been transforming for a while. The growth of transport hub and business centres has established strong demand for more quality retail brands of coffee, sandwiches and other fast casual concepts, while


“It is interesting to observe a recent renaissance of the pub. After 40 years of outlet decline, perhaps the sector is rebasing to a sustainable level”

quick service restaurant (QSR) brands such as McDonald’s and Greggs continue to enhance the quality of their offers and retain relatively strong value and affordability.

Casual dining The sector that feels most challenged by all these changes to location and trends is the casual dining sector. Traditionally it relied on a strong element of more functional “can’t be bothered to cook” or “while out shopping” occasions to supplement demand. These trends must have an impact on future casual dining relevance for these more basic needs. Casual dining brands need to ensure they elevate their experience and differentiation beyond the everyday to remain relevant for more social than functional occasions. This puts pressure on the quality and reliability of all aspects of the guest experience, which also explains

the relative growth in appeal of the more polished or premium casual dining brands such as Cote and The Ivy – they may cost a little more but they offer an assurance of a higher-quality casual dining experience that is demonstrably worth more. Additionally, casual dining brands are searching for new growth platforms to replace the lack of short-term potential in traditional store expansion: ● Companies such as Casual Dining Group and Boparan Restaurants are seeking to franchise their UK brands internationally ● Casual Dining Group has been trialling delivery-only concepts using existing restaurant kitchen capacity ● New partnerships are being formed to open brands in new-location formats. Jamie’s Italian is rolling out on Royal Caribbean cruise ships while Carluccio’s is opening in Marriott Hotels ● Drive-thrus are extending beyond the traditional QSR brands and are being rolled out in new brand formats by Leon, Greggs and Starbucks All this demonstrates an ongoing transformation of the eating out sector as it seeks a way to retain and strengthen relevance amid changing consumption habits. This transformation will create opportunities for new concepts to flourish in growth locations and segments. But it will also challenge the model of many traditional brands that will need considerable longterm evolution to ensure future relevance in this fast-evolving sector. ■

Ian Dunstall is a consultant in brand strategy, insight and development. He has supported more than 40 brands with their positioning and development in the UK and internationally. Previous roles at Mitchells & Butlers include ▲ director of marketing and director of concept development


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Picture of Gavin Adair by Alex Maguire

Taking Rosa’s to the next level

Martin Cooper talks to Rosa’s Thai Cafe managing director Gavin Adair about developing the brand since he joined the company a year ago, future plans and his relationship with founders Alex and Saiphin Moore AUTUMN 2018 PROPEL QUARTERLY


Feature Rosa's Thai Cafe, Tower Bridge

MC: What is your background in the industry and what attracted you to join Rosa’s? GA: I started out as a chartered accountant before becoming finance director of ASK Italian under Harvey Smyth, then chief executive of Gondola Group and managing director of ASK on a part-time basis. That was a great baptism of fire into the sector. I guess I’d always been a frustrated chartered accountant who wanted to be a general manager, as it seemed much more glamorous. I left Gondola to work with Mark Selby and Thomasina Miers at Wahaca. Tom Byng, of Byron, introduced me to Mark. It was just a casual chat but Wahaca was the kind of business I wanted to work for, in that eight to 15-site bracket, enough where I could add value. I helped the company set up Burrito Mama in St Paul’s, London, and another Wahaca spin-off business DF Mexico. That was my role, to design, implement, execute and run those businesses. I did that for a couple of years before moving into a broader commercial and strategy director role. MC: So four years later another innocent conversation with Rosa’s Thai Café co-founder Alex Moore led you to your current position? GA: I was only meeting Alex to find out how one of his sites was trading – we were looking to put a Wahaca in nearby. I thought: “These guys are going to need a managing director in six months, I’ll stay in touch.” Alex was obviously thinking the same thing as a month later he texted me


to say “shall we have that follow-up beer MC: TriSpan invested in the company in sooner rather than later?” And here we June. How does it view Rosa’s prospects? are. What attracted me was I had always GA: TriSpan is just as excited as I am by liked the brand, I really liked the food the company’s potential. Our business and I liked where the business was at plan is obviously to size-wise. What I also learned grow the business from that first meeting was I ‘‘The business by building on like the culture and the way is real, there’s the success we’ve the business worked – there’s had to date. It’s substance to a real heart to the business. early days but I The sum of all those things it. A lot of our think TriSpan will meant I felt I could learn but ingredients still be a great partner also add a lot of value to the come from Thailand because it doesn’t business and have a lot of fun want growth for doing it. It was a wrench to and we don’t want growth’s sake and leave Wahaca and the team that to change’’ genuinely seems to there but it was too good an buy into my strategy, opportunity to turn down. which is to focus on our teams’ happiness that will, in turn, MC: Alex and Saiphin Moore founded increase our customers’ happiness and Rosa’s Thai Cafe in 2006, what is their that of our investors. It’s a difficult time in role in the company now? the sector as a whole but we are confident GA: They are still working in the business. it’s a good time to have invested. I guess they both have ambassadorial roles but they’re real roles. Saiphin is still MC: What sets Rosa’s apart in the Asian very much leading on food development. eating out space? TriSpan has argued She’s the inspiration driving and pushing it is the most authentic Thai offer in the our food boundaries, authenticity, flavour, market place. quality, all those things. Alex is still involved GA: In the premium casual dining space in our property, site evaluation and I think that’s absolutely true – it’s what acquisition. He still sits on the board and brought me to the business. I’ve been they both have brand ambassadorial roles, debating with our senior team over the like a cultural sounding board. We want to values of the business and the way the make sure as Rosa’s grows we don’t lose team needs to change as the business the heart of the business. We need them evolves. Within those core values are actively involved, allowing the business honesty and authenticity. The business is to evolve but not losing what has made it real, there’s substance to it. A lot of our special – not only for the customers but ingredients still come from Thailand and also for our teams, where they can see the quality and family feeling is real. we don’t want that to change. ▲


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Feature MC: What areas have you focused on since joining as managing director? GA: Learning and listening. It’s a fascinating culture. I’ve looked at structure, processes and property opportunities. The One Tower Bridge site, which launched in July, is the fourth opening since I joined, following Seven Dials in Covent Garden, Tooting and Ealing, so it has been a busy 12 months running the business while helping to secure investment. MC: How difficult is it to take up the reins from owner-founders? GA: I expected it to be difficult for them to let someone else make the decisions they had always made. We described it as me taking responsibility of their child but, from day one, they said: “This is the way we do things but you’re managing director for a reason, you do what you think is right.” As they have given me that freedom it has made it easier for me to take my time and think about things. I’m not going to abuse that trust. At Thai New Year I went to Thailand with Saiphin and stayed at her family home. That accelerated my understanding of the culture and hospitality of the brand. Seeing the farm where she grew up and where she gets her inspiration. We spent another four or five days visiting suppliers around the country, which made it even more real. It was a really humbling trip. When an employee joins Rosa’s we show them a video I shot with Saiphin in Thailand, telling them the whole story. I come to every induction and show that hand-shot and badly voicedover video, which hopefully gives them some idea of what I bought into. When I talk about it the hairs on my arms stand up because you get a bit of Saiphin’s passion. We want to hang on to what makes Rosa’s so special. To deliver all that great food on the plate it needs all that other stuff behind it, the stuff that makes it real. I need to protect that – that’s my biggest challenge. If it’s not real, eventually you get caught out.” MC: What is Rosa’s approach to staff recruitment and retention? GA: Retention rates in the management team are phenomenal. People have grown up with the company. That was another challenge when I came in to run the business. Recruitment-wise, we’re looking for people who can grow with the business and fit with the culture. It’s naturally a Thaiheavy workforce but we also have staff from other European and Asian countries. Challenges such as language are dwarfed by the advantages this brings. We’ve got a brilliant ops team that has grown up with the business. Our head of ops started as a waitress in Rosa’s debut site and became manager of our second restaurant and continued her journey. When the business was sold, quite a number of people realised not insignificant amounts


‘‘When an employee joins Rosa’s we show them a video I shot with Saiphin in Thailand, telling them the whole story. I come to every induction and show that’’ of money, at all levels of the business, including a kitchen porter from one of our early restaurants who has worked in the business for nine or ten years. That’s one of the many things the business has done to make people feel included and part of things. That’s something I want to build on and widen. It’s something I’ve agreed with the investors. MC: How important is delivery to you and how is your partnership with in-house delivery system Orderswift working out? GA: Delivery works brilliantly for Rosa’s. Our food travels extremely well and there’s a lot of demand for it. I’ve embraced delivery at Rosa’s, while in the past I’ve been quite negative about its potential impact. It does swamp our kitchens at times and affects our operations, no doubt about it. It’s a constant battle looking for ways to minimise that impact but the demand is growing so we’re looking for ways to make it work better for us and our partners, including restaurant design, operational integration and technology. We moved all takeaway orders online by using a phone-answering service to direct customers to our website. Our in-


house delivery system in partnership with Orderswift is working well for us and we have the benefit of customer information. MC: The company has expanded in London and talked about evolving Rosa’s for the regions. What is your current view on regional expansion? GA: We’ve got a site lined up in the Albert Docks area of Liverpool as a bulkhead for a cluster of restaurants in the north west of England. We want to focus on one area outside London at first to make it operationally manageable so we’re looking at other sites to follow on from Liverpool. The Albert Docks site should open later this year with other sites to follow not too long afterwards. In the meantime, there are a number of opportunities in London we can look to infill, which we can run in parallel with the north west expansion. We’re getting offered sites all over the place – Brighton, Cambridge, Edinburgh, Norwich. There are deals that are super all over the place but the big risk is to try to go too fast and not control the quality. Every man and his dog has a site for us – but we must stay focused. ▲

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MC: What is the overall potential for Rosa’s – how big can the brand get? GA: There’s a real opportunity for the grab-and-go side of the business and we have a venue in London Fields that essentially does that. We also have a counter business at Westfield Stratford. I think there’s a proposition somewhere between those two businesses that would be an interesting, smaller-footprint, lowercapex, lower sales site that would be a good opportunity. We’ve been looking at that since I joined. It’s interesting that Leon has had a go with its Tuck Shop concept, so it can see the market opportunity too. It looks like that has shut but the market is still there and we’re pretty interested in it. MC: How might the Rosa’s menu evolve as the company expands? GA: We’ve just celebrated our tenth anniversary with activity planned around our most popular dishes during the past decade. Saiphin created all our dishes and some have been on the menu since day one. They are as popular today as they were at the start so they will remain. We do, however, need to keep working to make the offering fresh and interesting. Our next move will be to look at our drinks and desserts offer, we’ve got very low take-up on both. As we move into

more residential and lower-footfall areas I think we need to offer customers that longer dwell time and a fuller experience. We can definitely improve on that – and we’re working on it. MC: You ran a three-month vegetarian pop-up, Rosa’s Thai Veggie, in Soho last year. What did you learn? GA: That was an attempt to allow us to push the boundaries on our vegetarian dishes. We developed a lot of dishes for that, which led to three by-products. Firstly, we improved all the vegetarian dishes on our menus and took the highest-rated dishes from Thai Veggie and rolled them out across our other restaurants. Secondly, when we swapped the site back (popped-down!) we introduced a special vegetarian menu in Soho. The project coincided with Saiphin publishing her second cookbook, which entirely features vegetarian recipes. MC: As Rosa’s expands, what changes will you need to make to the head office team? GA: We’ve got a pretty small ops team but from the sheer number of restaurants we’re opening, we’ll need to increase numbers. We will also need to grow our finance team from a data and commercial reporting point of view.

Saiphin Moore's latest cookbook was inspired by vegetarian pop-up Rosa’s Thai Veggie



MC: How challenging have the widely reported cost pressures in the sector been and what have you done to mitigate them? GA: What we’re not doing is taking price. We’re looking at supply and cost opportunities but what’s been interesting talking with our investors is we’re staying totally focused on team engagement and customer satisfaction. We’re investing in technology to measure those factors on a more frequent basis. We recently launched with real-time customer feedback app Yumpingo. We’re trying to stay focused and committed to the things that drive customer experience and medium-term brand value rather than worrying about trying to offset costs. If we have to sacrifice a bit of margin in the short term, so be it. But our investors will obviously push us to avoid sacrificing margin. MC: Is there a franchise opportunity for Rosa’s? GA: Not in the UK – we’re owneroperators. Maybe internationally in the future but not any time soon. I believe strategy is as much about saying no to things as saying yes to things – staying focused on a small number of things and doing them well. MC: How is current trading? GA: We’re trading well above the Peach Tracker and have been for pretty much as long as I can remember. We’re trading against some really big comparables from last year. It’s not price-driven – it’s partly cover-driven and partly deliverydriven out of our existing estate. It’s really encouraging that we’ve stayed in significant, positive like-for-like territory, consistently well above Peach, but we’re not resting on our laurels. It’s a difficult market but we don’t want to take price – customers are going to be increasingly under pressure for some time – so the challenge is to keep that going and keep finding the right sites to drive the overall growth, which will be significant with the number of sites we have lined up.

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Déjà vu Cyril Lavenant, director of foodservice for the UK at NPD Group, looks at whether consumer behaviour is pointing towards a recession to rival 2007-08 and says you can’t change the past but you always have the power to influence your future


n an industry where people are surrounded by data, people are often expected to make predictions. There’s a good basis for believing you can do this. After all, Confucius is reputed to have said about 2,500 years ago: “Study the past if you would define the future.” Yes, past evidence is often a very good pointer when it comes to future trends – but hard data can yield robust predictions. At NPD we have been examining a particular “past” theme recently and it concerns the pattern of decreasing foodservice visits last seen at the start of Britain’s 2007-08 recession.

Warning signs Our data shows total visits in Britain’s eat-out or out-of-home (OOH) foodservice market dropped 1% in the first quarter of 2018 versus the same quarter a year earlier. That 1% decrease is equivalent to 28 million visits or 112 million on an annualised basis.

Total OOH visits trend – Q1 2018 vs 2017 Total Daypart



-1.0% -1.6%



Total OOH dinner visits trend 2017 vs 2015


Also in the first quarter of 2018, breakfast was down 1.6% in visit terms against the same quarter a year earlier and has now registered its second quarter of declining visits following more than seven quarters of growth. The 5.1% drop in lunch visits seen in first-quarter 2018 against the equivalent quarter in 2017 marks the third quarter of decline for this daypart in the past year after six quarters of growth. Dinner visits in the OOH foodservice market have been in decline for some time. While there was an increase over the first quarter of 2018 (compared with the same quarter in 2017), the longer trend, for the full year ending December 2017 (versus year ending December 2015) shows OOH dinner visits were down 2.3%. Dinner frequency is also down, with consumers averaging 61.2 dinners in the past 12 months (year ending March 2018), down 3.5% against the previous year. Lunch frequency decreased by 4.8% year-on-year (from 83.1 to 79.1). As I have mentioned, the industry showed this pattern of decreasing foodservice visits when Britain’s 2007-08 recession began. What is the significance of all this? Right now it is too soon to say whether we are currently in recession, but these are clear warning signs.


Remembering the last recession With more than a decade having passed since the last recession, it’s easy to forget some of the worrying events we witnessed and how severe the impact was. Banks began to stop lending to each other in summer 2007. There was the run on Northern Rock at the end of that year. In September 2008, Lehman Brothers filed for bankruptcy protection. A month later the UK government announced its rescue package for Royal Bank of Scotland, Lloyds TSB and HBOS. Governments stepped in to assist or take over financial institutions in the US, Ireland and Iceland. One UK newspaper reported at the start of 2009 that a senior government minister had claimed Britain was facing its worst financial crisis for more than a century, surpassing even the Great Depression of the 1930s. Banks were losing cash at a speed and on a scale few felt was possible. Companies were laying-off staff left, right and centre. Sterling was dumped by traders in panic selling and, in March 2009, the FTSE 100 index fell below 3,700. It’s doubtful any foodservice operator at that time could have recalled a more painful operating environment. The foodservice industry quickly felt the impact as consumers looked for ways to cut costs. People found cutting back on eating out yielded instant savings so many abandoned their favourite restaurants and treats and stayed in to cook for themselves at dinner or took their own food to work. The consumer attitude – quite understandably – was “anything to save money”. In 2009, The Independent reported on a “munch crunch” in which 100 restaurants went out of business in a single month. In the case of independent restaurants, the signs of distress were often the same – suddenly a favourite restaurant became quieter ▲

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Insight or it was surprisingly easy to get a good table without booking. Suddenly a notice appeared on the restaurant door: “After many years of serving our loyal customers, acute financial pressures have forced us to close our business.” Such restaurant closures meant at the very least an aftertaste of bad debt for proprietors.

Visits have yet to recover British market data from the 2007-08 recession clearly shows consumers quickly changed consumption behaviour. This resulted in a dramatic decline of 510 million OOH visits annually by 2010. The last recession was an opportunity for the industry to reshape its offering to consumers in terms of quality, choice and the overall customer experience. And in the decade since 2008 we have seen significant changes in foodservice, with ample evidence of innovation and creativity, and a proliferation of new brands and eat-out choices. But despite that concerted effort, the British foodservice market has still not fully recovered from the 2007-08 recession as the industry is still almost 400 million visits smaller each year than 2008. So the latest figures from the first quarter of 2018 are enough to suggest operators should be on the alert.

Total OOH visits (Billions) 2008




New challenges Britain’s foodservice operators are all too aware of the breadth and depth of challenges they face. Wages have been stagnant for some time and this has contributed to fragile consumer confidence and fluctuations in discretionary income. We saw plenty of headlines about rising inflation in 2017. While inflation appeared to be holding steady in mid-2018 at 2.4%, according to the Office for National Statistics, there is still potential for increases as fuel price hikes bite. However, there are many more business issues in play, including fears over the dynamics of the labour market after Brexit, workplace pensions, ingredients inflation, business rates re-evaluation, property tax increases, the National Minimum Wage and the National Living Wage. These are all having an impact on margins and the hard facts are that for every 1% increase in cost, a foodservice operator needs to grow visits by at least 2% to 3%. All this is happening at a time of growing competition, with evidence of saturation in some parts of Britain and in

“We advise British foodservice operators to gain the best possible understanding of core customers” some foodservice sectors. For example, an additional 13,400 outlets, restaurants and pubs have come onstream since 2010. The number of “available” visits per outlet in mid-2018 was 1.3% lower than in 2010. This is equivalent to £2,200 less revenue per outlet or 440 visits at £5 each. There is also the challenge of declining retail footfall, driven partly by the growth in online shopping. Each year, the number of consumers foodservice operators can physically attract is declining. According to Springboard, shopping centre footfall is down more than 12% (2016 versus 2008), while high streets are down 16.5% during the same period. The 2017 versus 2016 decline for shopping centres is 1.6%, while for the high street it was close to 1%. Fortunately, retail parks have compensated a little with growth of almost 8% for 2016 versus 2008 and 0.8% for 2017 compared with 2016.

gaining the best possible understanding of core customers, by engaging loyal customers through promotions or events that make them feel “special”, and by encouraging new customers to make return visits. We are also emphasising the need for operators to offer value for money, the highest quality food and beverages, and the strongest possible customer experience. We also underline how important it is for operators to better understand the strengths of their competitors. As we have said, although it is too soon to say whether recession is here, the warning signs are clear. Eat-out visits began to slow after the Brexit referendum in June 2016 and the consequences of this became clear from the second half of 2017 onwards when the market started to lose visits after four years of growth. This trend has accelerated since the start of 2018 and now is the right time to sound a warning. The foodservice industry has demonstrated Fresh threats remarkable resilience so far in the face If we are about to go into recession, this of tougher operating conditions, time any sustained downturn would cost pressures and uncertainty be more difficult to overcome caused by Brexit. But since because the foodservice the end of last year we have industry is seeing fresh seen some evidence of threats on top of the decline and operators will existing operating and number of outlets, need to monitor carefully cost challenges. The whether this downward restaurants and casual dining sector, trend continues. If it does, for example, is facing pubs to have come they will have to act fast to pressure from quickonstream since protect their business. service brands that are 2010 In business, it’s difficult to offering new food choices predict accurately but there’s and newly refurbished, modern nothing to prevent you making outlets. Consumers also have careful adjustments that respond to an a bigger choice than ever of operators evolving market place. You cannot change offering healthier and lighter eating. It is the past but you always have the power to likely any new recession in foodservice influence your future. would be harder to fight because the landscape is so intensely competitive.


Advice At the NPD Group, we are advising British foodservice operators to respond to the changing business environment by

Cyril Lavenant is director of foodservice for the UK at NPD Group AUTUMN 2018 PROPEL QUARTERLY


Advertising Feature

Staff uniform and the NMW trap Many employers, who fully intend to pay their workers the National Minimum Wage, are being caught out by a complex detail of legislation relating to uniforms. And because those falling foul of NMW Regulations are being named and shamed, this can lead to damage to reputation. 43 of the businesses singled out this year were from the hospitality sector - many of them big names.


mongst the operators identified, Wagamama was named as owing £133,212 to 2630 staff. TGI Friday’s owed £59,348 to 2302 staff and Marriott Hotels £71,723 to 279 workers. This is another potential squeeze on profits, as an employer must make good the underpayment to staff at the current NMW rate (potentially more than the current rate at the date of underpayment). In addition to the repayments, employers can be fined up to 200% of the money that is owed to staff (at a maximum of £20,000 per worker). One of the most common reasons for underpayment of the NMW arises from failure to pay for staff uniforms. Wagamama asked staff to wear casual black jeans with a branded T-shirt that they provided. The restaurant chain fell foul of the Regulations because they did not provide the black jeans or additional pay to cover the cost of them. In a similar case, TGI Friday’s failed to pay staff a shoe allowance. HMRC has the power to conduct audits to check whether staff are being paid the NMW. One of the issues on the current HMRC watch list is staff uniform, so it is worth checking the position you have taken on what staff are required to wear for work, to avoid unwittingly breaking the rules.

requirements are that staff wear basic black and white clothing, HMRC will still apply a notional deduction from salary to cover the costs of uniform before making the NMW calculations. Wagamama responded by giving staff a notional £50 each to cover clothing costs. It has also updated its uniform policy and introduced a uniform supplement.

How to avoid breaching NMW 1. Provide uniform free of charge 2. Do not impose uniform requirements where staff have to provide their own clothing 3. If staff are required to pay for uniform, ensure wages are increased so that when the cost is deducted from the first month’s wages the rate of pay is still NMW or above. 4. Give staff a uniform allowance in the first pay period and at intervals thereafter. 5. Don’t forget that as an employer you must keep records of pay for 3 years.

Uniform - what are the rules? If staff are required to buy uniform from their employer (even at a discount) then this will count as a deduction and may mean that when staff first start work they are paid less than the NMW in the first reference period. Equally, if staff are required to pay to hire uniform, this will deducted from salary before the NMW calculations are made. HMRC are taking this principle further now, and where


Specialist legal support for the Drinks, hospitality & leisure industry Call: 01908 668555 For more useful legal insights visit:


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The heat is on

Jessica Mason rounds up some of the highlights from the speaker line-up at this year’s Propel summer conference

Angela Malik, board member of the London Food Board The hospitality industry should look at ways it can help reduce food waste and help families living in poverty and hunger, Angela Malik told delegates She said: “The London Food Board is the mayor’s advisory panel. Every mayor has different advisory panels for food, health, education and digital. Boris had his own advisory boards but when Sadiq Khan took over all the boards were disbanded and he made everyone reapply for their jobs. “In 2017, he asked us to bring together this board to lead and develop a new strategy and our manifesto commitments are around massive societal issues – childhood obesity, child poverty and our increasing reliance on food banks. The London Food Board consists of 19 influencers across a range of industry sectors. We are now at the draft strategy stage. “In London we see massive inequality in how people are eating, with issues relating to poverty and inequality. One-in-five parents say they

have skipped a meal so their children can eat. Is this the society we want? Do we want people to go hungry in our city? The government still fails to measure levels of food insecurity across the country but what we want to do is make sure Londoners have access to healthy and affordable food. “What we are looking for are external partners who can be involved in these borough-level initiatives – a group of local restaurants that could help. “The Trussell Trust is handing out more emergency food provisions every year and 8% of London parents say their children have to miss a meal because they can’t afford to buy food – yet London has one of the most vibrant and booming economies on the planet. We serve more than 30 million meals every day, contribute £17bn to the economy and employ more than 500,000 Londoners in the food sector.

“What we are looking for are external partners who can be involved in these boroughlevel initiatives – a group of local restaurants that could help”

Zonal chief operating officer Peter Edwards Understanding consumer motivations and recognising what people are looking to achieve is fundamental for good business, according to Peter Edwards He told attendees: “One of the common mistakes is trying to oversimplify and assert your reality on the consumer rather than recognising you’re dealing with a complex collection of people with different motivations – ones that change by the day, the time, their mood or even by how close they are to payday.” Zonal research found almost onethird (31%) of under-35s book a table for most of their eating out occasions, while 72% use the restaurant’s own website when making an online booking. However, Edwards said it was important to recognise what consumers hoped to get from their interaction – reassurance. He said: “A number of people want control by planning their

“People who frequently book online have a wider repertoire of eating brands”

“These are just some of the contradictions and challenges we face as a city and as a culture. The mayor of London has made food a key part of a Social Fairness and Economic Equality Agenda. What can we do as industry people to get involved and make a difference to 12 million Londoners’ lives?”

meal out in advance while at home or work, so even if reservations only represent a relatively small percentage of your total mix, it’s still a critical channel for communication.” With almost one-third (30%) of under-35s driven by special offers, Edwards said online bookers were looking to be more experimental by seeking interesting dishes. He said: “People who frequently book online have a wider repertoire of eating brands.” The vast majority (92%) of people book tables from the comfort of home via a mix of devices, with laptops the most popular method. Edwards said more than half (51%) of respondents were willing to exchange personal information in return for tailored offers, while 18 to 24-year-olds were “less likely to share personal data versus the average person”. ▲ g p w ww www ww w .p prrop p op ope pe elho lh lh ho osspi sp piita p ttal alliity a itty .cco .c om AUTUMN AU UT UTU TU T UMN MN 20 2018 201 2 01 0 18 PROPEL PR RO ROP OP O PE EL L QUARTERLY QU Q QUA UA U ART RTE RTE TER RL RLY LY L Y

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Feature Sticks ‘n’ Sushi group chief operating officer Andreas Karlsson Japanese restaurant brand Sticks ’n’ Sushi is about to open two London restaurants Group chief operating officer Andreas Karlsson told delegates: “We are building a restaurant in Chelsea on the King’s Road and the one after that will be in west Soho in Beak Street.” Karlsson, who led the expansion of the business from its Copenhagen base to the UK, reported Sticks ‘n’ Sushi has opened seven restaurants in the UK alongside 12 in Denmark and one in Berlin, which launched a year and a half ago. He said: “Focusing on the UK performance, we have 370 staff and the majority of our leaders in our business are grown from within. We have three general managers and two head chefs who have come out of our Wimbledon restaurant. How is the business doing turnover-wise? If we stopped now it would be a £20m-plus business. The key to performance is you make more money than you spend, but you also need to look at your business over a long period of time. You plant lots of seeds before they give you anything.”

Karlsson linked the success of Sticks ’n’ Sushi to the way it communicates with people – with voices rather than technology or email. He said: “One of the things I have learnt from joining a business that spans borders is the more connected I get to my phone, the more disconnected I get to the actual things we do. At some stage we need to reconnect. The funny thing about phones these days is we don’t use them to talk any more. I think we should go back to talking more – to each of the people who work for us – because otherwise we are losing touch with the ground and forget what it was we did in the beginning that made people want to come back. To embed and secure our culture we wrote a book entitled That’s Us. It’s about how we want to behave towards each other. We talk to each other, not about each other. Communication is not about messages and emails. We speak to each other. Big smiles and small egos are what we attract.”

“Communication is not about messages and emails – we speak to each other. Big smiles and small egos are what we attract”

Karlsson said the brand’s UK expansion was focused on London – but only at sites with a similar demographic to its Danish roots. He said: “We were a neighbourhood restaurant in Copenhagen and that’s what we wanted – a place where people lived 52 weeks a year and went out for lunch, dinner and for weekends with families or business meetings. That is why we chose Wimbledon – it ticked the demographics we wanted. At the start, if we had failed in the centre of London with its £500,000 rent per year, that would have been very painful.”

Martin Morales, chef, author and chief executive of Peruvian restaurant group Ceviche Chef, author and innovator Martin Morales, chief executive of Peruvian restaurant group Ceviche, told delegates a blend of food, art and culture had been integral to his success Morales, who operates six restaurants and a bakery across his Ceviche and Andina brands, said: “Ceviche as a brand is a quick lunch, fun dinners, great cocktails. It’s the food of Lima and the coast of Peru, which is very different to other parts of the country so it’s a regional cuisine – light, fresh, colourful and healthy. There’s a focus on ceviche, nikkei (our Japanese-Peruvian cuisine), chifa (Chinese-Peruvian), salads and skewers. “Andina as a brand is different – it’s all-day dining. Andina has great coffee and a bakery. Brunch is off the hook and we do cocktails and wine. Andina is the food of the Peruvian Andes with Inca roots so it’s indigenous cuisine. The environment g

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of Andina is more rural, calm and stylish, and we focus on culture and craft such as pottery and textiles.” Morales revealed the future for Andina could include grab-and-go, with “several offers from hotels”, alongside a possible move outside London. He has written two award-winning cookbooks, appears regularly on television, hosts a YouTube channel for recipes, wrote a play entitled Here We Cook With Love, runs an ingredients company and recently collected the “best radio documentary in the world” award for Martin Morales’ Peruvian Road Trip. He said operators should consider what “sets them apart from others” and look to create something g people p p


would “still want in the future”. He said: “Trends come and go but always craft something exciting. The brands that are successful offer something strange, beautiful or personalised, which value flavour over quantity. Times are tough and going through this period, which I think will last a couple of years, we need to remember we’re all in this together. We must try to make improvements, push our businesses forward, enjoy ourselves and have a life within this incredible industry.” ▲ “The brands that are successful offer something strange, beautiful or personalised, which value flavour over quantity”



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Feature Laine Pub Company chief executive Gavin George Laine Pub Company chief executive Gavin George described the journey he has taken from owning one pub to running 55 and a 45-barrel production brewery in only 22 years He told attendees: “My business partner and I started with one pub in Brighton in 1996 – two years later that had grown to eight sites. In 1999 we bought another business and our estate grew to 22 so we became quite a big business in a place that has about 250,000 people. “In 2000 we introduced the first iteration of our management partner agreement and in 2007 Graphite Capital got involved when we merged with Seaside, which was another big George said: “We have waved operator in Brighton. The business goodbye to our friends at Risk Capital became Inn Brighton. and Graphite and new investors have “In 2010 we started brewing our come in – Patron Capital and May own beer under contract with a local Capital – and they are keen for us brewer and a year later Inn Brighton to grow our business too. There are opened its first pub in London, The also opportunities to collaborate with Britannia in Hackney, which became Punch, plus our joint venture with Ei The People’s Park.” Group – Mash Inns – is currently at four In 2012 the company sites and we’re looking at “We are looking started brewing for itself getting that up to ten within outside our estate at a five-barrel plant in the next year. for places to sell our Brighton it had converted “We are also looking beer – the obvious first into a brewpub. Two years at expanding our beer prospect is Punch” later Risk Capital came in operation. We have a alongside Graphite Capital lab in Hackney where we and the business changed its name to brew more experimental stuff. We are The Laine Pub Company to “align with looking outside our estate for places the name of the beer”. By 2017, the to sell our beer – the obvious first company had its “most acquisitive year prospect is Punch.” since 1999”. Despite such a diverse and growing George said: “At that point we estate, George said the company’s became quite a big business because values and ethos would remain the we had got to something like 55 same. He said: “Our strategy is to sites and found ourselves in awards always identify and acquire pubs up against Fuller’s in ‘best managed that have the potential for enhanced house’ categories. In 2017 we also offerings. We always research the opened our 45-barrel production plant local culture to establish a meaningful in the Sussex Downs. For the first time connection with the community. We we were brewing all our own beer for reposition, refurnish and relaunch. Then our entire estate.” we try to create an inviting environment, Today, almost two-fifths (38%) of indulge our customers through the the company’s sales are in London, services we provide, and inspire them with the company looking to grow its through the art, music, performance and business in the capital. immersive stuff we do.” do.

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PROPEL PR PRO P RO R OPE PEL P EL E L QU Q QUARTERLY UA ART AR RTER RT ERL E RL R LY AUTUMN LY AU UTU UT TU T UMN MN 2018 20 201 2 01 0 18 www w ww ww w .pr .p pro ope op pe p ellho lh ho h ossp spi piittal p ta aliity al ittty y com com co

Sector consultant and Think Hospitality managing director James Hacon Propel partnered with UKHospitality to create a study tour in New York for 50 UK operators and entrepreneurs that included a talk by Danish entrepreneur Claus Meyer, founder of new Nordic cuisine Regarding Propel’s tours, sector consultant and Think Hospitality managing director James Hacon told delegates: “We get in front of people you would never get in front of.” The 72-hour tour was “action-packed”, Hacon said, with Meyer talking about his move to New York where he has developed a number of restaurants and concepts. Meyer reminded the group it was “almost impossible for entrepreneurs” in New York because it was “remarkably expensive” with a “whole load” of legislation that made it difficult and inconsistencies across US states. Meyer’s advice was to “be bold and take the opportunities you are presented with”. Hacon said: “We’re remarkably lucky in London and the UK in that we have a relatively low barrier to entry to start a hospitality business. That’s why we have the most entrepreneurial sector in the world.” During the tour the group also met Richard Coraine, chief of staff at Union Square Hospitality Group, which is owned by restaurateur Danny Meyer. “We’re remarkably lucky in London and the UK in that we have a relatively low barrier to entry to start a hospitality business”

Hacon said: “Coraine has been there from the start and is the one who runs it day to day while Danny does his speaking gigs.” One thing those on the study tour noticed while meeting Coraine was a flat management structure when various Union Square Hospitality Group members discussed a specific area of the business – they all “sang from the same song sheet”. Hacon said: “When Richard spoke we noticed everyone – even from mid-manager level – could take over what the last person had said with complete consistency and understanding of the business. Richard would sit and nod and say: ‘Look I could sit and tell you what I think here but Bobby on the end is far better to say it’ – and he was right. Everyone knew their area. It’s a really superb business.” ▲

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Feature Grind creative director Ted Robinson

“Young businesses in the industry often trip themselves up with their USP by shouting about their product that will change the world. The truth is people like ideas but as customers they don’t want you to reinvent pizza”

Creative director Ted Robinson told delegates how a “few fun ideas” had helped build the USP at independent coffee and cocktail bar Grind He said: “We serve coffee, food and cocktails in a genuine all-day offer. They’re espresso bars and restaurants by day and cocktail bars by night. Some sites are open from 5am in the city, while the nightclub in Clerkenwell is open until 2am. “We launched in 2011 and have expanded to nine locations in central London. As well as five cafe bars and four restaurants, we also have a recording studio and a coffee roastery – this makes us eclectic.” David Abrahamovitch and Kaz James opened the debut grind in Shoreditch and after a while began adding cocktails. Robinson said: “They were spending a lot of time there and thought ‘we’d like to spend our evenings here too’. The development of ideas like that has helped the business grow in a really organic way. “Work, rest and play is a 24-hour business but it doesn’t take much to

say we’re paying rent on this place in central London, why are we closing at 7pm?” Robinson admitted the process seemed seamless but in reality it was a huge learning curve. He said: “When we opened in Soho and ran downstairs as a bar and upstairs as a coffee shop, we were essentially running two businesses in one space – it was hard. We found it wasn’t a clever way of doing things but those first three years are a microcosm of what we have learnt across seven years. We have expanded into restaurants and that is now the focus of our business. “The Grind USP is its authenticity as an all-day offer. If you think of terms such as ‘genre-busting’ and ‘disruptive’, which have been used to describe Grind, you see it’s just looking at something and considering if there are ways to do this better. “Young businesses in the industry

often trip themselves up with their USP by shouting about their product that will change the world. The truth is people like ideas but as customers they don’t want you to reinvent pizza. “Star Wars is a simple story with loads of fun ideas thrown on top. There’s a comparison to be made with Grind in that we are doing coffee, food and cocktails really well but what sets us apart are the few nice ideas we throw on top.”

Morar HPI director Matthew Coles Pubs need to adapt to lifestyle trends including teetotalism, health consciousness and premiumisation to stay relevant to consumers, Morar HPI director Matthew Coles told attendees He said: “We spoke to 2,000 people – 1,500 of them regular on-trade visitors. An important minority emerged – more than one-quarter (28%) of those people are “lifestyle abstainers”, people who regularly choose to go out but are choosing not to drink alcohol. The remaining 72% are “moderators”, who drink alcohol but moderately. “It seems we’ve got a process of recovery occurring. Alcohol consumption levels are down – just 57% drank in the last week. That’s the lowest since 2005 when records began. Teetotalism, especially among the young, is up. It has seen a 2% increase since 2005 to 21% and stands at 27% among 16 to 24-yearolds.

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Coles revealed lifestyle abstainers were predominantly female but spanned all generations, not just millennials. They go out less frequently – 54% in the past week compared with 63% of moderators – with alcohol rejection stemming from “not liking the taste”, “preferring to stay in control” and “health reasons.” He said both groups were motivated by healthy lifestyles, with almost two-thirds (64%) of lifestyle moderators believing non-alcoholic drinks were “part of a healthy lifestyle”, compared with 50% of moderators. Almost two-fifths (39%) of lifestyle moderators also admitted they “felt great” when opting for nonalcoholic drinks, compared with 20% of moderators.


Coles said: “There is a trend towards social acceptance – 71% of lifestyle abstainers say it’s becoming more socially acceptable to not drink alcohol. However, 63% of them still drink fizzy soda in pubs and 43% drink juice when they are out, so whatever they say they’re still consuming sugar and awareness of non-alcoholic beer brands still remains low.” ▲

“Teetotalism, especially among the young, is up. It has seen a 2% increase since 2005 to 21% and stands at 27% among 16 to 24year-olds”

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Feature Amber Taverns chief executive James Baer The challenges pubs face are down to the model many big pub companies followed not a flaw in the wet-led community local concept, Amber Taverns chief executive James Baer told delegates He said: “To some extent what happened in wet-led pubs in the early part of the century is mirrored by what has happened to capitalism in the past ten years – it’s not working for enough people. “Since the financial crisis in 2008, incomes haven’t really risen for ten years and for capitalism to have a moral justification you need to have a large percentage of the population becoming better off. People need to see there is an opportunity to improve their lot.” Baer said larger pub groups that were only interested in a debt-driven model were to blame for the decline of wet-led community locals. He said: “Those big pub groups were landlords who did well for a brief time – the ones who owned 20,000 of the 60,000 pubs in the UK. But it was a debt-driven model that led to limited investment, high beer prices, rentier rents, frequent turnover of tenants

“One of the things that went wrong with wet-led pubs was the tenant wasn’t making a living”

Kerb managing director Simon Mitchell Managing director Simon Mitchell explained how street food business Kerb acts as a stepping stone for traders to go on to launch their first bricks and mortar site He told delegates: “Initially the idea was traders would be stronger together and have some structure in place. This was the start of the street food scene in London. We evolved and now have six markets around London. We have a place-making role and can move around. We have a site at West India Quay and were brought in by Land Securities to reinvigorate an area that wasn’t doing very well – the same in Paddington. Most retailers hate Kerb but the people who work around there love us.” In 2016, Kerb took over Camden Lock street food market with a brief to “bring back the Londoners”. Mitchell said: “We brought in 34


of the best Kerb traders and rebuilt it – now we are there 364 days a year. It gave our traders the chance to step up because it was one step away from running a restaurant. “This year we’ll offer 12,000 pitches across London for street food traders – 50% of our businesses are femaleowned or led and Kerb markets will generate £12m of sales this year.” Kerb has branched out into the corporate catering sector too. Mitchell said: “People became bored of corporate catering events so we started offering our traders for them. This business is huge for us, we generate £1m per year from that business alone. We’re now listed with the Natural History Museum, Somerset


“This year we’ll offer 12,000 pitches across London for street food traders – 50% of our businesses are female-owned or led and Kerb markets will generate £12m of sales this year”

and a poor customer experience. That model doesn’t work. One of the things that went wrong with wet-led pubs was the tenant wasn’t making a living.” Baer recalled when Amber Taverns started in 2007, community wet-led pubs in the north of England were not popular but “with the help of some supportive investors and banks we have played a part in them coming back into fashion”. In 2010 Legal & General Ventures backed Amber Taverns. Baer said: “We had 56 pubs then but it was still a pretty contrary and brave move.” He added: “Capitalism needs to work for the majority of people. It’s never going to be completely fair, as with any system, but you begin with the operator agreement, which includes a sharing of risk and reward, look for well-invested sites and have value-for-money beer pricing, a Sky/ BT Sport package and a good level of head office support.”

House and Excel.” Through its new Kerb Vault programme, the company also provides training and education for traders. He said: “This is the start of what we call our eco system. Kerb Vault gives people all the resources they need to start their business. It also gives traders a chance to bid for events. “Some people we have put through this are now operating their own fixed sites within 14 months of coming to one of our workshops without having even started their business. We have more than 500 applications per year but we keep growing because we just want to nurture talent.” ▲

Feature HGEM client success manager Jason Horn and client insight manager Rich New Whether an operator should use a delivery service and how the service affected brand perception was the subject of a joint presentation by team members of guest experience management expert HGEM Client success manager Jason Horn told delegates: “We found 17% of customers don’t have their food delivered the first time, which is ridiculous.” But who do the customers blame? More than onequarter (28%) blamed the operator, while only 15% blamed the delivery team, with 58% blaming them equally. Client insight manager Rich New said: “If you are going to use a delivery service you need to consider you will be held responsible for a bad experience. We are not saying all delivery services are poor, we are saying some of them are offering ‘not so great’ experiences.

Jason Horn

Rich New

‘‘If you are going to use a delivery service you need to consider you will be held responsible for a bad experience’’

“What we need to remember as operators is the person delivering the food, be it Deliveroo, Just Eat or a number of other services, is the one we trust to deliver our brand promise.” HGEM found almost onethird (29%) of customers said “trust” was an important factor and had an impact on their choice, while 64% of customers preferred to order with a restaurant directly. Horn asked operators to think about whether expanding their delivery service might jeopardise their brand. He said: “It’s all a matter of trust. If you’re going to start using a delivery service, you have to trust what’s going to be delivered.”

Chozen Noodle chief executive Matthew Kirby Matthew Kirby told delegates how he took his Mongolian Barbecue concept to the US and other regions before changing tack He said: “I always wanted to be an entrepreneur so when I saw this ‘create your own stir fry’ concept while travelling in the Far East, I knew it was an opportunity.” Kirby, who had previously worked for Whitbread, opened his first Mongolian Barbecue in South Ealing in 1988, expanding to Wimbledon and then opening a site in Detroit with Billy Downs in 1992. He said: “I think we were the first UK concept to go to America and make it as a casual dining chain. The likes of PizzaExpress and Carluccio’s had a go but it’s not an easy place. Even Pret spent three or four years struggling to make money in New York. “The great thing about having a simple business is you can flex the space and channels and go to areas you wouldn’t otherwise. We were able to take what had started as a UK concept and take it to the US. Then from 1992 to 2007 we took it to Istanbul and the Middle East. Then we franchised it as well – by 2007 we had


28 stores and $75m in revenue. “We had taken that business from the entrepreneurial stage and did what we could with the brand but it needed someone else to take it on. In 2007 we put the business up for sale,


“I try to keep my businesses fairly simple. If there are ten things on the menu I ask if we can make it eight”

settled at six times Ebitda and I tried to retire!” Kirby said Chozen Noodle was born when an opportunity came up to open a unit at the Excel in London and, although the venue wanted a “quick-serve Mongolian”, he knew that wouldn’t cope with the queues. He said: “I came up with the idea of simple Pan-Asian dishes and we opened our first Chozen Noodle in 2007. We now have 40 units across the UK including 25 Chozen Noodles (five owned, 20 franchised) and 11 of another brand, Chow Asian Kitchen. We also took an investment from CP Foods and our franchise partners include Roadchef and Moto.” Regarding the key to successful roll-outs, he said: “Simplicity, because it helps you flex to the needs of places and people. I try to keep my businesses fairly simple. If there are ten things on the menu I ask if we can make it eight, if there are five steps in a process I wonder if we can make it three. You have to keep things simple to succeed.”

Sweet or sour?


Food for thought at


Advertising Feature

Personality shines through The My Job Pitch app was created by Edinburgh entrepreneur Mike Christopherson and unlocks a way to bring the personality out of a job seeker’s CV


he My Job Pitch (MJP) app was created by Mike Christopherson, an Edinburgh entrepreneur who had too many headaches finding the right people for the right jobs. For Mike, the straw that broke the camel’s back came after struggling to fill vacancies at his bars (Mike co-owns and runs the Swedish Boda Bars in Edinburgh). He found himself thumbing through 60 CVs, whittling them down to 20 for an interview shortlist, choosing the final ten for interview, reaching out to potential candidates and booking them for interviews. After all that, only one candidate was recruited from the three required. The reason was simple, you can't assess personality on a CV. The whole process took Mike three to four weeks, from initial advertising to shaking hands with the successful candidate. Something had to change so Mike considered spiralling costs on advertising, time wasted, quality and experience of candidates, general inefficiency of the recruitment process and, d d, most importantly, failure to find personality ty within CVs to give confidence of bringing the right people into the business.

wa also introduced to also give the job was seeker the ability to assess the workplace see – it has to go both ways. The app is to be used in the same way a dating app could be used – swipe until you find the co candidate you are looking for and, once ca you’ve found one, click to connect. The yo candidate will have uploaded not only ca their 30-second pitch but also their CV, th NI, refs and RTW (all consented) and, N voila, My Job Pitch is created. vo

Ready for market R

Simple platform In early 2016, Mike decided to look at alternative ways to recruit and decided to do something about it. He felt there needed to be a better connection between n employers and job seekers. Mike wanted a simple platform based around connections. s. Looking at the market, the best people connecting websites/apps today are dating apps. Mike then sought and met tech guys through his network who had worked specifically on dating apps. Through identifying and focusing on four key areas – time, cost, efficiency and personality – along with lots of trial and error they set to task. Mike wanted something different as a USP for both employers and job seekers. Introducing a 30-second job video pitch by the job seeker that any employer could see was the way forward. A facility for the employer to create a 30-second job vacancy pitch or pictures for the job in question


‘Swipe until you find the candidate you are looking for and, once you’ve found one, click to connect. The candidate will have uploaded not only their 30-second pitch but also their CV, NI, refs and RTW (all consented) and, voila, My Job Pitch is created’


Fa Fast a forward to December 2017 and My Job Pitch is ready to take to market. M Mike M reaches out to Tim Gibson, managing director of hospitality experts m TCG TC Consultants, to create and deliver a 24-month launch and growth plan. 2 Together, Mike and Tim have already To launched My Job Pitch successfully in lau Edinburgh. They have also met with a Ed number of major hospitality companies nu along alo on with many smaller private businesses. The feedback from those bu us meetings was invaluable and really me helped them understand what people he e needed rather than what they thought ne they the needed. This led to Mike and his tech team not only enhancing the video pitch functions on but making the MJP platform more bu versatile for employers by adding: on and ve off boarding, forecasting and rostering systems along with ability to measure sy turnover and team engagement (if staff tu are leaving, do you know why?) The ar interest in MJP has been fantastic and in energy and enthusiasm from the people the en met has been infectious. The next stage they m is to agree more trial dates as the MJP rollout plan grows. Mike and Tim are now well on their journey and, as My Job Pitch grows, they aim to establish My Job Pitch as the go-to app and platform for not only recruitment but onboarding, driving team retention and measuring team engagement for both hospitality and retail. For more details, please email

Tim Gibson (left) and Mike Christopherson



*YouGov Beer & Cider Study 2018



for the hipsters Glynn Davis argues the young dudes who revived Hackney’s fortunes could help save pubs in other London boroughs


t’s quite tough to reference Hackney without following it The Alchemist and Brewhouse & Kitchen as obvious targets for with the word “hipster”. This once down-at-heel London private equity and also – most likely – trade buyers, of which neighbourhood is inextricably linked to this young there is a strong pool of potential acquirers. Pub companies, demographic, which has art, culture, independent thinking along with large and regional brewers, are actively looking to expose themselves to more quality assets – particularly when and a bit of disposable income as defining characteristics. they involve quality freehold properties. It is the hipster influx into Hackney that has helped make it Against this backdrop it has been noticeable how much the only borough in the capital to have seen an increase in the corporate activity has taken place in the pub market in recent number of pubs since 2001, according to City Hall’s Annual Pub months, with a focus on wet-led players. Among the deals, Audit, which found a raft of openings had pushed its boozer BrewDog bought Draft House; Patron Capital and May Capital count to 175. Hipsters have brought vibrancy to the area and purchased The Laine Pub Company (after it earlier bought a desire to spend their money, with independent operators Distinct Group and six outlets from New Pub Company); offering craft beer and street food-style offerings. NewRiver acquired Hawthorn Leisure; and Fuller’s It certainly wasn’t such a positive story elsewhere bought both the Bel & the Dragon and We Are in the capital, where places such as Barking and Bar Group businesses. Dagenham lost half its pubs and Barnet was down The hipsters in 20%. But while this reflects a continued trend With companies such as Young’s having Hackney certainly for pub closures there are plenty of reasons to also stated it has a bag full of money ready disprove (to some be positive for boozers, even among wet-led for acquisitions and wet-led operator extent at least) the pubs where most of the closures have been Stonegate looking to add more pubs to its well-publicised theory historically concentrated. sprawling portfolio it is clear the sector will younger people have In fact there is a growing case for the wetcontinue to be pretty active in a positive sense abandoned the led boozer being the most attractive place for versus the increasingly depressed restaurant pub en masse operators to be in the pub sector. Whereas the sector – with fast casual dining at the brunt end number of such pubs across the whole of the UK of the difficulties. has fallen by 20% during the past five years to about The hipsters in Hackney certainly disprove (to some 24,440, according to CGA, there have been signs of a fight extent at least) the well-publicised theory younger people back. Over the past year the annual rate of decline has fallen to have abandoned the pub en masse – preferring to down a few 3% in 2017, compared with 6% in 2014. supermarket-bought cans at home – or are choosing to visit the It is well known success with a predominantly wet-led model gym and embrace teetotalism. can lead to attractive returns compared with food-led operators What we are also undoubtedly seeing is this younger and restaurants, where there is greater complexity and higher demographic shifting away from some of the more overtly running costs. branded fast casual dining chains and going into the betterAdd to this the fact that in contrast to pubs the number run independent pubs because even wet-led outlets generally of restaurants has grown dramatically in recent years – to the have a decent menu today compared with the old days when point of brand saturation in certain areas – and you can see how wet-led meant your solid options equated to nothing more investment is more likely to flow into the wet-led pub sector. than crisps, peanuts and maybe a pickled egg if you were that way inclined.


A recent report from BDO specifically pointed to businesses such as ETM, Drake & Morgan, New World Trading Company,

Glynn Davis is a leading commentator on retail trends AUTUMN 2018 PROPEL QUARTERLY


Advertising Feature

Are you managing your guest experience effectively? Competitive, crowded and fickle – the hospitality industry has certainly faced its fair share of criticism from those who have tried and failed to succeed. But there’s no need to lock up the bar or hang up your apron. The sector is also notoriously creative – whether your passion is food, drink or people, you are consistently creating an experience for your guests, with plenty of opportunities for forwardthinking operators who understand that continuous improvement is vital to stay ahead of the game Consistency is key Staying ahead of the game, however, is generally easier said than done. One of the biggest challenges in the hospitality world is working out how to manage this continuous improvement, making the right changes to attract new guests while keeping existing customers happy. From our extensive experience within the sector and close work with high profile clients such as Wagamama and Pret A Manger, we’ve found that a robust guest experience management system is the most effective way to do this.

Introducing ‘The Hub’ That’s why we developed The Hub, a powerful and pioneering guest experience management platform that utilises the latest in business intelligence technology. Complete with configurable dashboards, interactive reports and the ability to stream and analyse data from different sources, the system enables operators to pinpoint exactly which part of the guest journey needs improvement and offers actionable reports that can help make a real difference.

venue you previously enjoyed, how likely would you be to make a recommendation? You probably wouldn’t want to risk sending friends and family somewhere that could let them down. Yet our research has found that 80% of guests find word-of-mouth has the biggest influence on where they decide to eat – four times more than social media. Hospitality operators need to ensure that they deliver above and beyond guest expectations – not just occasionally, but every single time.

Data dilemma To manage your guest experience effectively, the first challenge is collecting a wide variety of in-depth data; a few tired feedback forms dished out after a meal just aren’t going to cut it. However, this isn’t where the story ends. The second

HGEM - not just for big businesses Of course, a common misconception amongst some operators is that guest experience management only becomes an issue if you run multiple sites. This isn’t the case. As anyone who has dined out twice at the same venue but been on the receiving end of two markedly different experiences will understand, consistency within a single site can be difficult to manage. Yet without a conscious effort to do so, the effects can be disastrous for business. After a shaky second experience at a



challenge is knowing how to cut through the noise of data by picking out key insights and forming an actionable plan.

Connecting the dots What’s unique about The Hub is that it helps operators align the emotions and perceptions of guests with the standards set by the business. Using reviews, mystery assessments and connecting the dots between what guests are thinking at various touchpoints in the journey, as well as what exactly the team is doing, provides a holistic picture of the changes an operation can make that will have the biggest impact. The Hub draws together data from surveys, reviews and the detailed mystery assessments we conduct, blending this information with internet audits, menu analysis, employee surveys and any other data which could assist with your business priorities. This enables hospitality operators to see the big picture, put all the information in context and make changes that count.

Makes your life easier Without a guest experience management system, feedback forms and general surveys tend to be the go-to methods of gathering data from guests. While they certainly can play a valuable part when handled correctly, this kind of standalone data cannot offer the depth of information necessary to make real and impactful changes. Another tactic hospitality businesses use is to push guest feedback to one side completely, and instead focus their efforts on operational measures to boost their bottom line. While this tactic might make business

ENGAGE YOUR AUDIENCE YOUR GUESTS Through branded survey sites MYSTERY GUESTS Your eyes and ears on the ground YOUR TEAMS Through web and mobile applications

sense, without prioritising what their guests are thinking and feeling, it’s unlikely to help perfect the experience. And if guests aren’t happy, then your bottom line will soon know about it. Working with a guest experience management company helps uncover insights from a wide variety of data sources, as well as directly boosting communication and engagement with guests. Meanwhile, it gives you the time and space you need to get on with what you do best – running your hospitality business.

Pinpointing change It takes time to collect, collate and analyse this kind of data. That’s one of the reasons why busy hospitality operators don’t do it. It’s also not an easy task to be suitably objective when measuring your own guest experience. We like to think of The Hub as a constructively critical friend; one who can help busy managers easily benchmark their performance and provide detailed, actionable reports that use insights to identify actions for team development and business improvement. If you think of the guest journey as a timeline, The Hub helps pinpoint and analyse gaps along the way. When the data suggests that key areas of the timeline dip in the eyes of guests on a regular basis, it becomes clear that this is where operators need to up their game. By measuring the gap between the intended and actual guest experience, we help businesses see exactly where they are going wrong. It could be that an operator’s training isn’t having the desired effect, or that something a manager thought was important isn’t actually relevant in the minds of their guests. Once we have

identified the opportunities or gaps in the experience, we provide actionable plans to drive change in the parts of the guest journey that can really make a difference.

Take the power back The Hub isn’t just another version of a CRM system that you’re left to work out on your own; the expertise of the HGEM team means actionable plans come along for the ride. In this way, we help empower businesses to take control of their guest experience, easily access the information they need, and translate this information into tangible results and action plans that will positively impact on their business. The Hub was inspired by the needs of guest experience managers at market leaders Wagamama, who have been an HGEM client for 14 years now. It was developed in partnership with them to support their philosophy of continuous improvement, but also to reflect the needs of similar businesses. Built in-house by the HGEM team, the system capitalises on cutting edge Microsoft technologies, which are currently leading the field in business intelligence. The team behind The Hub embody the saying ‘practice what you preach’ – while supporting hospitality operators to continuously evolve in a competitive environment, they are constantly improving The Hub, with new features released every month, seeking innovative new ways to empower hospitality businesses to stay at the head of the pack. HGEM works with over 5,000 restaurants, pubs, hotels and caterers internationally – to join those at the forefront of the sector and find out more about our guest experience management platform, get in touch today on 01225 470999. ■

MEASURE YOUR PERFORMANCE ASSESSMENTS To measure operational behaviours and standards SURVEYS & REVIEWS To measure guest perceptions and opinions ANALYTICS To measure KPIs, trends and benchmarks

IMPROVE YOUR RESULTS SCHEDULED REPORTS To track results and drive actions LEARNING CONTENT Aligned with your culture and standards CLIENT SUCCESS MANAGER To help you get the most from our services AUTUMN 2018 PROPEL QUARTERLY



Call off Christmas! Public Health England is out of control, espousing a ‘public health’ religion that sees the food and drink industries as a conspiracy against public interest, argues Paul Chase


here is a hilarious moment in the 1990 movie Robin Hood – Prince Of Thieves in which the Sheriff of Nottingham, played by Alan Rickman, finds himself provoked beyond reason by the antics of Robin Hood and exclaims: “Cancel the kitchen scraps for lepers and orphans, no more merciful beheadings, and call off Christmas!” Calling off Christmas is certainly something Public Health England (PHE) would like to do, as would all the single-issue, taxpayerfunded, sock-puppet charities such as Action On Sugar/Salt, Alcohol Concern, the Obesity Health Alliance and the risible NCD Alliance (Non-Communicable Disease Alliance), which is dominating the twitter-sphere at the moment calling for yet more government regulation to save us from ourselves. Like vampires that only come out at night, these nanny-state health scolds only emerge from hibernation to inhabit the short days and dark nights of January. Alcohol Concern’s Dry January is the most well known post-Christmas campaign to get us on the wagon – but the antibooze brigade is lumbering along an increasingly busy road littered with bandwagon traffic jams. The latest is the PHE’s “health by stealth” campaign, which has set dietary guidelines for adult and child calorie consumption in such a way it is having an unprecedented effect on our food and drink industries.

“These nanny-state health scolds only emerge from hibernation to inhabit the short days and dark nights of January”

Quango More of this in a moment but first, what is PHE and what does it do? PHE is a quango set up in 2013 that now presides over an annual taxpayer-



funded budget of £4.5bn, more than £3bn of which goes to local authorities, which took over responsibility for public health from the NHS. Yes, that’s right, the government believes local councillors and councils are better able to tackle public health problems than doctors and the NHS, which has a separate budget. So 2.1% of hospital admissions caused by alcohol misuse is no crisis, it isn’t growing like topsy, and it won’t bankrupt the NHS. We were hardly into 2018 when PHE started finger wagging. With the supposed Christmas excess out the way, PHE instructed parents not to buy their children snacks containing more than 100 calories. The new snacking guidelines were announced just after PHE announced guidelines for adults, whereby breakfast should contain no more than 400 calories and lunch and dinner should be capped at 600 calories apiece. That leaves a diet of only 1,600 calories a day – little more than half the recommended calorie intake under rationing during the Second World War! However, current PHE daily guidelines are 2,000 calories a day for women and 2,500 a day for men. Apparently snacks and drinks between mealtimes will make up the 900-calorie difference. PPHE has a legitimate role to play in countering epidemics and ensuring immunisation programmes are carried out effectively but since its founding in 2013 it has been something of an odd organisation. Who made the decision to establish a multibillionpound quango in the middle of an era of austerity? Why was it considered wise to decentralise public health to local authorities ▲

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Opinion and create a massive, vastly expensive, Sovietstyle centralised quango to tell them what to do? Its first pronouncement was to support minimum unit pricing for alcohol and, since then, much of its time and resources seem to have been spent on measures designed to regulate peoples’ lifestyles. Clearly there are lifestyle decisions that could increase your risk of developing noncommunicable diseases such as cancer and heart disease. However, “lifestyle diseases” are a consequence of millions of self-regarding, individual consumption decisions and while government advice on diet and exercise may be well-intentioned, the fact is eating, drinking, smoking and putting your feet up watching a movie with a bag of Butterkist are personal decisions that may or may not have consequences for the person concerned. A personal decision means it is nobody else’s business and none of the government’s business either. The most obvious criticism of my point of view is large numbers of private decisions, when aggregated, can have big consequences for society and the public purse, particularly costs to the NHS. Without wishing to be morbid, the fact remains a longer life resulting from a healthy lifestyle is much more costly to the public purse than the premature mortality of people who eat and drink too much. And that’s before we take into account alcohol and tobacco duties, which more than cover costs to the public purse arising out of misuse of these products. However, the deliberate conflation of private health with public health is what keeps the public health racket going. Once you create targets or guidelines for consumption of alcohol, sugar, salt, fat and overall calorie intake you have the means to measure deviancy and a reason to regulate. By how much people are exceeding their alcohol or calorie “guidelines” becomes the means to launch endless moral panics featuring alarmist rhetoric about “obesity time bombs”, “liver disease epidemics” and even the “time bomb of childhood obesity that has reached epidemic proportions”. The consequences of all this nannying is immense for the food and drink industries. Product reformulation through punitive tax measures such as the sugar levy; “shrinkflation” – making sweet and confectionery products smaller without reducing their price; and restaurants and bars bullied into reducing the size of servings on a “voluntary” basis with the threat of government regulation if they don’t. PHE’s “health by stealth” strategy has seen the food industry instructed to remove 20% of sugar from its products by 2020 – something we’re not going to achieve. Then there are all the other virtue-signalling, “me-too” bodies singing from the same hymn sheet. Local councils seeking to ban fast-food outlets within 400 metres of schools; councils banning the Coca-Cola truck at Christmas; the Advertising Standards Authority adjudicating the Easter bunny can’t be used to market sweets to children; and the drinks industry’s self-regulation body, the Portman Group, making decisions about product marketing that


“Like the Death Star in Star Wars, PHE truly represents the dark side of the Force!”


Public Health England’s annual taxpayer-funded budget

“PHE provides money and ideological support to all the nannying temperance zealots, dietary food-fad crackpots, and anti-capitalist social justice warriors”


defy common sense because it’s scared of the Alcohol Health Alliance. The public health racket supports a network of directors on six-figure salaries at every local authority, a host of taxpayer-funded charities, and a bloated £4.5bn-a-year bureaucracy that uses taxpayers’ money, received from the government, to lobby the government to introduce ever-more restrictive legislation. PHE provides money and ideological support to all the nannying temperance zealots, dietary foodfad crackpots, and anti-capitalist social justice warriors who want to create a utopian world of agrarian, teetotal, bicycle riders at war with the modern world. The means of achieving this dystopian vision includes smaller portions, higher prices, more taxes and bans, ever-moving goalposts like those in relation to the low-risk drinking guidelines down from 21 units a week to 14, or the daily “allowance” for sugar intake, halved three years ago. PHE is out of control. It espouses a “public health” religion that sees personal choice as the enemy of public health and the food and drink industries as a conspiracy against public interest. Like the Death Star in Star Wars, it truly represents the dark side of the Force! ■

Paul Chase is a director of CPL Training and a leading commentator on alcohol and health policy

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Safeguarding the industry’s economic contribution H

UKHospitality chief executive Kate Nicholls says reform of the business taxation landscape would ensure the sector’s unique success story continues for decades to come

ave you ever considered the UK hospitality industry’s scale, importance and potential? No doubt that’s challenging when you’re focused on tackling the daily pressures of driving footfall, sales and recruitment and the multiplicity of decisions you have to make to ensure you’re running a productive and profitable operation. However, it’s worth pausing occasionally to consider the contribution our sector makes to the UK – from both an economic and social well-being perspective. UKHospitality has worked with research consultancy Ignite Economics to produce its annual analysis of the sector and forecast its growth outlook for the coming years. Through this report, entitled The Economic Contribution of the UK Hospitality Industry, we aim to unequivocally demonstrate the importance of our sector to government, illustrate why it’s critical it responds to the unprecedented pressures operators face, and provide a compelling case for support that would help safeguard growth. Let’s look at some of the key figures:

levels of labour productivity growth of any industry, increasing GVA per hour worked almost 50% faster than the overall economy.

Risk of a slowdown

However, this remarkable success story is in danger of screeching to a halt because of escalating cost pressures during the past 12 to 18 months. The warning signs are there. We know the margineroding impact of labour cost increases, business rates and Brexit-fuelled price inflation all too well. These costs turn the tap off on investment, restrict the ability of businesses to hire more people, and reduce the flow of capex. The most recent quarterly employment data has shown a second consecutive quarter of year-on-year decline in employment – the first notable decline the sector has experienced since the economic downturn. GVA growth remains positive but has also seen a significant slowdown in growth during the past few months. Our report looks at three growth scenarios to forecast a bull, base and bear case for the industry’s future employment and GVA. Under the bull case scenario, UK hospitality employment would grow to reach 3.5 million by 2022, whereas this X The industry generated more than £72bn of gross would fall to lower than 2.9 million under the bear value added (GVA) directly to the UK economy – case – 10% lower than today. GVA is forecast to and a further £86bn indirectly. This is more than grow to £89bn by 2022 in the bull case but falls 2.5 times greater than that of all the transport to £69bn under the bear case scenario – a the amount in taxes manufacturing sectors combined contraction of 5% on current levels. the hospitality sector X The sector is the third-largest private What this acutely demonstrates is the generates for the sector employer, providing 3.2 million jobs growth outlook remains uncertain given the exchequer a year, through direct employment – almost 10% cost pressures and potential availability of the equivalent of of the entire UK workforce. In addition, it labour following Brexit. Conversely, it shows with the UK’s annual employs a further 2.8 million people indirectly. the right operating environment the sector can defence budget Employment continues to grow at circa 2% yearcontinue to thrive. on-year, ahead of the overall economy So what must be done? Of the £39bn in taxes hospitality businesses pay each year – in itself massively X Hospitality generates £39bn in taxes a year for the disproportionate to their turnover – the key imbalance is around exchequer, which is the equivalent of the UK’s annual defence business rates. It is now patently clear this is unsustainable as budget. Alongside this, investment by businesses in the sector a form of taxation – an archaic property tax cannot pick up the is estimated at £10bn, with the majority coming from the whole burden of corporate taxation in a world where so little thousands of small and medium-sized enterprises that are the “business” is now carried out from bricks and mortar premises. sector’s lifeblood The government has indicated it could introduce some These are big numbers that deserve further scrutiny and form of online levy in the near future, possibly as soon as the wider promotion. November Budget. What is critical is the government allocates Let’s look at job creation first. Employment in hospitality any funds gained through a “digital” tax to reduce the burden on has grown at twice the rate of other sectors – providing an traditional, high-street businesses that are being penalised under additional 300,000 of the one million new jobs generated since the current regime rather than simply raise extra funds. the financial crash. Furthermore, there is a regional success story The government has a golden opportunity to reform the underpinning the headline figure. Unlike some industries that business taxation landscape to keep pace with the way the suffer significant regional bias, hospitality is a major employer economy has changed during the past decade or so. Reform across every region and neighbourhood in the UK. It ranks as a will help ensure the hospitality industry’s unique success story top-seven employer in every region and, crucially, it’s a significant continues for decades to come by securing employment, employer of young people, offering them a first step into the government revenues and the future of high streets at the heart world of work. of Britain’s communities. Now let’s examine the value of the sector. The hospitality industry has grown GVA – a recognised measure of the value of To download the report, visit goods and services – faster than any other industry during the decade since the economic downturn – and almost double the Kate Nicholls is chief executive of the UKHospitality, annual growth rate of the economy as a whole. Allied to this, the leading voice for the eating and drinking out sector during the past decade hospitality has returned one of the highest





Wise words Jessica Mason picks out some of the highlights from Propel’s Finance Conference

Christie & Co director Ramzi Qattan The perfect storm pub company owners have faced would have many believe the sector is in poor health. However, Christie & Co director Ramzi Qattan says the long-term trading fundamentals for the industry look attractive and investors should recognise the opportunity this presents Qattan reminded delegates there were close to 70,000 pubs in the UK in 1989 but, even though the combined impact of the smoking ban and the recession in 2007 caused a peak in those closures, the market was “oversupplied” and the loss of certain sites had helped to “create a healthier sector”. He added: “The average quality of the pub stock we are left with is much higher than it was 30 years ago and is in pretty good shape as a sector.” Qattan said the rate of decline was “now stabilising” and, during the past 11 years, Christie & Co had seen this happen “quite a lot”. Qattan added: “We have seen new entrants such as Stonegate Pub Company and Hawthorn Leisure, which have been very acquisitive. We have seen Spirit split off from Punch and then be acquired by Greene King, seen Punch itself split between Patron Capital and Star Pubs & Bars, and seen JD Wetherspoon continue its slow organic growth. “Comparing where we were to where we are, we have lost about 12,000 pubs to the tenanted sector and I think about 4,000 of those have come back into the market as privately-owned freehouses, so they have left corporate and gone into individual ownership. “Even though the number of freehold managed houses looks relatively flat, it’s actually a lot more complicated and down to a number of unavoidable cost pressures that have taken place within the sector.” The cost pressures that have been the most challenging during the past 18 months include payroll costs caused by the National Living Wage, the Apprenticeships Levy, pension auto-enrolment, business rates, and the impact of Brexit contributing


to inflation, Qattan said. This had led pub businesses to adapt and flex to work around them but didn’t mean the pub sector wasn’t in a “healthy state”, Qattan told delegates. He added: “Trading fundamentals for well-invested, well-operated managed houses are excellent. Margins have suffered but topline growth has more than made up for this. “We have had a lot of managed houses converted into franchised or tenanted models as the cost pressures have hit and as the threshold for what it takes to run a successfully managed house has increased. Some of the more marginal sites have come across to other parts and other divisions in the businesses. “We have also had other managed houses built and some large tenanted units such as Ei Group actually take some of the tenanted houses back in to set up newly managed divisions. They have done that to 250 sites since the pubs code and Market Rent Only came in and they are looking at doing that to 800 in total by 2020.”

Craft beer, pubs with rooms and lifestyle buyers. He said: “The freehold nature of pubs is quite attractive. It provides security in a downturn, which is almost the exact opposite of what has happened to restaurants recently. There are also a number of high-growth areas – craft beer is particularly popular while letting rooms

‘‘It is a good time for the UK pub sector and I don’t think every investor out there has quite clued into that yet’’


continue to be a big driver of growth. “The independent market is strong, therefore, and we’ve seen the return of lifestyle buyers. As another health indicator of the sector, distress sales have remained relatively flat at about 6% of all transactions. “In terms of corporate deals, we saw Patron Capital and Heineken UK’s tenanted business Star Pubs & Bars split Punch between the two of them. We saw Cerberus sell Admiral Taverns to Proprium Capital Partners and seen sales swell. Proprium also acquired Matthew Clark and Bibendum earlier this year and we saw an aborted bidding war between Deltic and Stonegate for Revolution Bars Group, which may come back to the market, while we have seen NewRiver acquire Hawthorn Leisure. “The overall net picture is quite good, though. We think there’s about 4% to 8% value growth expected through 2018 and, all in all, there’s a pretty good outlook for the pub sector. “It is a good time for the UK pub sector and I don’t think every investor out there has quite clued into that yet. I think some of the negative publicity we have seen around restaurants over the past few months has deterred a couple of investors when, actually, the fundamentals look pretty strong and offer quite a positive outlook.”

Restaurants The restaurant sector has endured a “pretty torrid time”, Qattan said, but it wasn’t fair to “point the finger solely at private equity”. Looking at where the problems arose, he said: “Private equity has been looking within the sector for the ‘next big thing’ and the ‘next big brand’ to roll out and grow. But investment comes with very high growth expectations and with restaurant businesses that means the pressure for new site openings.” ▲

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F&IC Qattan reminded delegates because the restaurant sector was primarily leasehold, that factor combined with the pressure to open new sites had resulted in a rental market that had “completely overheated”. He said: “We saw it first with premiums that went up while people were buying sites from each other, then you saw the rise in rents as landlords wanted their slice of the increase in prices and values. This makes for an unsustainable market. The bubble has now burst and the market is readjusting.” Throughout the period, Qattan said, Christie & Co had seen businesses go through Company Voluntary Arrangements (CVAs) and rental negotiations to reduce rents but, on the other side of the coin, it had also seen businesses make a success, reminding operators there were “rewards aplenty for the right product”. He said while “generic casual dining” was not being eyed by public equity as readily as in the past, opportunities still existed. He added: “There have been winners and losers. Mid-market casual dining has struggled in particular and the number of big names, including Jamie’s Italian, Byron, Prezzo, Carluccio’s and CAU, have had to resort to restructuring their operations or CVA. “However, there are some businesses out there slowly and steadily expanding. For instance, Nando’s and Wagamama and the continued rapid expansion of Five Guys. Private equity does remain interested but only within the right product and less so in generic high-street casual dining, where we were a few years ago.” Qattan said investors had to find the “opportunities within the aftermath”. He said: “If you go back to 2014 and look at what happened in the three years there, we saw premium price growth of more than 40% in quite a narrow window. We are now past that peak and premiums on the high

‘‘We saw it first with premiums that went up while people were buying sites from each other, then you saw the rise in rents as landlords wanted their slice of the increase in prices and values. This makes for an unsustainable market’’ street are down. The result of that is values are down as well. “There are attractive opportunities out there. I think a year ago we were saying secondary and tertiary markets were where the best-value opportunities. I think now, if you’re careful, there are opportunities in every market – the primary markets as well as big cities and towns – and it’s just a case of snapping up the sites as the operators we mentioned dispose of them. “For independent leasehold businesses the reality is fairly bleak because we are right in the middle of that readjustment period and confidence is pretty low. But, on the other side of that, if you’ve got the capital and the confidence it’s a good time to go out and pick up one of these sites if you can get them at sustainable rents.”

Hotels The British hotel sector is split geographically into two sub-sectors – London and the rest of the UK. Qattan said: “Regional UK saw revpar growth in 2017 of about 3.8% so that’s a very good indicator of the strength of the market. The growth we have seen in the past 18 months has been entirely rate-led so occupants have pretty much flat-lined at a good place. “People are using room rates to drive that growth. A lot of the rates available

in the UK are still behind or even close to where they were at pre-recessionary levels, so there’s a bit more headroom to increase them further.” Qattan pointed out the “big impact” of below-revenue costs such as wages on the sector due to the “prevalence of lowly paid staff such as cleaners and waiters”. He added: “London is a different picture – 2017 was quite mixed. Despite the capital having to deal with terrorist incidents it is still an established centre of business, leisure and events globally so people still want to come to London. “That popularity with the city combined with the weak pound meant it was still a good year and average occupancies were strong. London has been running at about 80% for a number of years and investor confidence is clear. We’ve got more than 8,000 additional rooms coming online in London in 2018 alone. That’s a massive amount of stock in the market and will absorb any additional growth we think will happen within the coming year.” London is no different to the rest of the UK in terms of cost pressures, which have hit the capital in the same way. Qattan said: “What we’re hearing is operators need to grow revenue by about 6% this year to maintain flat profitability – that’s no easy task. However, yields have stayed pretty constant for the sector as a whole and operators are managing to hold that profit pretty much flat. “Geographically, it’s an interesting picture. Again, it’s very diverse. The hotel market includes everything from small independent owner-operated businesses and B&Bs up to large branded stock in cities. Most importantly, the market is relatively buoyant and in quite a good position across the UK. There are no real outliers and everything seems to be doing really well. The appetite for hotel stock in the UK is pretty strong.”

Imbiba partner Darrel Connell Darrel Connell told delegates sector investor Imbiba is expanding to back companies in their earliest stages of growth via a £50m fund He said: “We exclusively focus on the leisure and hospitality sector – roll-outs of innovative leisure brands and concepts. That can be anything from a bowling alley, cinema or bar to a restaurant or private members’ club – anywhere you can buy a coffee and where there’s a real estate angle. “We have two different pots of money, an EIS funding pot to fund startups and early-stage ventures that have first-site risk and the Imbiba Growth Fund, which is our new £50m fund where we will invest in eight to 12 businesses. These will typically be businesses with fewer than ten sites looking to expand to 15 to 30 sites in five years.


“The UK leisure market has had a panning in the press but for people who know and understand the sector, it’s a great time to be operating when everyone else is running scared.” In terms of trading, Connell identified like-for-likes were “mixed and choppy” and consumers were “increasingly price sensitive”. He added to this challenges such as a rise in fixed costs, which meant a rate of “3.5% just to stand still”, coupled

‘‘For people who know and understand the sector, it’s a great time to be operating when everyone else is running scared’’


with the “labour market being tough”. However, he admitted it was “beginning to get easier”. He also said some of the biggest issues such as rent, competition and excess supply was putting “expansion on hold”, while other threats such as delivery were discouraging people from going out to drink and dine. The winning businesses within the sector would be the ones that focused on five key elements – experience, price, being in a good tourist location, serving great food, and working with local suppliers. The next 12 months would hold “some positivity”, Connell said, adding: “Cost inflation will ease so growth margins will improve. There is a lot of evidence of that coming through. We’ll have an improved labour market and like-for-likes will turn.” ▲

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Risk Capital Partners sector investor Luke Johnson Risk Capital Partners sector investor Luke Johnson described the “battlefield” of private equity and gave his views on CVAs and “competitive socialising”


He told delegates: “There is a shake-out going on. Some may not survive, some are shrinking and many are reducing their growth plans considerably. “I think one of the biggest changes is that for ten years or more private equity – large and small – was pumping capital into the sector and has left the battlefield with some of them bruised. Out of 50 or 75 private equity firms, probably only three might be interested in investing in this sector. Even if the individual investment executives want to do a deal, their investment committee will say: ‘It’s a blood bath’. Much of the sector has been owned by private equity and so that’s where a lot of the wipe-outs are. “One can only guess but the companies that have gone through CVAs and others behind closed doors that are in pain, you’ve had 50-75-100% write-downs on investment – in excess of £100m in some cases. So all that destruction of value has put paid to a lot of that source of capital. In addition, the banks are reducing their exposure rapidly and of the major clearers none at this time want to increase their exposure – most want to reduce it dramatically. Two of the biggest sources of capital for the sector have gone or are massively reduced so a lot of the most ambitious plans for growth are at best on hold or at worst scrapped. “It’s clear costs have been the major issue for the past two years – be it National Minimum Wage, ingredients costs, rates or the Apprenticeship Levy. I think the worst period of inflation year-on-year has passed but we are still facing an annual increase in the National Living Wage and, although there’s a lag-effect in the cycle, some people are still suffering the five-year annual rent review uplift that will reverse – we all hope – or at least go no further on new leases. Many people have adjusted the model and are probably making lower returns and margins but they’re doing okay. Obviously if there is an overall downturn in consumer spending and virtually everything we do is discretionary, so in theory households could cut back on eating and drinking out – and that’s when it gets really hard. It could get worse – but obviously we hope it doesn’t.”


I think you need to be careful but this is a £75bn-a-year sector that is still incredibly Johnson said: “I’ve never done a CVA fragmented and I don’t think even if but I’m hugely in favour of them. I think there were a consumer downturn it would landlords have had it too easy for too cease to offer opportunities. I think it’s long. The landlords are the ones that about working with really good partners have made billions out of this sector in who know how to run things, having a the past 15 years with reductions in yields great economic model in your business on investment property and enormous and being lucky. I think there are still increases in their portfolios rented to nice businesses that offer great potential our sector. The fact that if you don’t pay and are worth investing in. I think one of the rent for two days after the end of the the hardest things to do, particularly in quarter, they send the bailiffs in to try to London, is differentiate between stuff that lock you out, I don’t shed many tears for is superficial and fashionable but doesn’t them. have staying power and businesses and “I think they’re going to have to get menus and concepts that are there for the real about the massive disruption overall longer term that can endure.” that’s happening in retail and they’re acting as if it’s someone else’s problem – that Johnson outlined how to spot a there’s this thing called ‘online shopping’ company that could expand versus a – but long-term it’s their niche offering that was problem. We are part of ‘‘Concepts with only unlikely to grow. He said: the solution but rents have with only a a handful of venues “Concepts got to get dramatically handful of venues often often have amazing have amazing initial sites affordable in many cases. “The landlords are and got lucky with the staff initial sites and starting to lobby against – but it’s never going to got lucky with the CVAs and I think one of make 20, 50 or 100 sites. staff – but it’s never I see food halls as having these CVAs they will try to gang up and stop. It’s traction for both landlord going to make 20, about time the tenants and tenant operators, 50 or 100 sites’’ began using the law to there are efficiencies their advantage because about certain services and landlords do it ruthlessly on every single seating areas, planning, toilet provision, all rent review, dilapidations claim, and oversorts of stuff like that. I also think people, inflated service charge and it’s wonderful to particularly millennials, are happy sharing see things shifting in favour of the tenants spaces and the boisterous experience of – the ones who create all the jobs and pay informal eating in those spaces means all the national insurance and other taxes. there is probably room for more. I doubt It’s never a question of ‘fair’ but a question it will ever dominate the sector. It will no of what’s legal.” doubt reach a limit.” Regarding experiential entertainment Advice for investors and the growth in “competitive socialising”, he said: “Experiential “I think every business is different and entertainment is about trying to satisfy it all depends on how productive, how demand for people who want a lot more profitable, how solvent and how well than an evening’s entertainment – to managed a company is. It’s about looking offer more than just food and drink. at those returns and the cash flows and Sometimes people are happy with just a taking a view on customer demand. restaurant meal or a pint in the pub but I would say overall, certainly in terms on other occasions, particularly groups of investments, be brave when others going out, they want something else. It are fearful. I think the next couple of might be crazy golf, tenpin bowling, quiz years will throw up some interesting opportunities in terms of investments and nights, a range of things that add value – competitive socialising such as table acquisitions. The best strategy is – judge tennis. Brighton Pier is tapping into that each business independently and listen demand and there’s potentially more to to what people want.” go for because on evenings out people Johnson outlined what Risk Capital want to make the most of it. Laine Pub Partners looks for from a business. He Company had a load of things in south said: “Generally I like to remain invested London that were highly profitable, in a company for a minimum of five years from escape rooms to giant Scalextric and if it’s ten years or longer then that’s tracks. These things made the venues great too. As long as it’s making progress a memorable place to go and had few and delivering growth, finding good competitors. Although there’s additional investments is hard so you don’t want to capex compared with a traditional and get out too quickly. I’m a net investor. I normal pub. I think these are interesting think prices need to be tempered by the new innovations that, over the years, conditions out there and I am sceptical people will invest in more and more.” ▲ about some of the more frothy concepts.


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City Pub Group chairman Clive Watson City Pub Group chairman Clive Watson talked through the company’s IPO journey and points learnt along the way Starting with some background, he told delegates: “City Pub Group started trading six years ago and we raised our money under the Enterprise Investment Scheme under the old rules, so we were able to buy large freeholds in London and elsewhere. We’ve now got 44 pubs of which 36 are trading and eight in development. The company saw turnover of £37m, which was a 47% increase.” More than 97% of the company’s investments are freehold. All pubs trade as independent freehouses with City Pub Group preferring to create “local identity to make sure we’re the best pub in the neighbourhood”. Watson said: “Virtually all our pubs are in the major cities across southern England or large provincial towns. We target cathedral cities and we like them because there are different types of market – students, tourists, business people, shoppers and local residents.” Since the company’s first acquisition – The Cork in Bath in 2012 – City Pub Group has looked to avoid high streets and their high rents, retail parks and shopping centres. Watson said: “We would rather target the cities we want to be in and have a cluster of four or five pubs within those places. If you can create a promotional strategy among your staff where you say: ‘We have this pub and another one around the corner so you can be a supervisor now but an assistant manager in another three months’, it’s a really good message to save staff. Quite often staff don’t want to move around the country. “Everyone else was going on to the high street and looking at the leasehold model and the branded model, we thought, ‘no, let’s push back against that’. The focus was London, predominantly freehold, unbranded and off the high street and that was effectively what we did from start to finish.” City Pub Group’s Ebitda has more than tripled over the past three years – the business floated in November on a forecast Ebitda of £6m – and the company’s Ebitda profit share is another way of retaining staff. Watson said: “In the profit share, 3% of company Ebitda is shared equally among all employees. I cannot tell you how massively incentivising that is for staff. The first year we did it the bonus was about £470 and last year the bonus was £750. To

the staff in our industry, who are typically paid just above minimum wage, that’s a massive boost to their income.”

How to make the IPO process run smoothly Watson said: “The initial public offering (IPO) process includes a number of things to highlight. For a business of our nature you need to have a three-year track record because you’ll have reporting accountants come in and go through everything you have done over a three-year period – not just financials but everything else. “You have to have a business plan that appeals to investors and strong management in key roles – not just the founders but a finance director and other key roles and all material contracts in place so make sure your supply agreements are there. “When we floated, we realigned all our supplier contracts to coincide with the flotation so we put them on to threeyear deals – people such as Heineken, Matthew Clark and Enotria & Co – so we could demonstrate to our investors we had procurement savings of more than a £1m over three years. That was a very good message to any investors. “On the banking side, you’ve got to make sure you’ve got good banking facilities in place. If they’re about to finish in 12 months that will unnerve investors. We’ve been with Barclays since we started six years ago but when we floated facilities during that time we added another four years. Make sure you position yourself well within your market. Make sure your investors know ‘why you’ and why they should invest in you rather than an already quoted company, so you need to position yourself to you can

‘‘Make sure you agreed your remuneration package and share options and disposals before you appoint the brokers because, if you don’t do that and you’ve already appointed them, they will try to get you to change your remuneration package’’

show you are better at retail than they are. “In terms of non-executives, you need to have at least two. I don’t just pick them a month or so before the process. Nonexecutives are seriously important – not just from a governance point of view but also as sounding boards and mentors. They aren’t people who just cost £40,000 per year and are a bit of a nuisance – they can add a lot of value. “The key advisors in an IPO are the financial advisors. You’re going to need a nomad and a broker – they don’t necessarily need to be the same. You’ve got to have a good working relationship with them, though, not just when they come to the office but the people who are going to actually manage the process. “If you go down this route you’ll need to ask who is actually managing the process? See what the brokers have done recently, see what their transactions are, how the share prices within those transactions have performed since the IPO. Also check the quality of their research team. Justify the evaluation. You don’t just go for the high evaluation because it sounds good. Whatever you do, make sure the analysts can justify the initial value they put on your business and that you are in complete agreement. Also, make sure you agreed your remuneration package and share options and disposals before you appoint the brokers because, if you don’t do that and you’ve already appointed them, they will try to get you to change your remuneration package. “Before you start the consultation process you have to carry out pre-marketing, where you go to five or six institutions to test the water. If it goes wrong or badly, this is the time you need to pull out or delay for six months. Don’t think that whatever happens, even if it has gone wrong, you’re still going to proceed. Instead, that is a good time to pause and think about which route you’re going to follow. I call it the ‘cold wet towel review’, which isn’t a city term – it’s a Clive term. It means it’s the point to put a cold wet towel over your head and calm down and pause for a moment.” ▲ AUTUMN 2018 PROPEL QUARTERLY



Andrew Ball, head of hospitality at haysmacintyre Andrew Ball, head of hospitality at leisure sector specialist haysmacintyre, told delegates there was increased scrutiny by HMRC and the hospitality sector was still in its sights. In light of this, he said there were more pitfalls to fall into than tips but he outlined the things operators “need to know”

Tip – get your capital allowances in early This tip is “particularly useful where you’re looking to sell sites”, Ball said. He added: “In the past you sold your site and filled in a Section 198 claim – and you could do that a year after the site was sold. Legislation has now changed and that needs to be done within the SBA process. Lawyers haven’t caught up with this yet and try to leave it until the last minute. It becomes a bit of a bartering tool at the 11th hour. The tip is to get this in there at the beginning, especially if you’re the buyer, as you want to maximise the amount claimed for because capital allowance will come across with the assets and you’ll be able to use that against future profits.”

Tip – incentivise your employees with EMI/growth shares Enterprise management incentive (EMI) schemes are an option to buy a fixed number of shares at a fixed price at some point in the future. Ball said: “The optionholder has to be a director, you have to have fewer than 250 employees, and the company cannot be controlled by another party.” Ball said growth shares were becoming popular to incentivise employees. He said: “This is where you value the company today and give new shares of a new class to an employee at a rate above the value. You might value the company at £10m

and give them 5% of everything over that value. If in five years it sells for £20m, you keep that first £10m and they get 5% of the remaining £10m. The good news is it is taxed as capital, rather than revenue.”

Pitfall – National Living (Minimum) Wage Ball said: “The National Minimum Wage is £7.83 for anyone aged 25 or over. This is easy to work out when someone works hourly shifts but £7.83 works out at roughly £14,000 per annum for someone salaried working a 35-hour week. However, if you have them work a 60-hour week this works out at £25,000 per annum and Inland Revenue is being aggressive in finding out if they are actually given the National Minimum Wage. You can’t use troncs at junior manager level and you need to make sure you’re not falling foul because HMRC is naming and shaming companies.”

Tip – entrepreneur’s relief/ spousal planning Ball said: “The rules are you have to own at least 5% of the voting rights of the

‘‘We are seeing a revenue attack on expenses – latenight taxis and staff meals. If your staff eat in the restaurant you’re meant to have a designated zone’’

company for at least a year; you must be a director or employee of the company; you have a lifetime limit of £10m gain; and the company must be qualifying. “It is a powerful rate of capital gains tax at 10% but the point is while you have your £10m, your spouse also has their £10m. Most people never pay any capital gains tax. Giving some of your company to your spouse may not be very good for your marriage but it’s good for your tax planning. If you have the option to get entrepreneurial relief, it’s never going to get any better than 10% so perhaps it isn’t the worst idea in the world.”

Tip – employment benefits Ball said: “We are seeing a revenue attack on expenses – late-night taxis and staff meals. If your staff eat in the restaurant you’re meant to have a designated zone. The Inland Revenue is attacking this, saying staff meals are a benefit in kind because you don’t have a seating area. The best thing to do is have it in a handbook, even if it’s a couple of restaurant tables between certain hours, and make sure the managers know.”

Tip – R&D tax relief Ball said: “If you’re doing things such as Deliveroo and finding innovative new ways to keep your food hot or presentable, you might consider a research and development claim. The relief is generous – you get 230% of the qualifying expenditure, which can include salaries, consultants and materials.”

Matthew Smallwood, managing partner of Instinctif Partners Offering advice on financial PR, Instinctif Partners managing partner Matthew Smallwood introduced guidelines in effective media communication using a combination of “lessons learned, common sense and experience” He said: “Always have a smile on your face when you place a call, it will show in your voice. Work on your company’s message and send out tailored pitches to journalists while knowing exactly what you want to say and the result you want to get.” However, he warned: “One thing to be careful of when in touch with journalists is be mindful of what you say. It’s amazing how many people aren’t. Everything is on the record unless you say otherwise so pay attention before disclosing information you don’t want published. If you don’t want it said in the media – don’t say it.” Smallwood said making yourself an asset could bring long-term advantages.


He said: “Be a resource for journalists by finding out what else they are working on and trying to help. But don’t forget, even if you have the most amazing restaurant or pub business or a revolutionary idea for the sector, it is not a done deal journalists will write about it.” He said it was best not to communicate with journalists through non-professional channels “unless you already have a previous relationship”. He advised to never call when a journalist was on deadline and “not to take rejection personally”. Smallwood added: “Don’t lie –

‘‘Don’t neglect your profile or ignore negative comments – it’s all an opportunity’’


ever. Nothing can damage your company’s image more than to be perceived as an untrustworthy brand or individual. Be honest and stay committed to the truth.” Smallwood said companies should ensure they have a crisis plan in place. He said: “Make sure your spokespeople are media trained and briefed before they speak to any journalist or television company. Stay calm and pause for thought when a crisis hits. Get the facts as early and as clear as possible and make sure the strategy for dealing with the situation includes social media. “It’s really difficult but try not to be defensive because it’s counterproductive. Don’t ever say the situation is ‘not our company’s fault’ and don’t ever wing it. Don’t neglect your profile or ignore negative comments – it’s all an opportunity.”


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Biting into the among the most important cultural activities in the city, with three times as many admissions to late-night venues than sporting events. On these trips we aim to inspire the group, give them learning opportunities from the great people and businesses we interact with, and provide superb networking time with other British business leaders. Having a group of such influential and passionate hospitality leaders gives me a brilliant opportunity to gain access to some of the best businesses and leaders, that’s where the added value comes in. Let me introduce you to some of the people and businesses we met and share some of our key takeaways.

James Hacon reveals some of the highlights from Propel and UKHospitality’s New York study tour


hen looking for innovation and inspiration in the UK food and drink hospitality sector, we look to the US first. The market is more developed with many more larger, well-established multi-site operators and a higher frequency of eating out of home. The teams at Propel and UKHospitality have teamed up for the past six years to take a group of senior executives to the States for a study tour to see what we can learn from our counterparts across the pond. For the past four years, I’ve been privileged to be involved in organising this. Last year we headed to Las Vegas to learn from some of the world’s largest hospitality operators in the city that never sleeps and, after almost a year of planning, I was thrilled to take this year’s group to the Big Apple. It seems New York consistently tussles with London these days to be crowned the world’s best city for restaurants – we’ve come a long way in the past decade! The dining scene is nuts, there is so much going on and the growth doesn’t seem to be slowing either. In the past three years the number of restaurants in New York has grown 7%, from 25,123 to 26,697. Walking the streets it’s clear this growth has been driven by fast casual, in some parts of Manhattan every other shopfront dons the branding of one outlet or another. It’s almost certainly the place to go to learn about this sub-sector. At the other end of the market, top-end restaurants tussle for celebrities in a frenzy we have yet to see in London, with one top restaurateur suggesting the best restaurants will give away more than a week’s revenue each year in free meals in a bid to attract celebrity attention. In a similar story to that of the UK, our colleagues on the other side of the Atlantic face their own “headwinds of cost” – mainly driven by changing labour laws. In New York State, the hourly minimum wage is climbing from $11 to $15 during the next three years for businesses with more than ten employees. There has never been a legal obligation to provide sick pay before, but this is coming too. Tipping stands at the centre of resulting conversations. With service staff receiving northwards of 20% average on the majority of tips, it’s a lucrative business. We were regularly told experienced waiting staff could earn more than $100,000 per year. Many restaurants have moved to a “hospitality included” or “tip-free” environment in the past year, although many changed back following a mass exodus of their best waiting staff – a real challenge for the industry.

Claus Meyer The Great Northern Food Hall Claus is renowned as founder of the Nordic food revolution, which secured a place for Copenhagen and other key Scandinavian cities as food destinations on the world map. Among his biggest accomplishments was co-founding Noma, which held the top spot on many global restaurant rankings for almost a decade. We met Claus at the Great Northern Food Hall, his collaboration with two billionaires that has created a modern food hall at the heart of Grand Central Station. He spoke at length of the challenges he faced when entering the New York market – telling us it’s almost impossible for entrepreneurs to launch there – but of course he accepted some of the unique challenges when launching in one of Manhattan’s most iconic buildings. Many of the problems he faced were due to the fluidity and inconsistency of legislation. Claus told us a story where he talked to three different attorneys until he found one who gave him the answer he was looking for, which would enable him to achieve what he wanted. Luckily persistency paid off and the last attorney was right. On a broader basis Claus talked of the need for a bold vision, thinking big, and taking the opportunities presented to you – a real visionary.

Richard Corraine and executive team Union Square Hospitality Group As you might expect, New York is one of the key nightlife destinations in the States, boasting more than 10,000 bars and clubs, accounting for 12% of the total number of such venues in the US. One key difference in these ownership models are laws that block brewers, liquor manufacturers or alcohol distributors from having ownership in venues. In a similar move to London and many other major cities around the world, the New York mayor’s office appointed a “nightlife mayor” last year to promote the night-time economy, which economic studies value at more than $10bn. The sector has been highlighted as

This company needs little introduction. Founded by legendary restaurateur Danny Meyer in 1985, the group has stayed at the top of its game since. Richard Corraine joined more than 25 years ago and has been Danny’s right-hand man since, serving as chief operating officer and then chief of staff. We were blown away by the level of effort his team took to host us. The company brought five of its top executives to speak as part of a panel. They were open and, more than any business I’ve seen, completely aligned. Much of what they talked about was aligned to Setting The Table, Danny’s best- ▲ AUTUMN 2018 PROPEL QUARTERLY



selling book about hospitality – it’s well worth a read. Some additional gems were worth a trip to New York on their own. The first was referring to the “home office” not the “head office”. This nuance in language makes a big difference, it instils a sense the business is centred around the restaurants. Taking this one step further, they also require all key home office staff to have come through the business or, as they say, to have graduated to the home office – even key people who have joined the business from senior positions have to go back to the floor for long periods before starting their new position. The next stand-out moment was the topic of transparency with the broader team. The company goes above and beyond to engage its teams in decisions from the beginning, sometimes before they’ve been fully discussed with the board. One example was when the company knew its time was up at the original Union Square Café site. It let the team know straight away before hitting the press and committed to finding another venue to open straight away. The success of this communication was highlighted by the fact the news wasn’t leaked before the company formally announced it, despite telling hundreds of staff. One of the main themes of Setting The Table is “enlightened hospitality”, with Danny talking about collecting the dots and connecting them to help make customer experience the best it can possibly be. The team talked at length about how it sees digital as a way to support this and how to learn to do that with reservation systems and social media – connecting online engagement with the actual experience through guest history and notes. Sounds simple, but I’m not sure many are doing it. The undoubted stand-out takeaway from the session was the company’s method of asking two specific questions during an interview that help to highlight the cultural fit of a potential team member. The first – “what’s the last gift you gave someone for any reason?” – is designed to understand how much people care about others, what’s important to them, and the effort they put in. The second – “who do you admire for any reason?” – recognises the ability of someone to see the best in others, speak with passion and show aspiration.

James Beard Foundation The James Beard Foundation was set up with a mission to celebrate, nurture and honour


chefs and other leaders who make America’s food culture more “delicious, diverse and sustainable for everyone”. It takes the name of the late James Beard, who was a champion of American cuisine, an author and teacher with an encyclopaedic knowledge of food. He helped to educate and mentor generations of professional chefs and food enthusiasts. The house in which he lived is used as a space to champion the work of the foundation and raise funds. Several times a week it hosts the best chefs from across the world, enabling them to showcase their talent on a stage in front of an audience willing to be tested. This releases chefs from their commercial shackles for an evening and allows their creativity to take over. We were able to secure seats for our whole group for one of the evenings. The chef was Lorena Garcia, a Venezuelan chef who runs a restaurant in Las Vegas. Even for someone at the top of their game, it was clear this night was something special for her, the “pinnacle of her career” she tells us, with tears of happiness running down her cheeks. What struck me most that evening was the important part the foundation plays in the food scene. It is instilling pride in chef work that is celebrating success not only at the top end of the dining scene but also among executive chefs of group and chain restaurants, building culinary acceptance in mass-market dining – ultimately giving a home to the industry. Something that, it’s fair to say, we miss in the UK.

John Rigos – Aurify Brands Aurify Brands builds, owns and operates fast casual restaurants in New York City. John Rigos founded the group with Andy Stern in 2003 when they invested in their first Subway store. From there they acquired further multi-unit national franchises, growing to more than 20 sites. The next step was to develop their own concepts, with fast casual at the top level. They work like an incubator, helping to support entrepreneurial people in their organisation to foster their own ideas and grow rapidly in a sustainable way, promoting constant innovation. We met the team at The Little Beet, which concentrates on simple real food served deliciously and with a 100% gluten-free

menu. It’s a quirky concept that clearly has legs. During the session we learned how far ahead we are in terms of our food quality, with many of the elements John and his team highlighting already business as usual in the UK. It’s not surprising to see why Pret has stormed the New York market. One idea almost certainly on its way across the pond is lunch subscriptions. Long shelves cluttered the walls of all the New York fast casual outlets, designed to provide a convenient way to pick up pre-ordered dishes without queuing at the till – adding much higher through-put at peak for the outlet and more convenience for the customer.

Wet-led learnings The evening bar tours were as diverse as always, highlighting a real breadth of venues from sports bars to rooftop outlets, basement speakeasies, dive bars and upmarket cocktail lounges. For the most part there isn’t considerable differentiation from London – actually it’s clear we do it better in terms of standards. Fit-out’s were far from our lofty heights of design for the most part, particularly in the sports-led bars, with a few exceptions of course. One stand-out was seeing how Brooklyn Brewery has taken the market in its home state. The brand is everywhere and is by far the most popular beer in the city from the statistics we found. Set-price timed drinks packages were a big part of the group proposition in restaurants and bars, much more so than we see in the UK. It seems the drinks range is far narrower, with rum and tequila far more present and promoted than in the UK – two categories, we were told by spirits suppliers, which will be the “next gin”.

Next Year We are heading to Los Angeles next year, where we have already had an amazing response from some tremendous operators and leaders. Many of the biggest and most successful groups are based there and will be included on the tour. If you are interested in joining the group, email

James Hacon is managing director of Think Hospitality, which advises multi-site brands on growth, brand and development strategy, and investing in early-stage concepts ▲ with a bright future


Voted Winners of BEST SNACK BRAND six times by readers of Fine Food Digest Winners of 37 Great Taste Awards since 2007


Uncovering a brand’s DNA


Ann Elliott gets under the skin and looks at who and what defines a brand

f the past six months are anything to go by, more and more necessity. These are, after all, the people living and breathing the brands in this sector will be trying to rediscover themselves. brand on a daily basis and representing that to every customer There’s nothing wrong with that. In tough conditions it’s the who walks through the door. That word “representation” is key business that truly understands what it is and what part of again, particularly for those larger brands where sites in the north its brand appeals to consumers that will continue to thrive. It will may have nuances and quirks compared with sites in the south. think smarter, and act quicker. Marcus Buckingham’s excellent book Break There have always been hero brands in this All The Rules explains the 12 key questions to “Focus groups with sector – Wagamama seems the most obvious capture everything you need to know about members of the team example. Many are quick to point out it’s a the workplace. One question is particularly in comparable roles are pertinent to the definition of a company’s brand with a clear visual identity and a clear menu offering with a robust hero item. For normally more effective, culture: “Does the mission/purpose of my other brands, that isn’t as immediately obvious. company make me feel my job is important?” seeing what incites That said, there’s so much more to Taking it one step further, understanding and catalyses debate is Wagamama. The staff live and breathe why the mission is important will help you usually a good indicator understand the team’s on-site value in the the brand, which in turn hires people with a distinct, individualistic personality. The business and what it offers customers. This of a brand’s value” customers live and breathe it, embracing its includes general managers through to the unique service style and layout to return in waiting team and sous chefs – each are likely droves. You could probably replace the word Wagamama with to bring something different to the table. Nando’s and much of the above would be true – it’s another brand Speaking to business development managers or area managers, with a simple clarity. those who see multiple sites on a daily basis, is equally important. The key to deciphering a brand that has the chance to Going from site to site makes these members the gateway to outperform the industry lies in understanding which audiences it consistency within the business. They’ll understand better than needs to be speaking with to do it. Combining feedback and input anyone what the consistent strands in the brand are, in particular what from multiple sources is the best way to get the under the skin of customers in one town value that customers in another value as well. what that brand DNA looks like. Of course it’s also pivotal to get senior input. Leaders naturally have a great deal of influence over what defines a brand. Understanding what vision leaders are spreading within the Internal business is imperative. Combining these three levels of feedback will provide a Looking inwardly is usually a sound first port of call. There’s more substantial understanding of where the pride in the brand lies to this than having an internal workshop or trying to work it out internally. In terms of the mechanic, this doesn’t have to be one-toduring a board session. The key is representation – hearing and one chats. Focus groups with members of the team in comparable incorporating the voices from different levels and disciplines within roles are normally more effective, seeing what incites and catalyses the business. debate is usually a good indicator of a brand’s value. ▲ The on-site teams, back of house and front of house, are a



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The customer

an outward view and recognising where a brand has a positive gap versus the competition is usually one of the greatest foundations to develop a brand. With the internal state captured, next comes external. Speaking The question every brand has to ask itself is: “What’s in it to customers can again be complex but this is the most important for a customer to visit us as opposed to x, y and z?” What are stage in brand understanding. This isn’t as easy as just bundling the benefits of visiting the brand that don’t exist elsewhere? out a survey or conducting a few focus groups. In particular, what is it about the brand’s experience that’s Instead, the first task has to be understanding usage. Looking contributing to the value equation but isn’t for other brands? A at data and deciphering what level of loyal usage there is versus lot of operators over the years have said they passive, infrequent usage and working out have “great service” or “good-quality food”, which customer groups and demographics “This is about those but these don’t cut it. This is about those are particularly loyal brand advocates will help unique elements that unique elements that simply aren’t replicated identify who should be given a voice in the simply aren’t replicated elsewhere and, once again, these specifics are definition of the brand. It will also help to iron arguably the most valuable things to identify. out any geographical quirks and differences in elsewhere and these Wagamama has its katsu curries, making the customer types across the country. specifics are arguably brand accessible and bringing people through Once the different customer types have the most valuable the door time and time again. Nando’s has been identified, it’s key to speak to each type things to identify” peri-peri. in dedicated sessions – ideally taking into Furthermore, turning this activity on its account different geographic nuances as head and understanding what other brands customers in urban environments will be very do well by comparison can be valuable. However a word of different to those in secondary towns – to identify what they value warning – more often than not this isn’t an indicator to develop in the brand. Crucially, what’s the specific benefit of visiting the a brand, there’s usually a reason one brand is doing something brand versus another comparable brand? different. The heart of this exercise has to be identifying what you What’s the one thing that convinces them to walk through this do well rather than what others do well. brand’s door? This could be anything – it doesn’t need to be a Conducting a gap analysis, even via desktop research, and generic appreciation of the atmosphere, decor, menu or service. It comparing the brand with a competitor’s menu range, price, focus, could be something as specific as a particular dish they crave and drinks, environments and decor, TripAdvisor feedback for service adore. It could be a specific table they like sitting in. It could be a indicators, and even the digital and social media journey, will always specific voucher – although you’d hope not! It could be a certain unveil unique elements a brand can consider placing at its core. daypart on a specific day. Understanding the specifics that are Every brand in our sector will have its Wagamama moments, appreciated is even more valuable than understanding which topits Nando’s quirks. Sometimes it becomes immediately clear line areas of the offer are appreciated. when speaking to the various audiences that shape the brand. Looking deeply into how the loyal customers (those who visit Sometimes it’s a case of listening, and listening again, to the most often or spend the most) vary with those who don’t come consistent themes across the board. quite so often can also unearth gems. Very often learning what What’s always consistent is if people are going through a the typical casual dining or pub consumer values in a brand in venue’s doors, there’s a reason. If people are applying and then comparison to a niche, loyal customer is a better indicator of what waking up and coming to work for the business, there’s a reason could define greater mainstream appeal. to do so beyond their compensation. There’s a reason leaders are There’s often an instinct to involve lapsed or non-user customers leading in this particular business. There’s a reason competitors here but the reality is there isn’t a single brand that doesn’t stand are behind. All this, combined, is the synthesis of a brand. ■ to win from increased usage among loyals. When brands in this sector carry out research to see where else their loyal customers are visiting, they’re often surprised at the wallet share they don’t lay claim to. The opportunity to grow loyal usage always exists. Ann Elliott is chief executive of Elliotts,

The competition Finally, and staying external, is the competition. There’s a classic quote: “Managers look internally, leaders look externally.” Having

the leading integrated marketing agency in the hospitality and leisure sector – Follow her on Twitter: @elliottsagency ▲ AUTUMN 2018 PROPEL QUARTERLY



Opinion leaders Restaurant Marketer & Innovator hears from talented leaders from brands that cover digital, content, loyalty, brand training and market research

Could your brand be baby-booming? By Oliver Taylor, insight and research director for Elliotts Agency When you conduct qualitative research, focus groups and the like with about 1,000 consumers in 12 months, one of the really fun things about the job is picking up on the universal themes throughout the various streams of intel you’re gathering. During the past 12 months I’ve had the nagging feeling, growing the more groups I run, that there’s a significant disconnect between the feedback we’re getting from younger consumers compared with the older generation, the over-55 consumers who represent such a significant share of leisure and hospitality expenditure. This might sound obvious, after all any researcher worth their salt will make a point of gathering and cross-referencing feedback from differing demographics for this very reason, but there’s something deep-rooted here. The hypothesis? Consumers in this life stage feel disconnected with restaurant brands. They don’t believe brands make the same level of effort to connect with them and engage with them as they dedicate to younger generations. We’d heard enough in focus groups to suggest this was happening, but I wanted proof. I ran a quick online panel dedicated to the subject; nothing too large, just 100 consumers, but enough to satisfy me the inkling aligned to reality. The results were staggering – 52% of consumers aged 55 and over said there were no restaurant brands targeting people their age. In the south east, this figure was as high as 60%. But here’s the thing, there will be brands out there who want to target this demographic. They aren’t time poor. Incomes perhaps aren’t as stretched. They’ve both the time and the inclination to eat out. So what’s missing? Why do more than half of them believe they’re being forgotten? The first answer is marketing tactics. Almost two-thirds (65%) of consumers aged 55 and over told me they never look on social media to find new restaurants to visit or try. Conversely, only 20% said they never ask friends for recommendations. Rather than digital means, traditional means such as


door-drops and direct mail are preferred. It’s a personal touch that stands out – I can attest to that from what I’ve heard in person.

Perfect restaurant The second answer, the tougher answer, comes in the experience. I also asked consumers in this category to describe the perfect restaurant to me. Here’s the word cloud for all the answers I got to that question: You can see the main influences in crafting the “perfect restaurant”. Service (in particular friendly service) was mentioned in 76% of descriptions, 54% mentioned good food, 46% atmosphere and 38% cleanliness. For that top response of service a typical answer I received was: “My server doesn’t talk to me condescendingly; they have a conversation with me. And doesn’t rush me!” It sounds simple but you can tell the boundaries are narrow. Service teams need to be able to have a friendly conversation with customers but at the same time not try so hard as to become condescending. To make the job harder, engage too much and you risk looking like you’re trying to rush the customer. Experienced members of the service team have to lead by example. Good food was second and doesn’t necessarily translate as top-quality food, rather food that justifies and exceeds the expectations set down by its price point. The typical quote ratifies this nicely: “Good food that doesn’t cost the earth. Not mind-blowing


but good enough and comforting.” Atmosphere was third and could easily translate into ambience based on the responses. Here’s a good one: “Cosy ambience. I’m not saying really quiet but I’m not saying loud. Romanticises me.” Essentially the older customers are seeking out a subtle atmosphere rather than flat quietness. They want to feel safe but want to feel a comfortable buzz from the atmosphere. I’d be willing to bet (but of course can’t prove) there’s a traditional perception in our sector that older consumers are more functional in their approach to eating out. The above breakdown quashes that for me – cleanliness was only the fourth-highest factor, and quite some distance behind friendly service and a good atmosphere. When asked to give a spontaneous description of a perfect eating-out venue, the emotive elements of the customer experience come to the forefront. No doubt there are brands already doing this very well but this doesn’t sound like the hallmark of major chains. It will be interesting to see if any brands try to take ownership of such consumers in the drive to survive the Brexit Battle Royale. ▲

Oliver Taylor is insight and research director for Elliotts Agency and was listed in the Restaurant Marketer & Innovator 30 under 30 for 2018

Jumping on the loyalty scheme bandwagon By Claire Small, group marketing manager of ETM Group Getting more customers through the doors more regularly who spend more money each time they do. If you can’t become a verb – a la Facebook and Google – become a brand people love and trust enough to return to over and over again. That’s the holy grail of marketing. Sounds so simple it must be complicated, no? Perhaps. But does it have to be? Loyalty schemes have an incredibly important role in the hospitality industry. There are plenty of award-winning, revolutionary loyalty schemes out there – just think of the Nando’s card (and the infamous black card counterpart) and the My Starbucks Rewards app. They prove that when done right for the right audience, they can deliver excellent customer experience and drive revenue. I doubt marketers go long without feeling pressured to consider and develop a groundbreaking, industry-leading loyalty solution for their brand, whether it’s a small independent coffee chain or a nationwide, branded restaurant group. And with numerous, increasingly sophisticated solutions on the market it can be a costly and intimidating field to navigate. Before calling an emergency budgetrequest board meeting, could the solution lie closer to home? I’m talking about the on-site teams. Not so long ago identifying your most loyal customers lay in the hands of general managers and front-of-house staff. Relationships were built face to face, not by triggered emails, by chats at the bar and compliments to the chef, not push notifications. We’re in the business of hospitality; are sophisticated loyalty schemes driving us to lose sight of that?

Opportunity for operators With one in four UK customers eating out more due to restaurant offers (source: Worldpay, 2018), there is certainly opportunity for some operators. But I’ve been surprised by recent moves from some groups whose guests are city dwelling, affluent young professionals – investing huge proportions of their budgets in apps and membership cards. Consider the major reasons for guest visits, whether it’s a business meeting, special occasion or fuelling the Instagram feed at an “oh-my-god-youhave-to-go-there” venue, vouchers aren’t always functional, fancy or filter-friendly. Maximum opportunity for loyalty scheme

‘‘Not so long ago identifying your most loyal customers lay in the hands of general managers and front-ofhouse staff. Relationships were built face to face’’ success lies in the regular purchase, high competition, close proximity segment (ie daily coffee, post-work pint). The one-to-three times a year “splurge dining” occasions will be much harder to convert – and the incentive needed to drive sign-up and redemption much larger – so are unlikely to be as conducive to regular loyalty use. More than two-thirds (68%) of all UK consumers – and a whopping 75% of Generation Y – prefer to try new places when they eat out (Worldpay, 2018). With such a nomadic customer group, incentive schemes have to be meaningful to a customer and distinctive to a brand to alter behaviour. The average person in the UK is a member of 14.3 loyalty schemes (Deloitte, 2017). To break into the increasingly crowded loyaltyscheme market, a scheme must be easy to use and warrant its place front-of-mind for the guest. Deciding the platform on which the loyalty scheme will reside is one of the biggest decisions. Cards risk being lost or forgotten; anyway, who’s going to carry actual cards around when the world is moving to mobile? Phones don’t have unlimited memory – we’ll need to delete those loyalty apps we haven’t used in three months to download the next (insert favourite Netflix show here). So perhaps web is the answer. But hold on, who can actually remember whether or not they signed up to that loyalty scheme last year – never mind the password – or if they reconfirmed their newsletter subscription since GDPR regulations kicked in? There goes half the audience you were expecting for your exciting new summer offer e-shot. Shame. With investment in some top-of-the-range

loyalty platforms requiring six-figure sums – and costly continued subscription and retainer rates – being able to track, prove and deliver significant return on investment can be a challenge. Could those budgets be reallocated “Pret-style” to teams at a fraction of the cost, empowering them to surprise and delight? Surely that could be more hashtag generating, special feeling creating and repeat visit driving, not to mention allowing the true hospitality stars of the business a little more creative freedom and ownership of guest relationships?

Memorable experiences My most memorable, word of mouthspreading experiences are from the team behind the bar at the pub where I grew up. Ten years later, they still recognise my face and send out a chocolate brownie on the house. Or the friendly manager of the new salad bar around the corner from the office who mistakenly asked me how my Monday was going last month and always asks for an update on “housemate-gate” when I pop in. I’m a Starbucks gold card member – thanks to a genius flash sign-up offer in 2015 – congratulations Starbucks marketing team, I’ve retained my status ever since. I’ve also dabbled with Adventure Bar group’s online profile loyalty platform. I even have a few half-full old-fashioned stamp cards taking up valuable real estate in my purse. But as a fickle, exploratory, social media-using millennial Londoner, the appeal of being first to try the new Tel Aviv-inspired cafe in Hampstead Heath or a pop-up peanut butter fondue bar in Shoreditch I’ve seen in TimeOut will always beat getting one step further on my 20-stamp journey to a “free” 125ml glass of house wine at my favourite chain establishment. And you won’t change me, no matter how much your hand-held, eye-recognition, horoscope-based loyalty-creating device thinks it can. ▲

Claire Small is group marketing manager of ETM Group and was listed in the Restaurant Marketer & Innovator 30 Under 30 for 2018 AUTUMN 2018 PROPEL QUARTERLY



Strengthening the brand through team engagement By Sophie Evans, head of marketing, Be At One Any of you who’ve spent time in one of our cocktail bars will have seen first-hand how fundamental our bartenders are to delivering the unique guest experience that underpins our continued success. Be At One is not only a lighthouse for cocktail quality, our highly differentiated consumer offer resulting from innovation in team, brand and design means we continue to perform ahead of the market. Our brand is all about creating memories and giving guests a fun time so it drives advocacy, repeat visit and customer lifetime value. Having an engaged team that lives our brand values every day helps strengthen relationships with our loyal guests but also encourages new cocktail lovers into our bars. Results from our last Cocktail Insights Report revealed about 60% of Be At One guests got to know the brand because a friend took them to one of the bars or recommended it to them based on their experience. First and foremost, we select new recruits based on personality. For us, it’s critical we employ people with the right attitude and character whose main focus is to enhance our guests’ experience with lively and friendly service. Our bartenders are taken through an intensive training programme of up to eight weeks before they step behind one of our bars unassisted for the first time. Through this industry-leading development programme, we give them technical and life skills that will remain with them forever. Last year we underwent a brand evolution with an aim to create an integrated approach where our values flow through the entire business. Our previous branding, truth be told, didn’t fully reflect the Be At One


“personality”. The evolution injected an element of fun by using new colours, tone of voice and design. We knew from the start it was important we took our bar teams on the journey with us given how critical they are to delivering the brand experience. Be At One has great customer satisfaction scores and word of mouth performs strongly so we needed to get prospective customers who may not have heard of us to visit and enjoy the Be At One experience. Throughout the project we delivered face-to-face briefings with our teams in bars across the country. This facilitated an open, two-way dialogue and gained their feedback on various aspects of the evolution. Off the back of this feedback we made tweaks to our website and app features to ensure they were more user-friendly.

Digital challenge One of the things we are known for experientially is our bartenders helping guests choose a cocktail suited to a customer’s tastes. A challenge we have had is how to recreate this on a digital platform without taking away the bartenders. The functionality of the Drinkr feature on our app was directly influenced by bartender feedback and taps into the Tinder concept,

‘‘Having an engaged team that lives our brand values every day helps strengthen relationships with our loyal guests but also encourages new cocktail lovers into our bars’’


helping our guests navigate to their perfect cocktail. By a series of pre-constructed questions, guests can swipe right if they like something (for example, coffee) and swipe left if they don’t. This leads guests to a cocktail they can choose to “redeem” for £5 in a bar. The success of keeping everyone on the journey was evident through a social media “Thunderclap” exercise, which our team chose to support and help drive fantastic results. All 400-plus employees were asked to share a GIF promoting Life Is What You Mix It – our brand campaign – on their personal social channels with the relevant hashtag and tagging our Twitter handle. Every bar was given a unique tracking code and the bar that drove the highest amount of traffic to a specific web page won a staff party. Their combined effort meant the total number of people who saw the post topped 225,000. Investing significant time and effort into each of our employees has helped build our reputation and strengthen our brand. It also means we build a loyal and committed workforce – many of our bartenders stay with the company for longer than the industry average, while others go on to apply for head office roles. Importantly, it also drives the financial success of our business. We continue to perform ahead of the market with industryleading like-for-like sales of about 7%. We are now generating in excess of £50 revenue per labour hour across the group, demonstrating the strength of our business model and the amount of revenue each Be At One bartender generates. It is further testament to the consistently high performance of our engaged bar teams. We believe our brand lives and breathes in the heart of everything we do. Importantly, given the fact our three founders are themselves former bartenders, decisions are made through the eyes of our front-line team. We know how vital our bartenders are to delivering our brand promise for guests each and every day. ▲

Sophie Evans is head of marketing at Be At One

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The need for great photography and video in restaurant marketing By Emily Chambers, freelance hospitality sales, marketing and communications consultant Because of the ever-growing competition within the hospitality industry, it is vital for marketers to make their brand stand alone and become the preferred provider. There are endless solutions to do this – but visual marketing is key. Photography and video content play an integral part in marketing for any hospitality business. Whether you’re using content for social media, websites, public relations or advertising, a single image portrays a great deal of power. The visual content you communicate can make or break a marketing campaign and adversely affect your business’ sales. Imagery can perform many functions including catching a prospective customer’s eye, bringing concepts together and enhancing the appeal of a product or service. Although instrumental in marketing, imagery is often left until last, creating an “okay” advertising campaign rather than an exceptional one. When it comes to websites, it’s important to remember they are the face ce of your brand as well as the primary information mation source for your audience. In addition to being easy to navigate and instrumental in increasing reservations, websites must be visually appealing otherwise fundamentally they won’t deliver. First impressions are paramount.

‘‘The visual content you communicate can make or break a marketing campaign and adversely affect your business’ sales’’

Dealing with the press The press is also becoming increasingly selective when it comes to what it features and photography plays a part in this selection. If you have a great story without effective imagery, it probably won’t be featured. Social media has changed the face of marketing, providing the opportunity to reach out to your specific target market. More than three billion people around the world use social media each month, with nine in ten accessing their chosen platforms via mobile devices (source: 2018 Global Digital suite of reports from We Are Social and Hootsuite). With the popularity of image-led channels such as Instagram and Pinterest, photos and videos are now at the forefront of social media, making it increasingly important to experiment with different content and compete with your competitors locally and digitally in all visual forms.


Video marketing is an effective tool to connect to your consumers. Last year, almost half (49%) of marketers using video content grew revenue faster than non-video users (source: Wordstream 2017 video marketing statistics). Providing more detail than a single photo, video allows your brand to communicate a detailed and specific message. With the growth of YouTube, vlogs and Instagram Stories, videos are emerging as a market leader for marketers and, although the tools at hand may seem overwhelming at times, video is one not to be missed. The channel you use is also worth noting. YouTube has more than a billion users and each day those users watch a billion hours of video, making it the leading platform for video content. On Instagram, video consumption has increased 40% but photos


generate 36% more likes. On gene Instagram Stories, viewers tend Insta drop off after four seconds, to d showing the need to keep sho video clips short and sweet. It vid is iimportant to understand not every channel is the same so carry eve out your research and ensure ou you’re not wasting your time or yo content. co It is also important to “shop around” when it comes to a retaining a photographer or re vvideographer. There are so many out there to choose from m and in general they don’t come a cheap, so do your research cche and always look through their a portfolios and ensure their p sskills are relevant. Once hired, briefing and styling is vital – b as a marketing manager you must become director of the m shoot and ensure your brand sh is portrayed correctly. Lighting also crucial. Photographs is a taken by natural daylight are tak always better and if daylight isn’t alw available, the photographer must avai be iinformed and prepared. When posting a photograph W video you must never forget or vid ask yourself “why?” As well to as representing your brand, the as rep content must navigate the user to conte your end goal. If a picture is worth a thousand words, think about what you want that picture to say. If you own a hotel and post a beautiful image of the hotel’s spa, your main goal should be to drive traffic to your spa’s website not achieve 1,000 empty “likes”. In the digital world we live in, you need to know exactly what will stimulate your audience and drive sales to your business. Text-based content is always going to be an integral part of marketing but visual content in terms of photography and video must be at the forefront. Storytelling is powerful and also competitive – ultimately you write your brand’s story. Make it bold, beautiful and informative in both visual and contextual sense and you will stand out from the crowd. ▲

Emily Chambers is former group sales and marketing manager of Jason Atherton’s Social Company. She is now a freelance marketing consultant and was listed in the Restaurant Marketer & Innovator 30 Under 30 list for 2018


The return of your customers – this time it's personal By David Charlton, commercial director of Zonal Marketing Technologies In today’s competitive market where customers have so much choice, hospitality operators need to be smarter and find cost-effective ways to attract – and retain – customers With more choice than ever on the high street and online, hospitality businesses are finding it increasingly challenging to attract and retain customers. The home delivery market in particular has grown an astonishing 73% during the past decade, driven by the Netflix generation who want instant access and on-demand service, and is now worth a whopping £4.2bn. Advances in technology are providing new ways to address these challenges, allowing businesses to become smarter and more cost-effective, from initial bookings through to feedback and loyalty. The days of working nine to five have gone and flexible working, coupled with 24/7 lifestyles, means consumers are more spontaneous and put convenience and swift service at the top of their list of priorities and see the use of mobile devices as a good way to overcome these frustrations.

Online bookings First impressions count and this often starts before a customer steps across your threshold. Customers don’t just want to research restaurants and pubs online, they expect to be able to book online too, and if they can’t find and book your venue quickly, they will swiftly move on to somewhere they can. Therefore, operators need a reservations system that can keep up with customer behaviour and deliver an excellent experience at all times. By deploying an online booking system that shows real-time availability, businesses can better meet the expectations of customers. But to be truly effective any booking system needs to deliver operational connectivity across all channels – website, telephone and walk-ins – so operators have a seamless picture of all bookings at the tap of a finger by allowing all reservations to feed into one live system. An online booking system also allows businesses to build a GDPR-compliant loyalty database. This information can then be used to better understand customers and tailor offers and promotions to their preferences.

Why apps are so app-ealing Being on the go 24/7 also means time and convenience are powerful motivators for customers. Any business that can create easy time savings is on to a winner, particularly in relation to leisure activities. This is supported by GO Technology, a quarterly report by Zonal and CGA, which


tracks the eating and drinking out technology habits of 5,000 adult consumers. GO Technology indicates speed is the key driver for diners who like to use their mobile device to pre-order and pay for food and drink, with more than one-third (36%) of respondents citing this as their main reason for using an app. Convenience is another major factor, with 22% opting for pre-order and online payment during busy trading times or for convenience when part of a large group (21.63%). Also, 82% are more likely to use a restaurant’s own app as opposed to a thirdparty provider, with trust being a major factor. Therefore it should come as no surprise hospitality providers are joining the race to develop their own apps. At Zonal Marketing Technologies we have seen this played out in the number of enquiries we’ve received from customers, with a steep increase of 400% during the past 12 months. Order and pay at table technology gives customers greater control of their own experience and by empowering customers to take care of the “administrative tasks” front-of-house staff are able to devote more time and attention to making their visit more enjoyable and personable. And don’t underestimate your customers’ technical ability – 69% have already placed food orders using mobile devices.

Building loyalty It’s not just about giving customers a fantastic, seamless experience – understanding their spending habits is crucial to building loyalty. Through integrated technology, operators can review and analyse a customer’s entire purchase history and build a better understanding of them as an individual. This profile is invaluable, giving actionable insights that allow you to better serve each customer. Putting that information to work allows you to create specific, relevant communications and deals that speak directly to the customer’s preferences, helping to tempt them back. For example, if a customer drinks the same red wine when she’s in your venue but hasn’t visited for more than a month, an email offering a free glass of that wine when she next visits is more likely to encourage her to make a booking than a generic “10% discount” email. Do not underestimate the importance of personalisation either. Almost threequarters (72%) of consumers say they expect


companies to understand their unique needs and expectations. What happens if you don’t personalise? Almost two-thirds (66%) say they’re likely to switch brands if they feel they are not being treated as an individual. While data and analytics are invaluable for understanding your customers there will still be gaps, particularly when you’re dealing with first-time visitors. The best way to capture information about their experience is simply to ask them through an insight tool such as Feed It Back. Thanks to the system’s integration with EPOS, customer feedback is combined with their order data to give a complete picture of what they ordered and how much they spent. Ultimately, building customer loyalty should be the goal of any technology project. Everyone loves a freebie but those that are tailored to individual tastes and preferences are without doubt more successful, with 40% of consumers citing this as key to driving loyalty (source: GO Technology). EPOS data allows operators to identify their customers’ preferred food and drink – so why not offer a discount on their favourite meal next visit?

Competitive advantage There is no doubt technology is transforming the hospitality industry – driven by consumer demand – and the key to success is integration. Hospitality businesses generate a huge amount of customer data that can be put to good use, if it’s harnessed in the right way. However, when IT systems evolve with online, EPOS and reservations databases coming from different providers or using incompatible platforms, this leads to inefficiencies and silo thinking. Then there’s the stock control system, accounting system, customer feedback system, and anything else you care to mention. To deliver a seamless and efficient customer experience, it will be those businesses that embrace technology and unify their systems so they can automate everyday interactions that will be in a position to extend their competitive advantage. ■

David Charlton is commercial director of Zonal Marketing Technologies, an event partner for the Restaurant Marketer & Innovator European Summit, which will be held in London in January 2019


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To be or not to be

Professor Chris Edger looks at what lessons business leaders can take on board when deciding to pursue a singlebranded or multibranded growth path



s it better to be a single-branded organisation (SBO) or a multi-branded organisation (MBO) within the pub, bar and restaurant sector? This is a question I am frequently asked by students and executives on my multi-unit leadership programmes, which I have been running for almost a decade at our high-performance university academy. It is a difficult question to answer! There are innumerable examples of category-killing SBOs – McDonald’s, Pret A Manger, Domino’s, JD Wetherspoon, Nando’s, Wagamama – that seem to prove SBOs provide a more effective path to strategic success. On the other hand, several pub companies – forced to leverage historic assets in differing demographic locations – have proved more than capable of evolving into outstanding multi-branded or format organisations (current exemplars include Stonegate Pub Company, Fuller’s, Young’s and Marston’s). But what measures of success can we apply to resolve the debate once and for all and what lessons can business leaders take on board when deciding to pursue an SBO or MBO path to growth? Academics have identified a tight range of measures and characteristics that are fundamental to successful service-based SBOs. Leonard Berry in his seminal article Cultivating Service Brand Equity argues all strong service brands have the following four features – they dare to be different; determine their own fame (provide a valuable market offer that focuses


on unserved market needs); make an emotional connection with consumers; and are successful at internalising the brand’s key attributes for service providers. In his best-selling book Creating Powerful Brands, Leslie de Chernatony highlights three fundamental pre-requisites for service brand success – a focused position (ruthless clarity about what the brand stands for); consistency (of product quality and experience); and values (unified and inspirational internal belief systems that bind the brand together). Clearly category-killing SBOs such as Wetherspoon and Nando’s incorporate and over-index on all these features and failing SBOs (several notable casual dining examples in the UK) lack them! But is it possible for MBOs to craft and maintain these essential pre-requisites of success given their more complex, ambiguous and diffuse organisational structures and forms? Executives generally justify their MBO structures in three ways. First, they will bolt on assets or create new formats, claiming such additions create greater economies of scale through leveraging pre-existing support/ IT infrastructure, greater buying power and collective knowledge transfer. Second, they will argue creating an MBO structure will increase their levels of portfolio optimisation (their ability to provide the “right offer for the right occasion in the right place” and create an organisational entity that can run several assets in proximal locations). Third, they will justify an MBO structure along the lines of corporate ▲

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Insight “The problem with MBOs is they often run into serious problems because their formats converge, becoming insufficiently differentiated”

resilience (a spread of branded formats addressing different consumer segments reduces risk; one brand/format compensating for another during economic/demographic fluctuations). The problem with MBOs, however, is they often run into serious problems because their formats converge, becoming insufficiently differentiated. Why? Management becomes distracted by fixing sub-optimal “lagging assets”, senior leadership becomes too detached from the founding DNA of their multiple brands, front-line operators become despondent over their diluted identity and focus, and disappointed or disapproving customers abandon the brand in droves!

So how can MBOs flourish? I would point to three things successful MBOs do:

• Market separation – to maintain their brands’ identity, personality and evolution they create structures where there is complete separation between their differing consumerfacing offers. Individual brands/formats are protected from homogenisation in MBOs through separate structures, where the operators and teams can address their market segment with clarity and energy. Marketing, branding, recruitment, product development and design aren’t shared, they are owned by the brand. Distinctive, committed tribes are created with a sense of real meaning, purpose and identity.

• Decision-making autonomy – leaders of brands within MBOs sit under a corporate technocratic structure that often enjoys nothing more than tinkering and interfering with its “branded toys”. Unsuccessful MBOs have corporate centres that meddle, interfere and slow things down. Successful MBOs act more as holding companies, providing capital and expertise as and when required. They trust the decision-making capabilities of their brand leaders – experts within their respective domains – to craft, evolve and lead their businesses to outperform their respective competitive set. Ownership, accountability and agility is strengthened by devolved decision-making powers to the individual brand leaders within MBOs.

• In-brand succession – one of the fallacies of MBO structures is the notion such configurations enable best-practice knowledge and talent transfer, strengthening the overall corporate entity. The reality is that having created strong brands/formats with powerful tribal identities, the individual brands themselves are the best breeding grounds for succession and knowledge transfer. People who have grown up with


and “lived” the brand are far more likely to intuitively understand what its customers crave and expend more discretionary effort to ensure its prosperity and success. Often – as shown through multiple engagement survey results – people who work for individual brands within MBOs express far greater levels of loyalty to their respective brands than their overarching corporate entity. Focusing on developing/progressing people within individual brands rather than trying to propagate futile cross-brand talent transference is a far more important function for successful MBOs. In summary, the debate over whether it is better to aspire to the status of categorykilling SBOs such as Wetherspoon and Nando’s or optimal MBOs such as Stonegate and Marston’s is one that will continue to rage in my classroom! As this article argues, there are best practice features and common pitfalls that apply to both models. For most organisations, however, it is not a matter of choice, their structure is probably cast in stone – more through an accident of history and naked opportunism than rational planning. The real exam question might actually be how SBOs and MBOs should leverage the strategic assets and capabilities they currently have to carve out sustainable competitive advantage in the turbulent times ahead! This is a question that will merit further analysis and discussion. ■


“Marketing, branding, recruitment, product development and design aren’t shared, they are owned by the brand”

Professor Chris Edger is a leadership author, speaker and coach and author of Inspirational Leadership with Tony ▲ Hughes


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