Propel Quarterly Summer 2016

Page 1


Andy Harris, Landlord Temple Brew House, London

This summer’s winning line-up

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ISSUE 15 • SUMMER 2016

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

Head Coach

Inside: Peter Marks interviewed Making big business out of breakfast The growth of Small Batch Coffee Luke Johnson interviewed Lessons in brand creation Working with the thin blue line Performance conversations Online food ordering for the tech-savvy elderly

Kevin Charity interviewed


ISSUE 15 • SUMMER 2016

Editor’s Opinion

Editor’s Opinion

Let’s not be afraid A once-in-a-generation vote looms on 23 June. Should the UK vote to remain in Europe or choose to go its own way? So far, uncertainty has been the chief characteristic of the debate. As poll results veer wildly, most people I speak to complain of an information deficit. As Association of Licensed Multiple Retailers (ALMR) chief executive Kate Nicholls said recently: "Much of the concern from operators appears to be the sense of uncertainty as to what will actually happen following the vote, particularly should Brexit actually occur. Unfortunately, the uncertainty surrounding the potential EU exit is creating a lack of clarity and, as we know, nothing undermines confidence and hinders potential investment like a lack of certainty." Employment minister Priti Patel has perhaps argued the case to hospitality companies for leaving the European Union most cogently. Speaking at the ALMR spring conference in London, Patel argued the economic benefits of “standing tall as a free, independent and sovereign country”. She said: “The UK has not managed to block a single proposal from becoming law through the EU Council, costing this country £2.4bn each year. Not only does this undermine our democracy as we are unable to hold European decision-makers to account, it has devastating consequences for our economy. In 2005, the Treasury estimated the costs of the ‘single market’ could be over £125bn per year, the equivalent of 7% of GDP, £4,639 per household, or £23,236 per company. "By getting rid of some of the EU rules that make it so difficult to create employment, we could deliver a £4.3bn boost to our economy and 60,000 new jobs. Cutting EU red tape on business – starting with small and medium-sized businesses – will be a valuable boost to productivity, growth and job creation. History also tells us the prosperity of our businesses cannot be left in the hands of the EU. Last year, it turned its fire on small-scale cider producers demanding the removal of tax exemptions. Your business and interests could be next. Voting to leave the EU will also give us back control over our borders and our immigration policy. This does not mean we will close our borders – I know how important migrant labour is for your businesses and the hospitality, leisure and retail sector – but it means we can put in place robust controls that enable us to bring in the brightest and the best from around the world and recruit to fill shortages in the labour market. "Our choice on 23 June is a clear one. We can choose to remain in an unaccountable, unreformed EU that damages British business, takes our money, and puts our future prosperity at risk. Or we can vote for a positive and secure future as a free, independent and sovereign country, where we can spend our own money on our own priorities, make our own laws, take an axe to EU red tape to free enterprise, and make the most of the potential and talent our great country has to offer.” My own views are in line with Patel's. For me, this is a common-sense issue. What sensible business would hand over far-reaching powers and pay for the privilege? The EU has not been an economic success, leading to extraordinarily high rates of youth unemployment in member states that have fallen victim to the centrifugal effects forecast by former euorsceptic MP Richard Body in his book A Europe of Many Circles – he argued forcefully 25 years ago the EU would cause economic power to gravitate to the centre of the union to the cost of countries on the geographic edges. I believe the UK has only escaped these powerful forces because this country kept its own currency. The compelling logic of this is we take the next step to recoup the powers required to chart our own way in the world.

Best wishes,

Paul Paul Charity ¡ SUMMER 2016 ¡ PROPEL QUARTERLY



Contents 10

Making big business out of breakfast Sonya Hook interviews Sam Roberts of Boston Tea Party





Online food ordering for the tech-savvy elderly

by Glynn Davis

by David Martin






The growth of Small Batch Coffee


Night fever


Smooth operator


Czech mate


Newspaper doublethink


Head coach


Propel Multi Club Conference


Lessons in brand creation


Site for sore eyes


The quick and the good


Working with the thin blue line


Stay relevant to survive


Performance conversations

Published by Propel Hospitality The Goose House, Brighton Road Lower Beeding, West Sussex RH13 6NQ

Director Jo Charity T: 01444 810304 E:

Managing Director Paul Charity T: 01444 810306 E:

Commercial Director Sharon Dickinson T: 01444 810305 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 892685 E:


Sonya Hook interviews chief executive Nigel Lambe and co-founder Al Tomlins

John Porter interviews Peter Marks, chief executive of Deltic

Paul Charity interviews sector invester Luke Johnson

Glynn Davis interviews Jamie Hawksworth, co-founder of Pivovar

by Kate Nicholls

John Porter interviews Kevin Charity, The Coaching Inn Group founder and managing director

in pictures

by Chris Edger and Tony Hughes

by Ann Elliott

by Maria Bertoch

by Paul Chase

by Gareth Powell

by Lee Sheldon Contributors Maria Bertoch, Paul Chase, Glynn Davis, Chris Edger, Ann Elliott, Sonya Hook, Tony Hughes, David Martin, Kate Nicholls, John Porter, Gareth Powell, Sam Roberts, Lee Sheldon Printing and Distribution Evonprint, Mackley Estate, Henfield Road, Small Dole, West Sussex, BN5 9XR


uarterly ©Propel Hospitality Ltd. 2016



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Making big business out of breakfast


reakfast has become big business and, luckily for Sam Roberts, a good family brunch was something he had his heart set on in 2005, before it became big business. “We saw a massive opportunity in breakfast back then,” he explains. “It was a time when in many households both parents were working, which was very different to the

Sam Roberts, managing director and owner of Boston Tea Party, tells Sonya Hook how he turned a small coffee shop chain in Bristol into an 18-strong brand with plans to open five further sites a year across the UK

Sam Roberts



1980s when families breakfasted together as a whole. It was all starting to change around that time. “Breakfast was our original business plan; to serve great breakfasts and brunches from 7am until 9pm.” There was one problem – in 2005 Roberts had no experience in the cafe business; his background was in advertising. In addition, Boston Tea Party at that time operated three sites and Roberts took it on as a going concern. Fast-forward ten years and it’s a thriving company with 18 sites and plans to open five a year across the UK. So how did Roberts make a success story out of brunch?

Setting out “Although at the time I worked in advertising I grew up in gastro-pubs and was drawn back to the industry,” he explains. “I had a business partner, Giles Clark, and we identified the kind of business we wanted to take on. I looked at a few places but I fell in love with the brand and the ethos of the Boston Tea Party; plus it had an anti-corporation vibe, which appealed to me.” Boston Tea Party launched in Bristol as a quintessential coffee shop in 1996 and, at the time Roberts and Clark bought it, consisted of three cafes and a franchise. “We kept the name; it gave us the flexibility to use the tea party aspect, which is reflective of good times, and we felt it allowed us to innovate,” says Roberts. “It also had a good customer base from the start, which helped us.” Another appealing thing about the business was Roberts and Clark both immediately identified areas they felt they ▲

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Feature could improve on. “We’ve been doing that over the past ten years,” he says. Naturally, though, there were a number of challenges when they started out. “We had to learn fast, and there were a number of things that became challenging,” Roberts says. “For example, we identified Barnstaple as a good site but, as we were based in Bristol, we learned the hard way the importance of geography and infrastructure. After that we expanded to locations that were not too spread out.”

Making it work Another challenge they faced was how to scale the business without changing it too much. Roberts explains: “When we took the business on it was 70% coffee and tea but we set about changing this and now we are 60% food-led, and we have massively added to the menu. “We have a head of coffee and a head of food, who work on the product development. We turned it from a coffee shop to an all-day cafe with dining service. “To do this meant we needed to get people in who understood what we were trying to do. Some venues have 150 covers, so it was all about developing the quality of table service. We now have 450 staff members and this is growing all the time. “For our management team it is all about trying to get people who share our ethics and our locally produced idea, and this can be a challenge.” It’s something Roberts has been focusing more on recently and the company now employs an HR director. Another way in that Roberts has managed to tackle this challenge has been to adapt the business to suit the site. “Opening hours can be flexible; great breakfasts and fantastic coffee works everywhere we go,” he says. “We see the company as a collection of individual businesses and this helps us to maintain our independent spirit. Stores can vary and some have more of a take-out function; it depends on the area.” It has been a successful strategy so far. The overall turnover for the company this year is predicted at £16m. “Normally we see 20 to 25% growth a year annually and we broke £1m Ebitda about a year ago,” Roberts says. The sites work well because it tends to be a destination business. “It means we don’t need to pay premium rates for key high-street pitches; we can be off the beaten track a bit,” Roberts says. “In Bath, we have a lovely building and people make it their destination to go there, although it has no real passing footfall.” Expanding the business is funded partly with cash and partly with rolling credit through Santander. “We agreed a £3m rolling credit deal with them last year and this allows us to finance our expansion,” adds Roberts. “We have no interest in expanding too fast; our biggest threat to the soul of the business is the speed of roll-out so we have no interest in going too quickly. We will take our time and this method of finance allows us to do that.” ▲ ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


Feature What’s on the menu? The main aim of Boston Tea Party is to appeal to people who might want to go out with their partner or families for breakfast, or for a weekend bunch. The menu features dishes with mouthwatering titles such as Chorizo Hash or Sourdough Eggy Bread with Smoked Bacon and Avocado. Roberts says: “We do things you might want to have for a treat for a weekend brunch, but health is also a key focus. So we have things like eggs benedict and kedgeree. They are healthy but are quite big meals. “At the moment, we are trying to encourage people to dine with us more frequently as we have had research done which shows people tend to come just once a month.” For the future, Boston Tea Party is adding gluten and wheat-free options to the menu, as well as meals with less bread. “We are looking at the smaller dietary concerns and making sure we address these,” says Roberts. “In January, we added more health and wellbeing options so various dishes with avocado, hummus, rye bread and also brown-rice porridge. Along with this, we introduced the slogan ‘Healthy doesn’t have to mean hungry’.” When Boston Tea Party launches a store, it invites people in to eat for free to help build up business. “Having spent seven years in advertising I know what a waste of time it can be now,” says Roberts. “Sampling is incredibly effective, so we do things like sending a big local business a load of cake to say hello. If you have confidence in your product, it’s the best way to spread the word.” Coffee and breakfast continue to be the main areas of focus, and it’s a strategy that has worked well for the company from the start. “I am still amazed by the amount of places that don’t do nice coffee and breakfast,” says Roberts. “We are able to go into new towns where there is no offer there to compare with ours.”



“We do things like sending a big local business a load of cake to say hello. If you have confidence in your product, it’s the best way to spread the word”


The company has 18 sites, with the most recent in Stratford-upon-Avon, its first venue in Warwickshire. “We opened there on Easter weekend,” says Roberts. “It’s already a nice and steady business and it is trading well. When preparing a new team, one of the biggest challenges is preparing them for how incredibly busy it can be. It’s hard to replicate that when you’re training, but we are happy with it so far.” The company plans to open five sites a year, although this year the total will be three. Earlier this year, the company’s plans to open a venue on the site of a former Kwik Fit in the Birmingham suburb of Moseley fell through. The company still hopes to open in Moseley but the six to 12-month setback means the company will open less sites this year. “We are looking to do five a year and we hope to do this in 2017 and 2018, but it’s far from set in stone. We look for sites that are 3,000 to 3,500 square feet. “One of the key things we have learned is to expand in regional hubs and so we are looking predominantly at the Midlands. We hope to open in Edgbaston early next year and are looking at Solihull and Sutton Coldfield.” Boston Tea Party also aims to expand in the south. “Spa towns work well for us, such as Leamington Spa,” says Roberts. “We will mainly focus on the Midlands and then the south coast, so Chichester, Southampton, Winchester, Bournemouth, those kinds of areas. Those are our core focuses for the next few years and then beyond that we may look around London, so Basingstoke or Milton Keynes.”

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Glynn Davis looks at the ways restaurants are tackling the crippling problem of no-show diners


seats, train tickets, and hotel rooms – as well as taxi rides hen making a booking at Alain Passard's L'Arpège with Uber – are charged at constantly varying prices. They are restaurant in Paris a full eight months in advance, dependent on supply and demand (and also, controversially, rain I agreed via email to forfeit 200 per person if I levels in the case of Uber). fail to show up on the due date and I will be But when it comes to restaurants – and retailers for that matter expected to contact the restaurant the day before the meal to – there seems to be an outcry when operators start to even confirm my attendance. suggest the idea of introducing a system that might sell a croissant This is all rather like signing a pre-nuptial agreement before for £2 at 9am but then knock it down to 50p at 3pm. It's not as if marriage (I suspect). It takes a little of the romance away from market traders' stalls haven't done this since the dawn of retailing. a special occasion. But I fully appreciate the situation facing It is clearly only a question of time before dynamic pricing incredibly popular restaurants that only have a modest number of is used more broadly in consumer-facing industries where it covers and need to maximise their revenues by avoiding the killer makes sense. With its troubles from no-shows – as well as the factor in such businesses – the no-show. desire to simply fill empty tables at quiet times – the restaurant It was just such an affliction that almost killed Hibiscus when sector looks to be in prime position to adopt such progressive it moved from Ludlow to London. And as incredible as it sounds, pricing policies. It has already started in fact. Norse restaurant in restaurants such as the upmarket Indian Gymkhana have an Harrogate is using Tock to give discounts on the bill determined average of 30 no-shows or late cancellations each day. This by the day of the week – so Tuesday is 25% cheaper can be crippling and is why the company has introduced than Saturday. a no-booking policy at its sister restaurant Hoppers, The industry certainly went gung-ho with selling which enables it to serve up to 250 people per day “Restaurants pre-paid discounted meals through the likes of from a very modest 36 seats. such as the Groupon, which delivered way less value to For those people (including me) who cannot restaurants than the adoption of systems such upmarket Indian comprehend waiting in line for anything, the as Tock could potentially provide. Restaurants restaurant uses queue management system Gymkhana have can enjoy total control over their pricing – from Qudini, which frees diners to go elsewhere an average of 30 charging premium and discounted prices for a drink while they wait to receive a text no-shows or late according to the supply and demand dynamic. informing them their table is finally available. Where there is downside risk for the industry cancellations This is all hunky dory for fast-casual venues from pre-paid bookings is the appearance of each day” with low average spends but for the upper end secondary markets where meals are sold on at with elaborate menus, that sort of no-booking seriously inflated prices. Despite the best efforts policy is simply unworkable. This is why restaurants of artists such as Adele, the music industry has largely are presently coming to terms with harnessing the latest failed to limit the activities of touts. It is therefore highly likely technology to avoid the margin-killing no-show issue. meal bookings at very short notice for the most premium The heart of any such solution is likely to involve the customer establishments could command seriously high prices. paying in advance for their meal. It's rather surprising there is This would be a problem for the industry because it would such a negative sentiment held in many quarters to such systems undoubtedly lead to the premier in-demand restaurants being because it's not as if we are not used to paying ahead for hotels, filled with expense account customers wining and dining their flights and other such leisure experiences and services. contacts and potential clients. Gone would be the largely One such restaurant solution is US-based Tock, which has democratic mix in our restaurants today that add vitality to the been installed by London-based Clove Club after initially being dining experience. One of the reasons I avoid eating out on used at Per Se, French Laundry and Alinea in America. When Valentine's evening is because of the one-dimensional mix of the the booking is made, the customer selects the type of menu diners, which creates a rather boring hushed tone. they want – at Clove Club there are different set menus – and The march of technology will undoubtedly make Alain matching wines can also be selected and pre-paid too. Passard's clunky system of avoiding no-shows a thing of the While any genuine restaurant-goer should have no qualms past but care must be taken because technology solutions have about such a system – provided it enables a refund option for a remarkable record of all too often leading to unintended people who have a real reason why they are unable to make it for consequences. Just ask the music industry. a booking – concerns do arise with these new systems' capability to allow higher prices to be charged at the most popular times. Again, dynamic pricing is not exactly unusual in today's Glynn Davis is a leading commentator on retail trends internet-enabled society. Everybody accepts the price of airline



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Will you still feed me... when I’m 84? Online food ordering for the tech-savvy elderly will become a massive market, says David Martin, so ignore the burgeoning elderly population at your peril


n a year that has already taken a heavy toll on the music world, we recently lost George Martin – no relation – a genius of musical invention who died aged 90, part of a booming cohort of the very old. The song hardly represents the peak of his magical musical tour with The Beatles, but When I’m 64 – a song written by Paul McCartney as early as 1958, long before its eventual release – is worth musing on. In 1958, to be 64 was to be over the hill. Not surprising given the average life expectancy of people born at the start of the 20th century was about 50. For children born nowadays, the odds are they will live to be about 80, and in the more affluent parts of the country, 90 will become an unremarkable age. The scale of this change is profound, and it’s global – here’s a watershed moment revealed in a recent US Census Bureau report: “For the first time in human history, people aged 65 and over will outnumber children under five. This crossing is just around the corner, before 2020.” In the 1950s, only about one in ten of the UK population was aged over 65. Since then, their numbers have almost doubled, an extra five million people, and they now form 18% of the population. In ten years’ time, we already know the numbers of over-65s will have grown by a further 20% – that’s another two million people. But how much business empathy is there with this high-growth market? How much interest is there in marketing to it? I’d suggest there is little – for two key reasons. Firstly, we tend to think about the old as they are now, or as they used to be. Secondly, the marketing department tends to be young, especially in these digital days. It’s not as if the economic importance of the older population is unknown. Here’s some recent US data from advertising guru Bob Hoffman, quoted in Business Insider: "According to research company Nielsen, people over 50 are the most valuable people in the history of marketing. In the US, they are responsible for 50% of all consumer spending [and]


control about 70% of the wealth of the US... and yet people over 50 are the target of 10% of marketing activity in the US.” He also noted over-50s only formed 6% of the population of the US ad industry.

Age imbalance Before we get too smug about the ad industry, we should consider recent Office for National Statistics (ONS) data on the employment characteristics of the UK hospitality industry. In what it quaintly calls "food and beverage serving activities" (I think they mean us), the proportion of workers aged over 60 was a mere 4%. Compare that with consumer data from CGA Peach’s Brand Track, where one in five people who eat out are aged 65-plus. Meanwhile, 52% of the hospitality workforce is aged 16 to 29. That’s not exactly well matched, and responses to the National Living Wage may well amplify this imbalance.

“For the foodservice world, it’s worth viewing old people through some new lenses” However, the story so far conceals a bigger trend – even higher population growth at the upper end of the age range. The number of people in the UK aged at least 85 will grow by 30% in the next ten years, by which time they will number two million. There were only about 300,000 of them when McCartney wrote that song. Extend the view further out and more than one in 12 people will be aged over 80 by 2039. Hard as it is for some of us to accept, those reaching their mid-80s in ten years’ time are McCartney’s generation. They are likely to be healthier in later life than their forebears ever were, with much more adventurous tastes, and far more of them will be online – the data on internet access from the ONS amply demonstrates it. But another fairly safe prediction is that despite these life advantages, this burgeoning very-old population will not be hugely mobile. They will have


been accustomed to routinely eating out throughout their adult life, much more so than their predecessors, but time will inevitably take its toll on their ability to maintain the habit. So who will still feed them? The delivery market is very much in vogue, but the current focus is largely on the young metropolitan market. It makes sense – last year, CGA Peach’s Brand Track survey revealed more than 40% of delivery users were aged under-35, with three quarters of 18 to 24-year-olds saying they’d had a meal delivered in the past six months, compared with only one in four of those aged 65 and over. But the elderly had meal delivery long before the rest of us – the Meals on Wheels service dates to the 1940s. And in terms of ready-meal delivery, Wiltshire Farm Foods has been around for almost 25 years. The average age of its customers is 83, and while its menu is still solidly centred on traditional tastes, they can already live a little dangerously – with a lamb tagine. To bring this argument’s long and winding road back to George Martin, his musical genius was in applying the new and innovative to an established genre – with a mould-breaking creative effect. Online food ordering – recently described as the "modern day milkman" – has transformed the traditional grocery retail sector. But in our industry, who’s going to deliver the modern day meals on wheels for the fast-growing, online-savvy elderly of the near future? It will require a kind of business empathy for the old market that is all too rare now – and my market research world is just as guilty of ignoring the old. But few, if any, consumer markets will grow so fast in the coming years and, unlike the uncertainty of most business forecasts, the beauty of demography is we know these changes will happen. For the foodservice world, it’s worth viewing old people through some new lenses.

David Martin is managing director of Red Circle Insight, a market and customer insight resource


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Don’t let all your hard work go up in smoke Equipro Worldwide managing director Bert Schultink, who has a long history in assisting restaurants reduce the risk of fires in commercial kitchens, shares his experience about how best to protect your business


ou have poured your life and soul into your business and the threat of weeks of closure of your operation would cause you to lose more than just sleep at night. Heat and fuel are all very present in a busy kitchen area. The hot fats, oils and heat sources along the cooking range create the perfect opportunity for a fire to take hold and in the UK alone some 2,500 to 3,000 businesses are impacted by a restaurant fire requiring fire brigade intervention every year. It’s no secret if the fire brigade is needed to put out the fire the damage is already significant and the threat of downtime and the inability to serve customers becomes very real. When a kitchen fire takes hold, the high energy developing flames and thick black smoke can quickly devour the kitchen and spread via extraction ducts and other flammable materials to other areas. The space is quickly consumed and the business out of operation potentially for weeks or months as you get to grapple with the insurance companies and their warranty clauses and exclusions as well as builders and renovators. The impact that would have on your business capability to survive only you would know but there is a way to stop this threat in its tracks and allow you to sleep deep and well at night. Installing an automatic fire detection and suppression system to protect the cooking range can mitigate the risk of fire in a commercial kitchen to an extent any downtime is related to a minor clean up and your operation continues doing business seamlessly – keeping your customers happy.

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Al Tomlins (left)

Full of beans Sonya Hook talks to Small Batch Coffee’s Nigel Lambe (chief executive) and Al Tomlins (head of coffee) on how they grew from a single five kilo roasting machine into seven cafes around Brighton and Hove, a successful wholesale business and attracting investment from Luke Johnson


t was 2007 – the start of the recession – and two friends, some of the smaller coffee roaster businesses that had found Al Tomlins and Brad Jacobsen, wanted to start their first success over there. In Brighton at the time there was hardly any business. The pair had worked together in cafe kitchens and competition so we were keen to give it a go and could see our coffee shops but what they really wanted to do was roast start-up costs would be relatively low. We bought a five kilo their own coffee from scratch. roaster and taught ourselves how to roast coffee.” Running a business and roasting coffee was something Although the coffee market in the UK wasn’t quite as neither of them knew how to do, but they were compelled to sophisticated as it was in Australia, coffee was already big give it a go anyway; and from that moment Small Batch business in 2007. It’s the reason Small Batch managed to Coffee was born. The company is now a renowned ride it through the recession years, according coffee roaster and wholesale business, with seven to Tomlins. cafes and more in the pipeline. “We started out at the start of the financial “There are two So how did they go from buying a small crisis but coffee was kind of seen as affordable things that makes machine and teaching themselves how to roast then,” he explains. “People still wanted to Small Batch special coffee to becoming one of Brighton’s biggest treat themselves to a coffee but they were – the quality of the success stories? And how did they manage much more discerning with their money; coffee we source and to attract the attentions of a key hospitality being that we had a brilliant product, it meant roast and the quality private equity investor? we were in a strong position. We were also of the people” lucky with Brighton because coffee shops Early days and independent businesses are popular and It wasn’t all straightforward but the pair stuck to consequently the business continued to grow the small bean of an idea they started with and made throughout these years.” it work. But it needed to be more than just a small roasting machine, “Jacobsen is from Australia and he knew the UK was about selling coffee into cafes. five years behind with coffee, compared with where the market “We quickly realised we had cash flow problems but we was over there at the time,” explains Tomlins. “He knew thought ‘we have this great coffee’, so we persevered and ▲ ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


Feature moved the whole roaster to a new site (Goldstone Villas in Hove) with a cafe in 2009. That really kick-started it all, which helped the wholesale brand.”

What happened next? By 2010, Small Batch had developed a name for itself and a reputation for quality coffee. Around this time current chief executive Nigel Lambe joined the business. The team grew and so did the company – it now has seven sites around the Brighton and Hove area as well as a successful wholesale business, with its branded coffee now appearing in many other local venues. In addition, Small Batch has set up a barista training centre. Last year was a big period of change for the company. Original founder Jacobsen decided to move on, selling his 64% stake in the business, which could have pitched the future of Small Batch into turmoil. Instead, the business looks set to move into a new phase of growth. “Jacobsen left but Tomlins and I were still committed so we started a conversation about new investors,” explains Lambe. “Risk Capital Partners, headed up by Luke Johnson, had been looking at the marketplace already and I had had a meeting with them a year earlier so we went straight to them to have this chat. It meant that within a few days, it was clearly a deal we all wanted to do.

Small Batch Seven Dials

“Growth for the wholesale business is in excess of 30% year-on-year” “One of the real reasons we picked Risk is they understood the company. It had to be an investor who understood Tomlins’ values and the lengths he goes to source and make the perfect coffee. “There are two things that makes Small Batch special – the quality of the coffee we source and roast, and the quality of the people. Risk understood we couldn’t open ten new stores a year because it would take too long to train high-quality baristas and maintain what makes the business special. We can only really open a new store two or three times a year.” Despite this, Risk and Small Batch both want the company to grow. “Risk can help us grow but they get what makes the business special,” added Lambe.

What’s next for the company?

Alison and Freya

Small Batch, Brighton


Small Batch currently operates multiple sites around Brighton and Hove but the business is ready to expand its reach and is close to securing a site along the coast in Worthing. After that, the team will look at other parts of Sussex. “We will keep growing slowly and we will focus on Sussex,” says Lambe. “There are lots of places that need a great coffee shop.” He adds finding a site outside Brighton has been a challenge, mainly because it takes time to find the perfect site. Meanwhile, Small Batch’s existing stores also required some love so the company recently invested in new seats for its Seven Dials store and a new roof for the Wilbury Gardens venue, as well as investment in the Goldstone site. It has also renewed the lease at its flagship venue at My Hotel in Jubilee Street for another five years. “The sites are all in double-digit growth but we are always looking at ways to make them better,” says Lambe. The wholesale arm remains important, and the business continues to roast coffee seven days a week. Growth for the wholesale business is in excess of 30% year-on-year, says Lambe. “We are very pleased with this although we reinvest heavily,” Tomlins adds. “We started as a wholesale company with a roastery and we want to grow that side as well. We have a new machine that is five times the size of our current one – we are currently trying to secure a site for this and it is becoming a matter of increasing urgency.” Currently this is one of the company’s biggest headaches. “We need this site to be central and we have been looking for ▲





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semi-industrial locations in Brighton,” explains Tomlins. “We want a showpiece, ideally. We want people to see the trouble we go to with our coffee and it can become part of the education process. “We want a beautiful, open-plan warehouse-style place like Willy Wonka’s chocolate factory.” Seeking out new sites is a big focus at the moment but another area that has always been important to Small Batch is its staff.

Food and drink

“Food has always been secondary to the business but we will be putting a lot more focus on this area” “There is quite a lot of good coffee in Brighton and the service element is big,” says Lambe. “We need to find the same level of staff for our new stores. To maintain this great service we invest a lot of time and money in staff training.” But while Lambe notes there are an increasing number of speciality and independent coffee shops appearing around Brighton, he says the growing levels of competition do not concern Small Batch. “It all just helps get people more into drinking coffee,” he adds. Small Batch also wants to develop its mobile kiosk units during 2016. Lambe says: “We have two (at Brighton station and Hove station) and are looking at a third which will just go to events such as food festivals. There’s an event practically every week in Brighton through the summer and plenty of others elsewhere in the wider Sussex area. It might be on the agenda to prepare for next year rather than this summer but it’s definitely something we are looking at.”


The business started with an aim to produce exceptional coffee, and this continues to be the ethos of the company today. It roasts the coffee beans daily in small batches, so the coffee is always fresh. Small Batch uses La Marzocco machines to brew its coffee; the machines are hand-built in Florence by a company founded in 1927. Its wholesale business offers customers coffee from a range of sources, including Brazil, Colombia, Ecuador, and Grand Fromage, which hails from Rwanda. It also offers Throwback Express from El Salvador, Blue Note Filter Blend, Goldstone Espresso and Goldstone Decaf. Its range of coffee is constantly changing and, as the company’s head of coffee, it’s Tomlins’ job to travel around the world visiting coffee producers and sourcing beans to make new blends. There are other plans afoot including menu developments, particularly on the food side. “We have just appointed our first head of food,” explains Lambe. “Food has always been secondary to the business but we will be putting a lot more focus on this area. We have new products lined up and we will add more creativity. We will focus on primarily being a breakfast and lunch venue, and we have no plans to look at the evening occasion.”


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Night fever Deltic Group chief executive Peter Marks tells John Porter things aren’t all doom and gloom in the nightclub sector


he announcement in March this year the Office for National Statistics (ONS) had removed nightclub entry fees from the basket of goods used to calculate inflation prompted various questions in the media. Was it a sign of the terminal decline of the nightclub as a British institution? Are the new generation of low-paid, student debtburdened young people turning their backs on the traditional night out? For Peter Marks, chief executive of Deltic Group, it prompted a slightly more straightforward question – “Who even knew nightclub entry fees were in there in the first place?” he laughs. While Marks’ upbeat take on the late-night market was reported as part of the story, it definitely wasn’t given the same prominence as the ONS decision. He says: “I was stuck at the end of a BBC online report saying ‘Peter Marks says everything’s OK’, but the likes of The Times and Telegraph don’t want to hear that story, they just stick something in for a bit of balance. The press picked up on the ONS decision as a piece of negativity, attached it to CGA figures showing there are only half the nightclubs there used to be, and suddenly everybody’s all doom and gloom. I just try to be honest. This isn’t always a straightforward market but, you know what? We’re doing well.” Deltic’s published figures back up that claim. An increase in profits to £4.3m on turnover of £101m in the year to February 2016, with Ebitda up 16.8% to £13.4m.

Rescue package It all represents a significant turnaround from the position at the end of 2011, when Marks led a rescue package that bought the Luminar business out of administration. With an industry track record including not only a previous stint with Luminar but also Brooks Leisure and Sports Café, his passion for the late-night sector was undeniable. However, the decline of the once-mighty Luminar was widely seen as an indication the post-licensing


reform, post-recession landscape had moved the goalposts. Marks was nonetheless confident there was a profitable business to be developed from Luminar’s portfolio of brands such as Oceana, Liquid and Cameo, as well as many of its standalone venues. Speaking to Propel just over a year into the project, he expressed the view “invested nightclubs could still very much work”. Almost a further three years on, the evidence from Deltic’s financial performance seems to justify his faith, but he also acknowledges the overall market is smaller. He says: “It has helped us that a lot of supply has come out of the market, which means that as an operator you’re in a stronger position than you might have been five to ten years ago. People are still coming out but, if there’s fewer places to go, it’s to the benefit of any businesses that have got late licences. “It changes from one town to another. For example, Brighton is still a booming town and very competitive, but in somewhere like Tamworth we’re really the only club, so we do very well.” The business, which rebranded as Deltic from Luminar in summer 2015 and now operates 58 venues, clearly doesn’t have the market to itself.

Late-night rivals Acknowledging the quality of rivals such as Stonegate Pub Company, sector investor Luke Johnson’s Brighton Pier Group, and Walkabout operator Intertain, Marks insists: “We love to see a vibrant late-night sector. We want to see bars and clubs around us, and we want to see them invested in. We’re still going through a correction of the complete lack of refurbishment in high streets/late-night by the industry. It isn’t just us, it’s everybody. More operators are investing and, as a result, people are coming back to the towns. I don’t want Deltic Group to be the only invested operator out there, I want to see everybody improve because that brings people into the high street.” As chief executive of the largest operator of nightclubs and late bars in the UK, Marks clearly has a role both as a spokesman for the sector and as a campaigner on its behalf. For example, he was instrumental in lobbying the government for a recent change in the law that should protect operators from challenges to their licences over noise from live music and entertainment made by residents of developments built near venues already trading. Marks says: “That’s been enormously welcome. You cannot ▲




01244 321 171


Bar & Beyond, Chelmsford

have a situation where people who’ve been running a very successful live music venue, in some cases in the same family for 50 years, suddenly get shut down. That can’t be right.” First and foremost, though, Marks is an evangelist for his own business. A major refurbishment programme was initiated when the business was acquired and £9m will be spent on the estate this year. Marks says: “It’s always been our view that until we’ve got the whole estate refurbished, we haven’t got the most out of it. We’ve still really got about 25 venues to go, and we’ll do another 15 this year.” 12 clubs have been refurbished in the past 12 months, including Deltic’s biggest single investment so far – £3m in Basildon, Essex, which was technically a refurbishment but actually saw the club relocated to another unit at the same leisure park. The reopened business is performing “spectacularly well, exceeding our own high expectations”, and is expected to achieve ROI in Deltic’s standard two-year timetable for an investment to come good, instead of the three years budgeted because of the scale of the project. To put that investment in context, Deltic’s extensive refurbishment of its former Gatecrasher club in Birmingham city centre will come in at slightly less than half the cost of Basildon, at £1.4m. The Birmingham site will reopen under the Pryzm brand in June. “That investment is very much at the top end of our usual range, as it’s a big club,” says Marks. “We’re still spending what we normally do. It averages about £60 per square foot, but there’s a big range – some will be £40, some will be £70.”

Bar & Beyond Another significant move has been the launch of a new concept – Bar & Beyond. More of a late-night bar format than Deltic’s Pryzm, Liquid, Envy and Cameo clubs, the first Bar & Beyond, in Chelmsford, was a conversion of a former Chicago Rock Café bar, one of eight acquired by Deltic in 2014. Marks says: “Bar & Beyond is core to our future, it’s another leg to the business entirely. These are not pure clubs, these are bars, with no dedicated dancefloor. You can dance anywhere and everywhere, but there’s lots more seating, particularly more booths so people will pre-book.” With the Chelmsford site performing well, a second Bar &

Beyond opened in Stevenage in April, also a conversion of a former Chicago‘s. Marks has to rein in his clear enthusiasm for the concept. “The second one will give us a better idea and the third one will give us another flavour as well, but we think we’ve got something exciting that we may be able to do 20 or 30 of,” he adds. “We bought eight Chicagos and we’d say six of them will become Bar & Beyond when the time’s right. We’re also looking at two new sites we could put Bar & Beyond into. So we’re ramping this up – slowly. We’re quietly confident.” Deltic’s overall acquisitions policy remains opportunistic. “We are actually appraising about nine sites currently, nine existing clubs,” says Marks. “But we may not buy any of them. We look at things as they come along, or as people come to us, and we’ll take a view. Nothing can be at the cost of our own refurbs. If you’re a manager running a club that’s had no money spent on it in ten years, you don’t want to hear about the latest acquisition if it has cost you your refurbishment.” As well as 25 sites that have had no more than maintenance capital so far – “not something transformational that makes the returns you look for” – Deltic’s first wave of refurbishments will soon be back at the top of the list. “We look at a five-year refurbishment cycle,” says Marks. “Some might go to six, but others we might need to do a bit earlier. If we’re making our money back in two years, which means we’re making a reasonable profit in years three, four and five and then we start again.”

Customer demographics Making that money back, of course, relies on a regular supply of customers. One perennial challenge for the late-night sector is its audience changes annually as a new generation of 18-year-olds come of age and start work or college which, in theory, should be roughly balanced out by the numbers exiting at the top end of the demographic into mainstream pubs and other forms of leisure activity. Students are important to the market and Deltic is keeping a close eye on proposed changes to the cap on numbers each university faces, which could see fewer students in some towns and more in others. “Students are always going to be price sensitive, but we think overall the student market is stable, it’s not getting better or worse,” says Marks. ▲ ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


Feature “I wonder what’s going to happen to those universities at the Peter Marks bottom of the pile, some may end up with a bit of a problem. What really matters to us, though, is youth unemployment. The 18 to 24-year-olds were particularly hit by the recession. It topped a million, and we’re now seeing that come down. That’s the biggest macroeconomic indicator in any difficulties we face as a business. “When the students are around, maybe 16-20% of our income comes in from those early-week student sessions. On a blended basis, it’s probably 10% because you’ve got 20 weeks when they’re not around. It’s an important part of our business, but by no means the most important part. “In fact we’re seeing a migration to the weekends by of a lot of students now, although I still don’t think anyone’s entirely sure why that is.” Understanding the customer mix at weekends is crucial, One added benefit of the focus on refurbishment is it can with 45% of Deltic’s income generated on Saturday nights. nudge up the age of Deltic’s demographic. “It’s not everywhere, “Our market is very much 18 to 25 and is 50% female,” says Marks. but the average age in a Pryzm compared with an Oceana is “We start getting busy between 11pm and midnight. We have hardly probably two or three years older,“ Marks says. “We use ID anybody in before 10pm. We do early deals, promotions on cocktails scanners so we can see where the average age of a club has in particular, or on prosecco. We make them female-friendly deals to gone up. Bigger towns such as Brighton and Bristol have an get them to come in earlier, and that side of our business is improving amazing mix of people. Generally, If we’ve got a refreshed, markedly. All of these little elements make a difference but our core refurbished club in a town with a good mix of late-night venues, market will always be midnight to 3am on Friday and Saturday nights, we are doing very well on driving an older audience, because the and that’s where we make our money.” audience is already out there. Where it’s more tough is in a quiet A marketing focus on pre-booking means the number of town where your club has got a reputation for being younger.” customers booking in advance has doubled since the current management took over the business. “On a typical Saturday night Staff retention we sell 700 to 800 booths in advance; each has a drinks package The staff demographic matches that of customers fairly closely. and it’s all about theatre,” says Marks. “People want to be seen in Marks says: “A service industry business is all about people the booths, and they put it on Snapchat, Instagram and Facebook.” and it always will be. You’ve got to have a good working The focus by Deltic’s young head office marketing team of environment, the right pay grades, and the right training. driving social media means “it’s a real surprise when the “The sort of work we offer won’t suit everybody, phone rings”! Marks adds: “We’ve got an amazing but a lot of our people are there as much as machine for sales, and that’s very much part of “We make anything because they love the clubbing the transformation of the business. We focus on female-friendly environment. They wouldn’t do the hours we premiumisation, the pre-booked booths and ask of them at McDonalds. There are certain deals to get them pre-booked drinks packages, because that’s areas we’re trying to improve, such as staff where the market is. People go out less, but to come in earlier, engagement and staff retention. We’re OK at they expect more on the occasions they do go and that side the moment but we could be better.” out. We put a lot of effort into ensuring we are of our business In a business with a payroll of £30m a year, current in the market. In our retail offer, we work is improving the cost of the introduction of the National with the best leading drinks brands and we offer Living Wage in April for Deltic was £160,000. premium service.” markedly” “Most of our people are aged under 24 and During the past two years, £2m has specifically part-time,“ says Marks. “There is definitely an been invested in improving the entertainment, above-inflation push, but we don’t see it as material and which in many venues has seen the DJ taken out of the neither do we factor in that some of our customers might be traditional booth and put centre-stage. “It’s the way a festival DJ better off. They may or may not be – most of them are under 25 so would be seen, because that’s what people are expecting,“ Marks won’t get the benefit.” says. “That works well for the bigger names, who like the idea we’ve Coming full circle, Marks crunches the numbers that paint put them on the stage and given the clubs the festival flavour. a very different picture of the late-night sector to the one that “A lot of the premium DJ community wouldn’t come to our coverage of the ONS story tried to present. “Eight years ago clubs five years ago. We were uninvested and they didn’t see us admission fees as a percentage of our total sales were 22%,“ says as good for their individual brand. That’s all behind us now, we’re Marks. “Now it’s 22%. It hasn’t changed one iota. pulling in the best names.” “We might do some early-doors deals before 10pm, but Other entertainment across the business includes comedy generally speaking everybody’s paying. Where we do a refurb we through a partnership with the Jongleurs brand, as well as live music, can usually charge more, and we’re also charging more for our boxing and martial arts. Marks says: “These are secondary additional drinks so our gross profit margins are on the increase. Spend per income events and a lot of these things happen on a night when the head, the number of drinks per person, are all on the increase.” club would be closed. The audiences are not clubbers, maybe 50% Given the media that reported the ONS article are based in of a Jongleurs audience will stay for the rest of the night.” London where there are very few pure nightclubs and a lot of bars charge nothing to get in“, he can understand why people Bar & Beyond, Chelmsford might have the view nightclub admission fees are declining. He adds: We’re the biggest single operator provincially and we’re not even asked!”

Deltic Group performance In the 12 months to 27 February 2016: ➤ ➤ ➤ ➤



Turnover up 8% to £101m (93.3m in year to 29 Feb 2015) Profit before tax £4.3m (£3.7m) Ebidta up 16.8% to £13.4m (£11.4m) £9m investment in site refurbishment (£8.5m)


Smooth operator

Sector investor Luke Johnson discusses the economy, pizza market, his investment strategy, and sector multiples during an interview conducted by Propel managing director Paul Charity at the Casual Dining Show



Feature PC: How do you assess the current health of the UK foodservice market? LJ: I think it's fairly buoyant. It's grown exponentially since I first got involved, it's a lot more sophisticated, a great deal more competitive. The only thing I would say is I think storm clouds are gathering in the sense that, and this is not just in the foodservice sector, I've seen some worrying signs in the past three to six months. The Bank of England has already lowered growth expectations for this year and I fear it might lower them again. If you look at the affect it has on sectors, from commodities to property to banking and so on, it's clear quite a few parts of the world are in or close to recession, quite large sectors of the overall industrial mix are struggling. The stock market is often a leading indicator so I am less bullish than I was six months ago. PC: Is there a particular warning sign that you're seeing? LJ: No and, as it happens, my more prominent investments in the sector are fine but you just look in-depth at profit warnings versus upgrades and that's flashing red and I think 2016 is not really going to be as good as I hoped it was. PC: What does the current situation remind you of from your time in the industry over the past 30 years? LJ: That's a very good question and one I've been asking myself of late. I don't know. Some of it is gut instinct, you could say valuation terms and lots of others, but there's a sort of assumption across all of us, and we're all to blame for this, that growth will carry on inexorably, that it's never in doubt that people will forever spend more. I've been the one banging that drum as much as anyone. But, if I were a betting man, I would say that we are coming into tougher times. PC: How would you say the UK foodservice scene compares with the US in terms of quality and sophistication at the moment? LJ: It all obviously depends what you're comparing, whether that's properties here versus the Mid West there or Manhattan versus London, but I think we have caught up to a fair degree. 25 years ago I would have said the UK was miles behind the US but these days you go to Chicago, New York or wherever and London feels right up there with them, and Edinburgh, Manchester and so forth are catching up. So I think we've learnt a lot from them. I think we've become dramatically more demanding in terms of customers, a lot more sophisticated in terms of supply chain, and the coverage of food, drink, eating out and so forth, and I would argue that London is the world's capital for eating out. And I think that says a lot.

PC: You have the best part of ten investments in the foodservice sector at least. Given the warning bells you say you are starting to hear, do you have an appetite for more investments? LJ: Yeah, because no-one lives forever and you might as well keep going. I can't think of anything else to do! But I'm probably not going to be as wildly bullish as I might have been otherwise. I think now is not the time to be signing the really crazy deals and to take on very high levels of leverage. It's time to be rather more thoughtful about one's expansion plans. However, long-term, I do believe in the growth of the West, of Britain, the foodservice market and, in the long run, societies get richer and eat out more. That's what we rely on and I think that still holds true, but there are cyclical upturns and downturns across that pattern.

PC: Why do you think there has never been a national Asian food chain? We've got Italian brands such as Zizzi and PizzaExpress. Curry is very popular in this country, yet we don't have a mainstream Asian food chain. Do you think there is any reason for that? LJ: I think there are some big cultural reasons. The competitors in that sector are family-run businesses with all the competitive advantages that enjoys. Therefore, competing against them on price and costs is tough. Also, I suspect an awful lot of the customer base wants to feel they are patronising a local establishment and not part of a national chain. I also think the overall curry market, the Indian restaurant market in the UK, has been in decline for some years now so I don't think that market is necessarily an attractive one in which to build a chain.

PC: Looking at the ratio of hits to misses in terms of what passes across your desk when you are looking at them regarding possible investment, how many things do you look at before you invest?

“I would argue that London is the world's capital for eating out”

LJ: You'd like to think it's a question of look at 100 and invest in one, but it's a much lower ratio with this kind of stuff. So, certainly if they're up and running businesses rather than pure start-ups. I don't see that many deals and I'm normally a bit of a sucker. I find it hard to say no. I don't know the specific ratio but I like innovative ideas and founder/owner drivers and I get very excited by new investments and it's such a fun industry. Yes, on occasions I can get a bit carried away and probably I diversify too much.

PC: What are your views on the impact of the new National Living Wage on operators and, in particular, its impact on prices and consumer spend?

PC: Would Brexit be a positive move for the foodservice industry? LJ: I think, very short term, not much will change except for currencies. Medium term, there may be some challenges about making use of the immigrant workforce. So the availability of migrant labour might become more of an issue. I think longer term, regaining full control over our own democracy and sovereignty is very important. It means we can kick out those politicians who pass laws we don't like, whereas it's impossible for us to kick out the European Commission who, frankly, pass most of the laws imposed on us. I think long-term for business a reduction in regulation and a reduction in taxation should be good news. I think the UK being able to take control over its own government is the priority. PC: Do you see any danger? LJ: There would probably be some fluctuations in terms of currencies and there might be some shorter-term difficulties in arranging trade deals but I think long term, as the UK is the fifthlargest economy in the world, we would be better off.

LJ: Obviously, wages go upwards on their own with significant baked-in inflation wages in the system that's going to feed through in the coming years. That should lead to higher discretionary spending and hopefully that's in the eating out market. Clearly for all operators, and we are an industry that uses an enormous amount of labour and our industry has provided more new jobs since the downturn than any other industry. We suffer, if you like, disproportionately and it's not just this year, it's the next few years as [the NLW] builds up to £9-plus an hour. So that's a huge challenge for all of us and you can only rearrange rotas and cut other costs so much before you do have to start passing on your cost increases or commit to taking lower margins and lower profits, and no one wants to do that very much. So, I suspect there will be inflation, passed on via prices to the consumer. I just hope they are being paid enough more to put up with it. PC: Yourself and many other people in the industry have accused "institutional landlords" of not understanding your business, do you think over the past five years they've listened to you and are getting better? LJ: No. I think they understand our business fine. But I think things like, for example, the system whereby rent reviews are agreed, where anyone who has been through this knows what it's like, where either a chain where the economics are completely different or a clown who is going to go bust takes a site ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


Feature next to yours, agrees a bonkers rent, that rent is then used in arbitration for the comparable – it's a fix! And what I think is deeply unfair is in any arrangement, there's the agents, the landlords, and the tenant. And it's in the interests of two out of three of these parties that rents go up – all the time. And it doesn't matter whether the agents are acting for you or the landlord, because the next time they're acting for the landlord, they're also rewarded based on what the rents are. So it's in the interests of most of that group rents go up more and more and more. And for all those who've had sites in central London, and are facing a rent review in the next few months, look forward to a 100-150% rent demand increase and see how that impacts the numbers. The fact is, it's not the landlords and the agents who are creating all these jobs that is keeping the UK economy going – it's us, the operators. So the system is deeply unfair and unsustainable, and no other country in the world has anything like it. So many people I know in the industry have seen a proportion of their revenue go from X to 2X as a percentage of sales over the past few years and it feels unstoppable. You could say (operators) have brought this on themselves by overexpansion, by pouring too much capital into the sector. This is quite possibly true and, along with the National Living Wage, I think unsustainable rent increases, particularly in central London, are a huge threat to the prosperity of the foodservice sector.

“Pop-ups are the sort of guerrilla tactics necessary in an oppressive institutional climate where the landlords have far too much power”

PC: How does rent as a ratio of turnover compare with other countries such as France, Germany, the US. Do you pay more rent in the UK as a percentage of turnover? LJ: It varies really depending on whether they're capital cities or not, but I'd say the UK is right at the top of the range. PC: Talking of property – how are business rates in the UK? LJ: The total now across all commercial sectors is north of about £25bn a year – dramatically higher than anywhere else, certainly more than in Europe, I think. Quite unsustainable and deeply unfair. It's even worse for those who are not like us. At least we're in the experiential game. Mainstream retailers who are competing against foreign line operators, the economics are not working for


Draft House in London, where Luke Johnson is chairman and part-owner

them any more but given the desire for job creation, it seems to me to be very misguided government policy. PC: Having seen lots of instances of rates and properties over the years, do you have an optimal figure you see in terms of turnover potential where you think that level will be fine? LJ: I don't have a general rule because I think it varies a lot depending on what kind of business model you've got. If you've got a very high growth margin on something like coffee, you can afford a higher occupation cost. If you're in an area where the growth margin isn't as high, then you're going to have to have rent as a lower percentage. PC: What is your perception of the attractiveness of street food as a vertical, seeing as rent has a slightly different variable as compared with others in the sector. LJ: I think it's one of the ways we can fight back – pop-ups, street food – you know, these are the sort of guerrilla tactics that are necessary in an oppressive institutional climate where the landlords have far too much power. I'm all for it and I think, potentially, it is a nice business model if you get it right. Scale is the issue. Can you really grow and how big is your market? But I think it is one way of fighting back. PC: What are the key ingredients you look for when a business proposal arrives on your desk that give you the confidence to invest? LJ: An innovative concept that has appeal, that feels as if it's got scope to expand. Also, a very commited, knowledgeable and energetic entrepreneur or team, an established


concept that has appeal and has proven itself. An economic model in terms of the box, ie the economics of the site(s) itself that makes good financial sense. A sustainable business that's not too much of a fad and the right sort of valuation that makes sense from my perspective. PC: Popping back to business rates. You now invest in four pub businesses, is it true pubs are being hammered harder by business rates compared with other parts of the sector? LJ: I can't say I've noticed that but I think pubs obviously, as (JD Wetherspoon chairman) Tim Martin endlessly points out, suffer disproportionately in terms of the overall tax burden because, obviously, they've got National Insurance and business rates etc, but they've also got tax on alcohol. So there is an amazing amount of money that flows from the pub to the government and it is disproportionate, I feel. PC: Let's talk about the pizza market for a moment. Obviously you've been involved since 1990 in PizzaExpress. What do you think of PizzaExpress now compared with how it was in 1990 and do you still think it is a business with big global potential in China and elsewhere? LJ: I have a lot of affection for PizzaExpress, at the time it was duly novel. But I think now, if I was going to eat a pizza myself I'd go to Franca Manca – it's cheaper and a better product! PC: Strada was an aberration in terms of success. Obviously it was on the market last year. Have you ever been tempted to buy back a business you've sold at rock bottom price to build it again? LJ: Yes.

Feature of the concept itself and, you know, the US restaurant industry is generally more competitive than here, I would say from my experience. Generally, it was a disaster from start to finish. PC: Did you chalk it down to experience afterwards? LJ: Yes. We were arrogant and foolish and paid the price. PC: Is it true to say that in terms of investment, the foodservice sector holds the record in terms of never actually losing numbers? LJ: I have lost money, as Belgo in the US proves, but much less money and less often than in other sectors.

PC: Which one? How about Strada? LJ: Well, I wasn't as generous as the buyer. I didn't offer enough money. PC: So you actually offered to buy it back? That's not generally known is it? So obviously you had a hard, long look at Strada before you made the offer that wasn't good enough. What is it that went wrong at Strada do you think? LJ: I sold it a while ago and my memory fades but I think it hasn't had the investment and the love. I think the market has become a hell of a lot more crowded and competitive and it probably needs to have a lot of reinvention – and that is hard. Sometimes restaurant chains can be successfully reinvented – but often not. PC: Let's talk about Patisserie Valerie. When you first bought the company, it sort of made no sense as a business.

cost. Then you have to take the view if you open ten branches, would that mean a great deal more of the unit contribution flows to the bottom line and suddenly it's starting to make economic sense – and that frequently is the case. PC: Let's talk about an excursion to the States. For the second time you went across to look at Belgo. What was that experience like? LJ: A disaster! I blew my brains out! Me and Andy Bassadone in the UK lost $5m in about two years, so it was expensive. PC: What was the mistake you made? LJ: Going! From the wrong location in New York to the partners we took on to the fact we used non-union labour to the whole economics of importing Belgian beer at that stage. We were probably a few years ahead of our time in terms

LJ: The accounting function was rudimentary, so it was quite difficult to interpret whether the business was actually profitable or not. But I could see enough of the key numbers to be able to believe that, fundamentally, there was a very good business there and I saw, I think, the niche it was occupying and it looked to me attractive. I think it's absolutely true in the case of Giraffe, and Strada and PizzaExpress but I had no idea how big (Patisserie Valerie) could be. But I think that is fine. I often invest in a chain of five branches without having any idea whether it could be 20 or 200 but with a view that if it's good enough, and the economics make sense and the people are right, then it's worth a bet. PC: When you're working with a company that's not making Ebidta, or barely making Ebitda, how on earth do you work out what the value is? LJ: You have a punt. The truth is, an awful lot of five-strong chains have an overhead, which means virtually all unit contributions get absorbed in that central



“I think the market has become a hell of a lot more crowded and competitive and it probably needs to have a lot of reinvention – and that is hard”

PC: Despite the Belgo experience, you went back to Coco Beach, Florida, and bought a little, run-down restaurant that had been closed since 2010. Was that a bit of a long shot? LJ: Yes. It was an 8,000 square foot freehold site, a key site in that location, for $400,000. To me, it looked cheap. Admittedly I sat on it for a few years but basically I'm going to have to do something with it. I think that if it survived, and done properly, it could be successful. But you've got to have the right local partner, and lots of other things – and they're nearly in place. ▲

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PC: Propel reported briefly that you and Tom Molnar, of Gail's Bakery, might look to develop a bakery on the site? LJ: That's too early to talk about at the moment. PC: Can you talk about your coffee investments and where you see that going? LJ: Like many, I'm hoping our addiction for coffee continues. I've seen the stats that people like Coffer put out suggesting we only drink a fraction of the coffee they drink in places like Italy, Germany and Holland and so forth. Let's hope that's true. There is a very high growth margin and there are different ways of doing it. Small Batch, which is in Brighton, is very much at the artisan end, while some of our other businesses are somewhat more mainstream, but I think customers are going to become much more discerning. And we hope as people become more sophisticated in their tastes in coffee, they will continue to want a better product and we can serve them with that. PC: Somebody told Propel that breweries had been circling Patisserie Valerie. Have you any thoughts about how Small Batch might link with Patisserie Valerie? LJ: I think Patisserie Valerie's expectations in terms of scale, Small Batch would struggle to meet that. One is very much at the artisan end and the other is more at the mid-market end. PC: When you make an investment in the first place, do you have any sort of apposite time frame in mind? LJ: No, generally not. Generally I'm looking for something semi-permanent if needs be. I very rarely look for dividend on the way. I'm interested in reinvesting all the profits in the business to grow it because I'm interested in capital growth. I can't bear those sort of business plans where they'll obsess about a quickclick type of exit and a great deal of

information about what the end value will be because, in my experience, be it successful or unsuccessful, you just never know. But if it's a great business and it grows, you can guarantee you'll be spoilt for choice in terms of possible buyers when the time comes. But it's very rare, I think back on Strada or Giraffe or virtually every business I've been involved with that's done well, it's never been me who has pushed for the exit or the sale. It's been my partners, for their own reasons. I'm very keen on long-term growth businesses like Patisserie Valerie, like Giraffe was, so over ages you can do very well. PC: You've always talked very humbly that you've had as many failures as you've had successes. What is the biggest thing you've learnt from one of your biggest disappointments? LJ: There are so many mistakes one can make, it is difficult to know where to begin. Get the property right. I think for an awful lot of people in this business, that's the biggest single mistake they make. When I've seen chains and groups that have got into trouble it's because they put the wrong business in the wrong locations. Don't diversify too much, or too early inside a single branded business. Find your model, get it right, stick to it and do more with it. Those are a few of the lessons. PC: Regarding global platforms such as Uber, which have been able to transform certain sectors and industries, do you see the foodservice sector as ripe for something similar in terms of a digital, technical enhancement which could transform how we experience the sector? LJ: It's possible. I would never have conceived things like Airbnb and Uber. What I would say is I think the expectations of people in this sector in terms of operations are a bit different because, as far as I'm aware, neither Airbnb or Uber make a profit and

they are notionally valued at about $100bn between the two of them. Looking around this exhibition, there are probably 30 or 40 digital operators trying to sell kit and systems to us of one sort or another, each of them claiming to be able to save you huge fortunes, generate more custom and transform your business. That might be the case but I think these things are very much ancillary to what we do because, at the end of the day, we are serving great food and drink with service and hospitality, with warmth in terrific surroundings. This is what I call a high-touch business, or should be for the most part, and that's partly why I like it because you can gain a competitive advantage through your people which will make a hell of a long-term difference and a big sustainable barrel to empty, which is part of the attraction for me.

The key ingredients Luke Johnson looks for in a business proposal u An innovative concept that has appeal u One that feels as if it's got scope to expand u A very commited, knowledgeable and energetic entrepreneur or team u An established concept that has appeal and has proven itself u An economic model in terms of the box, ie the economics of the site itself that makes good financial sense u A sustainable business that's not too much of a fad and the right sort of valuation ยก SUMMER 2016 ยก PROPEL QUARTERLY


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Czech mate

Tapped in Leeds


he complete cost of the fit-out at the Euston Tap craft beer bar In London was a mere £45,000 when it opened in 2009 (it now does this in sales every week), whereas the extraction unit alone at the recently launched Pavement Vaults smokehouse and beer bar in York was £68,000. For Jamie Hawksworth, managing director of Yorkshire-based Pivovar Group, which owns these and six other beer-focused bars, this exemplifies how the company continues on a journey of "growing up" rather than having a grand plan involving a cookie-cutter roll-out strategy. "To say we have a masterplan would be wrong," Hawksworth explains. "Our business is not exactly unplanned but is just about doing what we think is the right thing at the time. We certainly don't have an exit strategy in mind. Instead, we're about building bars that we want to be in at that time and having the beer on that we want to drink. Each of our bars is now a snapshot of a time and a period in our lives. There wasn't even an intention to have any bars at all or even be in the beer industry. Although Hawksworth had brewed when he was young, his parents wanted him to get a "proper job" and so he became a structural and architectural engineer. It was while travelling to the Czech Republic on business that he says the "passion for beer I'd been harbouring" came to the fore. "I was in my mid-twenties with the innocence of youth

Jamie Hawksworth, who founded Yorkshirebased brewer and operator Pivovar Group, talks to Glynn Davis about how a Czech lager transformed his life and why the company just can’t stop growing

and I wondered why we couldn't get Bernard lager in the UK so I wrote to them and they said, why not become our business partner and buy some," he recalls. "I had the pallets shipped over and sold every last drop that I'd bought on my credit cards. Winning a number of major beer awards, including a national listing with Tesco, resulted in him shipping a lot of beer into the UK. But this led to a big disappointment: "When I dug deep I found the pub industry was useless," says Hawksworth. "The Free House signs are pointless as most couldn't buy from me as they were tied to the big brewers in some way or other. It should be a trading standards issue. It was like finding out there's no Santa." ▲ York Tap ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


Table Manners 6 ways your restaurant booking system can improve yield management

As a restaurant or pub manager, maximum table yield is a top priority. Here are six tricks and tips you can employ to push your tables to the limit and increase profitability.

1. Consider overbooking on busy days

5. Make sure you’re mobile-friendly

For most restaurant and pub managers, this idea sends chills down the spine. But so do no-shows.

Customers are increasingly likely to browse and make last-minute bookings on their mobile. This on-the-go approach also means restaurants and pubs must be geared up with mobile-friendly websites and social media marketing to attract consumers on their smartphones.

So, use your data from previous periods to predict the amount of dropouts. This way you can dare to overbook a little based on normal patterns, leaving fewer tables empty.

2. Use waiting lists effectively

6. Discount, but be smart about it

Customer waiting time is another bugbear but you can actually manage this to your advantage.

Discounts and special offers are important but how do you avoid cannibalising full price business or even making a loss?

With better data you can give customers a more accurate wait time, invite them to have a drink and send them an automatic message via text or email when the table is free.

One way is to set up special, time-limited offers or limit the number of tables available in the promotion, giving you greater control over offers and discounts.

3. Make reserved tables work harder There’s nothing worse than being turned away from an empty pub or restaurant because they are “fully booked”!

Find more ideas and advice on our blog page at:

With the latest restaurant booking systems, front of house staff are better able to see exactly what is or will be available and when, meaning less table down-time and more income for the restaurant.

4. Stay live throughout sessions Online restaurant booking systems mean restaurants and pubs can keep taking reservations 24/7. They can also give you and your staff an accurate, real-time view of availability during each session. No more mental acrobatics, adjustments or conservative estimates! Available to download now: Crunch Time: How the restaurant booking system you choose could grow (or gobble up) your profitability

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York Tap

With further youthful naivety, Hawksworth reckoned the answer was to open his own bar. "I was eating a sandwich on a doorstep in York in 2007 and noticed an empty building so I signed up for a lifetime full-repairing lease secured against my house and all my other assets, and a £10,000 security bond,"he says. "My solicitor then told me they'd got me on all fronts!" It was originally called Pivo Bar and won a national best beer bar award before Greene King threatened legal action as it had trademarked the name Pivo (Czech for beer) even though it has never used it. The employment of an £800 per hour trademark lawyer lasted three hours before Hawksworth says he ran out of money and backed down. "We scratched off the 'o' and added 'ni', which is the Czech plural for beer,"he says. The sensible use of cash is a theme that runs through Pivovar Group – particularly when it

Main Pivovar Group people: Jamie Hawksworth ~ managing director Mike Cole ~ operations director

“We’re about building bars we want to be in at that time and having the beer on we want to drink”

Tapped in Leeds

John Holdsworth ~ partner Yan Pilkington ~ wholesale and purchasing director

comes to the fit-out of its bars. This was evident at the second outlet, The Sheffield Tap, located at the city's train station, which came about partly because the company had to import its interesting beers from overseas in minimum order pallets for the Pivni bar but the tiny place could only sell so much. Although it cost £650,000 to completely overhaul the building (no premium was involved) the cost would have been much higher if Hawksworth had not been so handson: "We project managed the whole thing with me acting as architect, designer, and doing the building work too,"he says. "I'm a structural engineer so I didn't trust anybody else to do it. What I'm not able to do is the craftsmen's jobs but we are able to give them very specific tasks to deal with and not involve any middlemen." The benefit of this was highlighted at the next bar, The York Tap at the city's train station that opened in 2011. The original quote from the glazier company for replacement stained glass windows was £170,000 for a two-year job. The total fit-out ultimately came in at £500,000, including the glass at a fraction of the original quote. A third station bar was then added in Harrogate in December 2013 with £480,000 spent on completely overhauling a formerly derelict site into a gem, with an interior that includes a wooden bar that was previously the tellers counter in a bank. ▲ ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


The new frontier of hospitality isn’t just delicious, but digital. Hospitality is all about interactions. Sometimes it’s the interactions between a group of diners, sometimes it’s between customers and staff; but master restaurateurs have for centuries sought to perfect the art of the exchanges that occur during a dining experience.

As we move further into the 21st century, there are a whole manner of new interactions restaurateurs are having to face, however unwillingly. Take social media for example. Historically, food was meant to be enjoyed and savoured. Today, WKDW VDPH PHDO ZLOO EH VQDSSHG ĆOWHUHG uploaded, hashtagged and shared with millions of #foodies online.

Chefs and culinary experts may despair RI WKLV QHZ WUHQG EXW LW LV PRVW GHĆQLWHO\ here to stay. Social media reaches into almost every aspect of daily life, today more customers are looking for an experience that isn’t just about the physical space they are dining in, but also the virtual one they are sharing their experience from.

What are you doing to cater for your customers’ Wi-Fi requirements? $FFHVVLQJ WKH LQWHUQHW YLD * PLJKW VXIĆFH for some, but the new requirements our customers seek, especially millennials, suggest that easy access, securityprotected Wi-Fi is now a must have. This begs the question: what can we do to make the most of this essential requirement and create positive value by offering a service the customer clearly needs?

A new source of accurate data

In short, the virtual environment within the hospitality sector has now become a space we can no longer ignore. As technology progresses, and the online world becomes nearly as relevant to the universe as the one we live in, the hospitality industry needs to welcome online guests to their venue with the same style and grace they would as the hostess at the front door.

New opportunity

The decision to create value from this space is the business owners’ - but if every other venue is building these online relationships and getting to know their customers’ likes and behaviours it must be worth a thought.

Now, data collection is nothing new to the hospitality industry. We have been doing it for years, using databases to share news and entice visitors using targeted messages throughout the year. Although data collection methods vary - online bookings, voucher downloads... The challenge is always how to collect accurate data from this process. Let us introduce Wireless Social, powered by the latest technology this system provides a router that plugs into the back of existing Wi-Fi solutions and FUHDWHV D KXJH UDQJH RI EHQHĆWV WR WKH hospitality industry.

Wireless Social Provides:

• A branded splash page targeted to the customer who logs on with relevant messaging: 2-4-1 cocktail free dessert or simply a friendly welcome. • Option to log in via social media – simple for the customer with no forms / data entry required. • Like your page – customers give your social media pages a “likeâ€? or a “follow,â€? DQ HIĆFLHQW ZD\ WR ERRVW \RXU VRFLDO channels. • Data collection - The customer’s social PHGLD SURĆOH LV FDSWXUHG VR \RX FDQ target customers much more effectively.

Arguably the biggest impact on this digital phenomenon is the “smartphone�. A dining experience could now include, social check-in’s, streaming movies to keep the kids quiet, paying the bill or booking the cab home. Customers are using their mobile devices combined with internet networks to enhance their dining experience.

• Understand Customer Behaviour - The VROXWLRQ ZLOO GULYH EHQHĆWV WR \RXU business that allow you to understand how long a customer stayed, their ‘likes’, and other information. • On-going marketing and communication - The data is then available to use to entice customers back, send birthday wishes (invites), special offers, seasonal events. The system even integrates with all leading mail systems – MailChimp etc.

Contact Wireless Social for a chat about adding value to your Wi-Fi solution on: 0800 561 0012

Advanced Wi-Fi solutions that connect your customers with your business Create a powerful virtual space that provides value to your business Data capture More Facebook ‘likes’

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Your customer logs onto your Free Wi-Fi



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Feature Top-selling beers (since January): Bernard Light Beavertown Gamma Ray (cans) Primator Weizenbier Magic Rock High Wire Grapefruit (cans) Tapped Brew Co Mojo

Harrogate Tap While Hawksworth says the likes of BrewDog employs a McDonald's-type approach to its bars' roll-out, Pivovar is looking for constant change, which led to it approaching Land Securities in Leeds for a unit in the new Trinity shopping centre development. So from grand Victorian station buildings to a new unit with an industrial fit-out – the Tapped Leeds bar, which includes its Tapped Brew Co brewery, duly opened. And it came with food. "We were growing up and at that time it seemed right to do food," says Hawksworth. "We were older and we thought that bringing some food into a space that we wanted to drink in was a good idea. So we put in a pizza oven as that's what I would eat in a bar to go with the beer." The new resident chef was dispatched to spend time with a renowned Italian pizza maker and today the authentic food involves a mixture of Italian yeast and brewing yeast cropped off the top of the beer that is brewed on the premises at Tapped Leeds. "The food was always going to be a side thing but we wanted to do it properly. It's a supplement to the beer offer." Hence the fact pizzas only account for 10% of sales but are a vital component. Food is a much bigger deal at the most recent opening, Pavement Vaults in York – with a £600,000 fit-out, which has a barbecue smokehouse menu. Again, it seeks to be the best of its kind and employs Andy Annat, a freelance butcher who also happens to be three-time UK barbecue champion and finalist in the world championships in the US. "It's not just another beer bar because doing the same thing does not interest us," Hawksworth adds. "We now sell 400 bottles of

“We’ve now got the land for the brewery and we hope we’ll have it operating 12 months from now”

wine per week and the ladies who lunch visit Pavement Vaults. During the weekend, food accounts for 66% of sales." While the bar business has continued to take the attention of senior management including John Holdsworth and Mike Cole, the wholesale side ticked along until less than a year ago, when Hawksworth says things suddenly went "crazy". He adds: "The mentality in bars was, we've never heard of that beer and what was new was seen as dangerous, but now it's the complete opposite, with new being exactly what everybody wants." The wholesale side broke through the 50% level of group sales – to now account for a hefty 65% of the £11m total turnover. Hawksworth says: "We realised just how good our product range is and how much the market has changed. The relationships we have with brewers means we can get stock that nobody else can get hold of." Helping this growth is the Cask Marqueapproved central warehouse that opened in 2013 and holds 2,500 lines at any one time. There is also the new electronic real-time ordering system that enables customers to buy beer via their phone. With this infrastructure in place, Hawksworth is again looking to further grow up. This involves the construction of a modern version of a Victorian tower brewery that will supply beer to all the company's bars. "Our breweries at Tapped Leeds and at Sheffield Tap have proven the beer production process," he says. "We've now got the land for the brewery and we hope we'll have it operating 12 months from now." Even with Hawksworth project managing the build of this undoubtedly adventurous undertaking, this is clearly yet another step-up from splashing out on a £68,000 extraction unit and a further sign of maturity.

Tapped Brew Co in numbers: Five tanks 3,000 litres of beer held Two brews per week Four weeks to lager 1,600 pints sold per week 30p per pint to produce, including duty £3,000 revenue per week over the bar



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Beware newspaper doublethink ALMR chief executive Kate Nicholls says newspapers have a ‘distinctly schizophrenic’ approach to food as a business, on the one hand bemoaning the march of machines while criticising operators for voicing concerns over the living wage


n keeping with many Londoners, I spend my commute nose-deep in a newspaper – and I have started to notice an increasing trend towards doublethink across the media since I last sat down to write an article for Propel. Newspaper articles expressing concern for the loss of community pubs sit cheek by jowl with those calling for new regulation or more red tape. Criticism of restaurants and cafes for changes in menu or team rewards alongside a cri de coeur for more artisan neighbourhood offerings. The television schedules extol food entrepreneurship, but we don’t like it when it means tough commercial decisions. We may be a nation of foodies, but the media has a distinctly schizophrenic approach to food as a business. I was particularly struck by this when I opened the Evening Standard and saw the same journalist writing two articles – one with the headline “A world with no bars or cafes and no friends is edging closer” and another with “spare us this poverty plea from Costa” – and with no hint of irony or a sense they might be in any way linked.

Evnin Standahd

In the first article he bemoaned the march of the machines – automated cocktail mixers, iPads and online ordering at McDonald’s and Tossed – and the consequent lack of human interaction and service. He acknowledged business was tough, both for bars and restaurants – rents are high, rates are high and staff costs are only going one way, meaning productivity savings are essential. He concluded by worrying about the future of hospitality – on the one hand, without productivity savings we may lose more valuable outlets and, on the other, it may be reduced to “solitary eating and drinking pods where we count the margins and wonder where all our friends have gone”.

“The two articles had neatly captured the cause and effect of legislation at the moment and the challenging position in which this puts business” In the second article, placed alongside the first on the same page, he was critical of Whitbread and its subsidiary Costa for voicing concern about the “crippling cost” of the living wage and the fact it may need to put up prices or change staff benefits as a result. If it allowed their workers to share in its growth, he argued, “ordinary people might have more money to spend on cappuccinos in their free time and everyone might benefit long-term”. I put it to him afterwards his two articles had neatly captured the cause and effect of legislation at the moment and the challenging position in which this puts business. He struggled to see how the two were linked – and explaining that is our challenge as a sector with politicians, the media and the general public as we move into the next challenging period as ever more costs hit the sector. If you significantly increase costs above that which is sustainable, businesses have to look at productivity across the board. This is not necessarily a bad thing for the economy as a whole – productivity improvement, once a key measure of growth, has yet to recover its level pre the financial crisis of 2007 and the crisis in productivity is the elephant in the

room at every Budget – but in a labourintensive business, productivity gains have consequences for employment and people. The success or failure of any hospitality business is dependent on one thing and one thing only – its people. We don’t sell products and services, we sell hospitality and experience so there are many things you may be able to skimp on, but your people is not one of them. The idea that, in a highly competitive marketplace, businesses would actively choose to pay people less than they are worth or withhold benefits just doesn’t stack up. But businesses do have to face the commercial facts of life, pay what they can afford and reward their teams in a way that allows them to continue to invest in training, in growth and in their communities. The alternative, of course, is everincreasing automation. That may mean an electronic mixologist or it could mean a return to ordering at the bar. In America, it has fuelled the rise of quick-service restaurants and self-service – with up to half as many staff as a result. The World Economic Forum forecasts five million jobs will be lost in the world’s 15 major economies by 2020. Now, I’m no purist – even Jay Gatsby had an automated cocktail maker and Charles Baker considered the electric handblender the greatest gift to daiquiri bar rum – but we are all only too familiar with what automation has done to the weekly shop. Retail has seen decimated service and staffing levels and high-profile business casualties. In short, a lot of unexpected jobseekers in the bagging area. The chancellor asks for our continued understanding when he makes tough decisions in the light of economic uncertainty and our businesses deserve the same level of support, not castigation, when they make their own tough decisions. Acknowledging cost and seeking ways to mitigate it is not trying to get round legislation, it is trying to protect jobs and hours that may otherwise be lost. Of course, we can choose not to – but, as the Evening Standard journalist noted, that leaves us edging closer to a world with no bars or cafes and no friends.

Kate Nicholls is chief executive of the Association of Licensed Multiple Retailers ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


NE W REFRESHING JUST GOT REFRESHED. • Striking new packaging launching Summer 2016 • From the UK’s No.1 bottled apple and pear cider* • Supported with multi-million pound media campaign


*Source: Nielsen Scantrack Total Coverage MAT 27/02/16 / CGA Brand Index MAT 23/01/16


Head Coach

John Porter talks to founder and managing director Kevin Charity about his evolution of The Coaching Inn Group, its burgeoning reputation, goals, staff development and expansion plans

Kevin Charity outside The Talbot Hotel, Oundle


ith the hospitality industry always keen to money, but that was disappearing due to the licensing law emphasise it offers a career path rather than changes. Finding a new third income stream, alongside food simply short-term jobs, the journey from being and beverage, was one of our tick-boxes, and we decided that Britain’s youngest licensee to running an was accommodation. “We wanted somewhere that was on the high street or expanding business revitalising a neglected, but profitable, niche marketplace. We know market towns inside out and we fully area of the industry, looks like an ideal case study. understand them – so we didn’t veer off into big cities and In 1983, Kevin Charity became Britain’s youngest stuck to what we knew. We knew if we mastered that, licence-holder at the age of 18 years and ten days we’d win.” while working in the pub in Boston, Lincolnshire, “We want to operated by his father Brian. 23 years on, he is Following the model set by the White be everything to managing director of Coaching Inn Group, Hart, acquisitions followed in the Cotswolds, currently ten-strong and targeting five more everybody, and Northamptonshire, Lincolnshire and openings by the end of 2016. Leicestershire. In 2015, the group extended fundamentally that’s Having built a 24-strong group of mainly its reach with two North Yorkshire inns – in what we’ve achieved. wet-led pubs under the Bulldog Pub Thirsk and Hemsley. The available funds for We are the number one Company name, the purchase a decade ago this expansion programme were boosted place in each market of the grade II-listed White Hart, a historic in 2015 through the acquisition of a 20% town. People see us coaching inn in Boston, led Charity and stake in the group by privately owned leisure as a reliable place the business to focus in a different direction. investor Commer Group, as well as a £4.5m to go” Bulldog divested most of its pubs and rebranded investment from the government-promoted first as the Bulldog Hotel Group and then, in British Growth Fund (BGF). summer 2015, adopted its current name. Location “Calling ourselves Coaching Inn Group made sense, it’s There are clear criteria for the type of business Coaching Inn exactly what we do,” says Charity, explaining the change Group is looking for, as Charity explains: “We find the place that of tack. “It’s a very specific market – not just a pub, not just is the focal point of the town and is ultimately the number one a restaurant.” desired place to go to for all events. It’s not just for a coffee, or He summarises the evolution of the business: “Nine years an afternoon drink, or an evening bite to eat – we want to be ago we reviewed the pub estate we had, and we needed to everything to everybody, and fundamentally that’s what we’ve be more focused,“ he says. “We were quite diverse up to then, achieved. We are the number one place in each market town. with a very mixed portfolio that didn’t necessarily make overall sense. At the time we had a bit of late-night trade, a bit of door People see us as a reliable place to go. ▲ ¡ SUMMER 2016 ¡ PROPEL QUARTERLY



Courtyard of The Three Swans Hotel, Market Harborough “These inns are 300-year-old icons, they’re already brands start of May. Charity explains: “We’re doing the lot at once. We in their own right, although typically they’ve had no capital rarely just shut somewhere down and redo it, these businesses expenditure in 30 to 40 years. The target customer is all and are too big to do that, and they’re usually already trading sundry. We appeal to everybody from morning coffee right reasonably well.” through to late dinner, the drinking crowd, and also conferences, However, every part of each business is brought up to functions, weddings, plus hotel accommodation. It’s a massive standard as soon as possible. The sales split across the audience. business as a whole is about 40% food, 28% wet, and “The establishments we buy are traditionally 32% accommodation, making all three strands “The positioned as a mid-market hotel, and nobody’s essential to the overall success. building those currently – everybody’s either establishments we “Our goal is to refurbish the inns to a standard building budget hotels or four/five-star that, wherever you go in that business, it’s buy are traditionally branded hotels. What we do is take threebetter than your own home,” says Charity. “The positioned as a star mid-market hotels and turn them back bedrooms should feel premium, you should mid-market hotel, into traditional coaching inns, which basically remember them. The bar, eateries and coffee and nobody’s provide food, beverage and accommodation. house need to be the same. Our current refit building those “We don’t want to compete against Premier decor is a new style we think is a premium offer, it currently” Inn or Travelodge, and we don’t want to compete feels very comfortable. It’s not urban, it’s premium against Wetherspoon on food and beverage pricing. casual. There’s a relaxed atmosphere, not forced.” We are quite bold and say our bar prices are 20p dearer Menu than anywhere else in town. Our point is that customers are The businesses trade well through the whole day, targeting “a prepared to pay the premium if they know they’ll get a premium local market that uses us for all dayparts. We start with coffee offer. And we deliver on that.” and patisseries in the morning, which we push hard and do well,” To deliver, each business requires bringing up to the required says Charity. “Lunchtime is a normal menu, and then it’s back to standard. For the most part, capital investment in acquired afternoon teas – but it’s a modern afternoon tea, don’t think of businesses is carried out in stages to avoid a full closure. One doilies and black outfits. We then go into evening dinner.” exception is the Kings Head in Richmond, North Yorkshire, While the menu varies according to the venue, “they’re ▲ acquired for £2m in February and closed for seven weeks at the The Three Swans Hotel, Market Harborough

Afternoon tea at The Three Swans





*Voted for by the readers of Fine Food Digest




The Three Swans Hotel, Market Harborough

Coaching Inns Group timeline 2016:

December 2015:

Jill Matthews appointed head of operations to support group expansion plans

October 2015:

Two North Yorkshire inns, the Golden Fleece in Thirsk and the Feathers in Helmsley, acquired from Homfray Hotels

October 2015:

Named Pub Company of the Year at the Eat Out Awards.

August 2015:

With eight sites trading, Bulldog Hotel Group rebrands as Coaching Inn Group

March 2015:

Secures £4.5m investment from British Growth Fund

January 2015: 2008 – 2014:



Five openings targeted to bring total estate to 15 by year-end

kissing cousins”, says Charity. “We focus on local produce but you’ll see a lot of crossover from menu to menu. Our sharing menu has been a big winner for us over the past 12 months, without doubt.” Featuring dishes such as local sausages, scotch eggs and piri-piri chicken skewers, “we call it sharing and grazing,” says Charity. He adds: “We offer about ten different items at every venue. You can buy them individually or mix them up and order three or four at a time, and they are absolutely flying out.

“Calling ourselves Coaching Inn Group made sense, it’s exactly what we do. It’s a very specific market – not just a pub, not just a restaurant’” “We also do a lot of fish and chips, which we do well with home-made batter, mushy peas, chips and tartar sauce. Dishes such as scotch eggs and burgers are also always home-made. Every dish starts out fresh in our kitchen.” The average gross profit being generated is about 72%. “We’re not expensive, we’re selling great quality food at sensible prices,” says Charity. I hesitate to say ‘value for money’ because people interpret that as cheap, which it’s not. Our customers are happy to pay £30 for a fillet steak if it’s a great fillet steak.” ▲

Commer Group takes 20% stake The rebranded Bulldog Hotel Group continues to expand with acquisitions including the White Hart Royal in the Cotswolds; the Talbot at Oundle, Northants; the Admiral Rodney at Horncastle, Lincolnshire; and the Three Swans Hotel at Market Harborough, Leicestershire. The 24-strong Bulldog Pub Company makes the decision to exit wet-led pubs to focus on coaching inns


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Coaching Inn Group results For the financial year to March 2016: u Turnover: £13,005,425, up from £10,065,972 u Underlying operating profit: £1,281,326 – up 60% u Site Ebitda: up from £2m to £2,701,223, an annualised average of £363,000 Ebitda per site

View from upstairs at The Three Swans Hotel, Market Harborough

On the drinks side, alongside the wine range, “we’re doing more and more cocktails, it’s big business now”. Charity adds: “We’ve got a good craft beer menu on – its working but it’s not massive for us. We sell a lot of cask ale, and we always put a beer from the most local brewer we can on the bar. “Overall, it’s where you want to go and feel relaxed, and are prepared to pay a little bit more, not massively more, to get reasonable service and good quality. That’s what we do and that’s why we’re busy. We’re getting a reputation for delivering. Our food and liquor is first class, and it’s always delivered consistently.” All this, of course, requires a high calibre of staff and, reflecting Charity’s own progress through the industry, there is a strong emphasis on training and career development for the 450 people who work in the group. An online training package from industry specialist CPL complements a tailored in-house programme.


Bridal suite curtains at The Three Swans Hotel, Market Harborough

Kevin Charity founder and managing director FAVOURITE MEAL: I love fish. However, it doesn’t matter how much I try to, I can never resist a medium rare fillet steak when it’s available. It’s a little predicable, I know, but add a blue cheese sauce and I’m in heaven. FAVOURITE FOOD: Eggs! Fried, boiled, poached, scrambled, baked, omelettes; and that’s just the start, because then you can start adding things and that’s a whole other story. FAVOURITE BOOK: I like nothing better than a good autobiography. However, the first holiday novel I ever read 35 years ago was Master Of The Game by Sidney Sheldon. A “can’t put down” classic.

He says: “Getting the right people in is what it’s all about, and it’s the hardest thing of all. We’re very specific and particular, and we don’t hire quickly. We also have a long induction so people are ready to work for us when they hit the floor, rather than just being left to their own devices. Training is everything in my view. I still go into venues and see people on the floor who’ve had absolutely no training, and that’s just shameful. “Our initial training and induction is important, and that continues – we’re constantly topping up training. We push a promotion programme; if staff want to move to a different level they can, and we have a clear career path. We also have a fast-track management programme for anyone who shows the capabilities and wants to apply. We can then move them into a deputy manager position in the hope an opening will come up for them to become a full-fledged manager. We do a lot of crossworking, moving people between sites, which seems to get the biggest benefit.” All of which requires a pipeline of new sites to square the circle. The BGF funding allows the business to move at its own pace, says Charity. “It was set up to lend to businesses that are growing. The point is, they’re patient capital. There’s no forced exit point so we’ve got time to do what we want to do when we’re ready. It’s a longer-term proposition. “We’re currently on track to have 15 inns by the end of this year and we’ve got enough funds to do that. After that we’ll probably need to look at refunding, but we have enough funding to see out our original plan, which was 15 in five years, and we hope to complete that in two years.” While many of Britain’s historic coaching inns may have been lost, the pipeline is still full enough for the group’s ambitions. Charity adds: “There are opportunities – they’re there, but you’ve got to look hard. We’re not sitting waiting for them to arrive, we’re searching for them. In fact, we’re physically knocking on doors. Two of the deals we did last year were on that basis. “We’re not going to overpay, but we’ll pay an amount that makes sense, if we think we can get our return. Ultimately, the deals are still stacking up.” ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


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Big turn out at Propel Multi Club Conference Wednesday, 16 March 2016 Congress Hall, London WC1B 3LS

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Feature Insight

Lessons in brand creation Chris Edger and Tony Hughes examine how a number of well-known brands have been evolved


n their recently published book Effective Brand Leadership – Be Different. Stay Different. Or Perish, multi-site leadership academic Dr Chis Edger and foodservice brand builder Tony Hughes explain how hospitality brands can create and sustain competitive advantage throughout their lifecycle phases (originate, escalate, evolve, revive) or ultimately perish. Accompanying their analysis and advice are more than 20 case studies from the leaders of the UK’s most dynamic brands, including Byron, Drake & Morgan, Cabana, Giggling Squid, TGI Friday’s and Domino’s Pizza. These five featured case studies provide remarkable contemporary insights into how brands can win within our burgeoning and vibrant sector.

1. Miller & Carter: finding the gap, by Tony Hughes Contrary to much academic commentary (that assumes a high degree of sequential analysis and planning) brands often come about opportunistically. There might be post-rational analysis about how and why a certain brand came about, but very often the "spark" that ignites the fire in multi-brand companies has arisen in a serendipitous, intuitive fashion as a solution to an "estate portfolio" problem rather than an urge to be spontaneously creative. Take one of the most successful brands I’ve created – people might think that at the time my team and I kicked off the Miller & Carter concept following some magnificent consumer insight. Perhaps that came later – but the reason we invented the brand is far simpler than that: • The motivation – really the main impetus behind Miller & Carter was born out of opportunism. We had just purchased 256 sites from one of our major competitors; many of these sites were failing "value" steakhouse venues. While we could fill many of these sites with brands from our existing portfolio (such as Harvester and Toby Restaurants), the demographics of some locations required a more aspirational solution. Although we had some (developing) premium brands that could have "fitted" the sites, the scale of the units required an offer that would accommodate high volumes of trade to exploit the asset potential.


• The insight – our initial kernel of an idea was to substitute the "value" steakhouse with a "premium" steakhouse offer (there’s always demand for a good steakhouse; think of Berni or Beefeater!) – the trick is KISS (keep it simple stupid). Looking at the UK suburban restaurant market, we felt there was a major gap to be filled here – there was no major chain that covered this premium market segment. Our issue was, if we were going to do it, what should it look and feel like? • The inspiration – I assembled an elite project team led by Ian Dunstall, our marketing director, Mark Jacobs, operations manager, and Tony Booth, of Design Coalition, knowing the US market fairly well, I briefed them to go to the US and look at three premium restaurant operations in particular; Houston’s in Addison, Dallas and Winter Park in Orlando, and Seasons 52 in Sand Lake Drive, Orlando. I asked them to closely observe, analyse and capture their design, core operations and service culture and, when they returned, we essentially simplified the operation to a premium steakhouse to make it more resilient and easier to operate. We picked Miller & Carter from the telephone directory as the most English-sounding names. The brand was essentially creative plagiarism; a bundle of "three ideas" put together – American design, premium steakhouse, and English name! After opening our first prototype and three trial sites, we formulated the brand position to define with clarity the core principles of the brand that connect it with its consumers and to provide guidance to future "brand stewards" for future evolution. The functional and emotional positioning values of Miller & Carter were defined as "Simple Luxury" – communicated as "Little Black Dress"; a clear and descriptive way of understanding the brand role. An essential element for every woman to own is a simple, elegant black dress that can be dressed up or down making it suitable for a wide range of occasions – always with style! Today, Miller & Carter is cited by its current chief executive (Phil Urban) as one of Mitchells & Butlers' power brands, protected from the "value" market "dogfight" through a clear premium positioning. It has a broad consumer appeal, having achieved category leading status in the local micro-markets within which it is situated. But it’s fascinating to know where its origins lie – necessity certainly is the mother of invention!

2. Hache and Giggling Squid: creating a vibrant culture, by Berry Casey and Andy Laurillard Founded in 2004, Hache is a London-based premium burger restaurant chain with six sites. Founder Berry Casey describes the culture he and his wife instilled in the brand, which they believe is a vital ingredient of its success. After a successful career in advertising, we founded and ran a couple of concepts – the Camden Crepe company and Bagels Already – that furnished us with many lessons when we came up with the idea for an upmarket burger restaurant in the mid-noughties. Central to our insights was the need to be differentiated from the competition both in terms of quality and price. But – just as important – was the culture of the brand required to underpin the brand’s personality. So how have ▲


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Insight we ensured our service and environment are distinctive from "canteen" and "better" burger concepts that have challenged us over the past ten years? • Central belief – at Hache (which means "to chop" in French), our philosophy is "j’aime Hache, j’aime la vie" ("love Hache, love life"). We are in the business of making people happy – both staff and customers. Yes, the core strength of the brand is derived from obsessive attention to detail to the core product (that we don’t undermine by "trading on price") but it is the philosophy underpinning our brand that our competitors can’t copy.

loyalty card and by putting on different specials every month ("vive la difference"!) However, we are aware we can’t stand still. As we have grown in confidence we have taken on bigger sites (our newest one in Chelsea is bigger and bolder and doing extremely well) and developed our interior design. But we are not focused on a breakneck speed of expansion rather, continuing to be innovative – remembering that it’s all about the brand – its distinctiveness, reputation and trust – evolving the brand in keeping with its core philosophy – "j’aime Hache, j’aime la vie"!

• Story – when we started up the brand we had a clear vision about what our brand must be. At the time, Gourmet Burger Kitchen was the clear market leader and we took a chance by opening our first site in an off-pitch location in Camden. At first we didn’t know whether or not Hache would work and over time we have faced not only the challenges of launching but also surviving the 2008-14 recession and the onslaught of new competition during 2014-15. But "don’t panic Mr Mainwaring"! We survived start-up by getting rave reviews in the Guardian and Time Out (culminating in a Burger Restaurant of the Year award) – this put 25% on the trade. The recession was weathered as we offered a "low spend per head" in chic surroundings. Presently we are seeing the competition off – retaining loyal regulars – because we haven’t compromised our principles. This story resonates with both staff and customers.

• Icons – my wife and I are fans of minimalist design with a "chic twist". Indeed, my wife has been the inspiration for many of the Hache design icons of the brand, such as the "stripped back" interior juxtaposed against chandeliers and fairy lights. The ambience and decor of our restaurants means we are set apart from "canteen lookalikes" – it is a place where people like coming to work and couples and friends like to socialise. • Hierarchy – our brand is like a family and, as the song goes, "the love you take is equal to the love you make". A happy team means a happy ambience – we have very low staff turnover and all our general managers have been promoted from within. The skills and talents of our staff are amazing (most of whom are aged 18 to 35) – they are well-qualified, energetic, positive people who "get" Hache. Yes, we’ve had to professionalise and standardise systems as we’ve grown (taking on more people to support the brand) but we have kept our formula for maintaining team spirit. • Control – the values of our brand keep attitudes and behaviours on track but technological innovation has meant these days you can view restaurant transactions and till takings from anywhere in the world, daily and hourly. So we have a pretty good upto-the minute feel for how the business is doing. If we have a problem, it becomes immediately apparent. • Rituals – this brand is all about having fun. The brand’s sense of humour is expressed in billboard advertising at tube stations near our branches and on social media. We have an incredibly loyal following who we reward through our Societe Hache

Giggling Squid is a successful Thai tapas chain that currently has 20 sites. Founder Andy Laurillard reflects on the consequences of cultural mismatch when the brand took over premises vacated by a "downsizing" national brand. Although I was working in marketing, my wife and I had significant experience running a Thai restaurant in Brighton called Mai Ped, Ped, Ped when another site was offered to us for a "proverbial box of cornflakes"! After brainstorming the name – my son came up with wriggling fish that over a bottle of wine became Giggling Squid. We opened our first unit based on greater accessibility to Thai cuisine, English language menus and a stripped-down contemporary design. During the Giggling Squid expansion journey from our first premises in Hove, we have encountered a number of issues such as picking a wrong site (that seriously stalled our wider roll-out plans), encountering listed building issues, and being quickly surrounded by casual dining competitors in key locations. However, the distinctiveness and quality of our offer allied to the fact we have been prepared to customise our offer in various locations (for instance, variable/seasonal pricing, different wine menus) has kept up our forward momentum. Our latest unit in Salisbury is in a prime location, challenging our assumptions we are an off-pitch operator that can only afford secondary sites, and is "shooting the lights out".

“The distinctiveness and quality of our offer allied to the fact we have been prepared to customise our offer in various locations has kept up our forward momentum” We now have a "market grid" that details key locational requirements and we now know exactly where our target towns and sites are. But one thing that has sustained and underpinned our growth is our culture. In one site acquisition, however, it all went slightly awry! If I was to define our culture I would say our main guiding principles are: • Keep it tight – we have strong values that are understood and bought into by all our people, top to bottom. Our estate is purposefully located only two hours from our house in the London commuter belt, enabling my wife or I to get around reinforcing messages and standards. ▲ ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


Insight • Co-operate – we stress co-operation as a cornerstone of the brand; highly necessary when you are refining and rolling out a new concept. • Share the work – hospitality is hard work, made easier if everybody pitches in to do whatever is required to delight customers. • Share the rewards – we really look after our people; we need to if we are to win in the Thai labour market! Our kitchen staff are on good pay and benefits. Also, back-of-house and frontof-house share the rewards; particularly regarding tipping. We realised how important these cultural dynamics were when we took over a premises from a major chain in a "theatrical tourist" hot spot town. It was a really good pitch and we assumed it would take off like a train. However, it was a car crash in terms of cultural differences. The staff we inherited just "did not get it". It took us quite some time – by redeploying staff into the unit from other locations – to get the microculture of the unit right. It was a good lesson for us – we now have a much greater understanding of the type of people we prefer – attitude is so much more important that skills and experience. As the organisation grows and we put in a supporting infrastructure – we have taken on an operations director and operations managers in the past 12 months – it is important these new-hires also buy into our culture, which is one of the main defining reasons for our sustained success. This is an extremely successful brand now, with real momentum but, like all successes, it has not been without its road bumps!

– something people didn’t even know they wanted! Based on our idea, what we came up with in our first outlet in Hampstead (a location we knew well) was an "all-day" brand (I believe in making best use of the property!) with a "world take" on music, decor and food – San Franciscan-type bacon and eggs breakfast, Sydney lunch, all-day smoothies – healthy ingredients from the best suppliers. The name Giraffe embodied what we wanted to convey – tall, exotic, fun, "global". • Culture – the competitive edge we created was based around our people – they personified the brand. We created a wonderful engaged team and, just like great teams in sport, everybody aligned working together for the success of the business. We created a great experience and atmosphere for guests by employing people we wanted to work with who bought into the ethos of the brand. For us, it was about giving freedom to our people to express themselves; giving them wider barriers, engaging them by being close to them, "putting our arms around nice people" and showing them they had a future as the brand grew. We wanted to be an employer they could be proud of, recognising them at events such as our GOSCARs, where we rewarded great guest memories and experiences. Also, we were highly visible founders, interacting with staff and customers, finding out what they wanted, aligning common goals, and communicating the message – particularly our philosophy of how we wanted to do business and why we come to work everyday! We often said: "We happen to be in the people business serving food!" We lived the brand every day and this reflected what our teams were doing and created memories and stories that made our customers come more often. Our culture and hospitality was rewarded by the measured success of the brand.

“The name Giraffe embodied what we wanted to convey – tall, exotic, fun, global” • Patient roll-out – from our first restaurant we grew it "one customer – one restaurant" at a time. We didn’t go for "big bang" solutions, it was our money at the beginning – we weren’t funded like some of our corporate competitors! Really, our site selection was more down to gut feeling while walking the streets. Market research can tell you only so much – you need to go look and see!

3. Giraffe: growing a successful concept, by Russel Joffe Giraffe was founded by entrepreneurs Russel and Juliette Joffe in 1998. By 2013, it had grown to almost 50 restaurants and was bought for £48.5m by Tesco. Russel Joffe reflects on how he and his wife successfully grew their brand from conception to the point of exit. How and why did we set up Giraffe? The journey we chose was one based on a lifestyle to create a restaurant brand by entrepreneurs who wanted to do things differently – no less professional than a big corporation but one based on people, hospitality, and wanting to give our customers something different. But what were the main factors behind its growth? • Experience – my wife and I had already set up and sold a successful chain of eight sites (one of the first real all-day cafes before Café Rouge) called Café Flo. Therefore, we already had experience of setting up and rolling out a successful concept! • Differentiation – after selling Flo we took a break, travelling the world and taking time out with the kids. During this time we came up with a gem of an idea – creating an affordable lifestyle brand based on world music and global food with a style of doing business where we wanted no barriers to how we did things. Knowing the UK casual dining scene at the time we knew if we wanted to do something it had to be a new "niche"


• Right partners – when we needed development capital to grow at a faster pace and were more confident to compete at a higher level with the bigger boys, we looked for new equity partners to not only provide this capital but support us with some operational board level experience in growing a brand. The discipline alone in having to have a board meet and prepare a pack gives you the time to think about the business and the decisions you are making – and then to discuss them and be challenged by the board helps you and your business grow. The challenge is not to let the corporate governance interfere with the culture you have created from the beginning – the heart and soul of the business. Without that you have nothing! The board has to be aligned in the decisions being made and the plan you are all working to. • Constant challenge – we were always questioning what the customer and our teams wanted us to be. Also, our relationships with suppliers had to be good ones – from securing best prices to the unit-level service required for demanding teams. Driving the best price is part of it but so is the best service – going the extra mile! But everyone has to leave the table in agreement with the way forward and the decision made at any level (operational, team, supplier negotiation, board meetings). We were always driven by a sense of healthy paranoia, a productive sense of fear about doing things better tomorrow. ▲


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Insight • Alignment and synchronicity – but in summary I think we were successful in scaling this brand up successfully because everybody and everything was in "sync" – our backers supported us, our team loved the brand, our customers (we had 250,000 website members at one stage) loved the experience we gave them. Our suppliers loved working for a growing brand, all our stakeholders were aligned, that’s why we maintained our growth – everybody was on board, we were all in it together! In short, alignment and having great partners is crucial (staff, customer, suppliers, local communities, shareholders etc) and communication between all is fundamental to building a great brand from the bottom–up.

4. Drake and Morgan: rolling it out, by Jillian McLean Jillian McLean is the founder of London-based bar group Drake and Morgan. After an extremely successful launch in 2008, the brand now has 14 sites generating a turnover of circa £25m with an Ebitda of £3.2m. During the next phase of its development, it aims to reach 20 to 25 units with a turnover of £70m and Ebitda of £10m. McLean has vast experience of the sector, having previously run some of the UK’s fastest-growing brands. Having successfully launched our concept, our attention has turned more recently to addressing the next stage of its development – scaling the brand up through a targeted roll-out plan. As its founder, with new investors on board, I have had to spend a great deal of time wrestling with a conundrum – how do we successfully "scale up" the brand without losing its "core" momentum. Based on my role here and my leadership experience rolling out brands for corporates in the past, it is my view that – in addition to all the obvious activities and tasks – the following "props" will be critical in effecting a successful roll-out for Drake & Morgan. • B to C team – while a great team has got us from A to B in our journey, through creation and start-up, we have had to spend a lot of time recruiting people with roll-out skills and experience that can get us through the next stage. Our first phase of development was characterised by energy, passion and a "can-do" attitude; this current phase requires more of a planning and organisational mindset (without undermining the brand essence)! In addition, we have had to be quite ruthless in making sure business does not "tail off" in our original sites through distractions posed by openings elsewhere. • Robust service platform – due to my corporate background, our business systems were relatively finely tuned and templated from day one. However, our new investors quite rightly challenged us to ensure our service model was replicable as we scaled up. Working with Pragma (a consultancy specialising in service delivery) we have simplified the customer service model by reducing the number of "touch points" within the customer journey. This simplification will lead to greater consistency of

execution from our teams and clarity of understanding from our customers as we move forwards. Sometimes, as a founder, you need to step back – certainly during the roll-out phase – and question how can we do things better, faster, slicker. And you must be prepared to discard what you initially thought were "sacred cows" to make the brand more "fit" for roll-out (again, without compromising the essence of the brand!) • Trend/Density tracking – of course we have carried out a lot of analysis on our current sites to define a robust "sitefinding template" (demographics, footfall requirements, building aesthetics, scale of unit etc). We have also made great efforts to understand not only where our market is now but also where it is going to. We’ve carried out a lot of work on demographic trends with McCann Erikson, while GVA Grimley has also helped us look at footfalls and densities in London. Customer traffic is constantly shifting; we need to understand transport hub plans, office development proposals and local improvement initiatives. This is where new "exploitable" markets and customer flows will exist in the future. • Landlord/Tenant relationships – when we have located prospective sites it is also crucial we create great relationships with landlords, principal tenants and developers. We have got to understand what their needs are and how we can pitch successfully for landmark sites. In 2008, we were on a shortlist of one when we pitched, now we can be up against nearly ten rival concepts to get the best locations. We have to ensure – certainly in office locations – we are perceived as being of high value-added to landlords/developers such as Land Securities and Heron – and really wanted by adjacent principal tenants such as the large media and hi-tech companies that rent the dominant space. We must emphasise our all-day proposition, quality positioning and value-led characteristics (within a broader upmarket context) to make sure they want us, time and again. • Concept flexibility – over time we have developed a systemised "turn-key" approach to developing sites (12-week build and fit-out, two weeks pre-opening training, followed by a soft launch). But we must always retain a degree of flexibility in two respects. Firstly, when we open a new site, 35% of our business is pre-booked so we find out pretty quickly customers likes and dislikes. This enables us to go back in to "reset" a few things; which is fine because our concept runs on an 85% fixed/15% flexible philosophy. Secondly, given the space constraints we face, we have proof-tested smaller formats which, while maintaining the essence of the brand, will enable us to access far more site opportunities in the future. As the founder of this brand with a great deal of influence from my sister Amanda, who is based in San Francisco and whose perspectives and knowledge derived from west coast American dining have been a critical ingredient of our success, I am conscious we have entered a new "acceleration" phase of brand development following "origination". This has meant I have had to adopt ▲

Drake and Morgan opening this summer at Heathrow Terminal 4 ¡ SPRING 2015 ¡ PROPEL QUARTERLY


Insight a different approach, transitioning from a “creator“ into “escalator“ role. This has been made easier by virtue of the fact I have been in this role before in my corporate career. The factors I have cited above will be key components of our future success.

• Social media – we also were early adopters of the latest trends in social media; taking to Twitter quickly, for instance. This generated an engaged fan base. It was important to me that we remained accessible and normal and that we challenged ourselves to stay fresh. In fact, I personally ran the Twitter account in the early days (probably slightly obsessively) responding to tweets. I can still be found as a guest editor from time to time! Phase two: scaling up (25 to 50+ units) – as we have grown we haven't lost our passion to produce fantastic, quality hamburgers delivered by people with personality in highly desirable places. But, inevitably, we have had to put in a little more infrastructure so we can continue to "move the needle" on the existing estate (increasing visit frequency) and launch successfully in areas outside London. Our strategy now is to make it as easy as possible for people to enjoy a proper Byron hamburger. This is something we have addressed by asking a simple question: "What do our customers want more of?" This has meant continuous innovation: • Upgrade website – recently we improved our website so people have a seamless, easy way to find out more about us. • Digitalise payment methods – as people are getting busier, convenience is key – online ordering, mobile payment are all key investments for the business.

5. Byron: driving awareness, by Tom Byng Tom Byng founded acclaimed upmarket casual burger chain Byron, which has more than 60 sites. Having established the brand successfully in London, Byng and his team are currently rolling out the brand nationally. So how did Byng drive awareness of Byron as he scaled it up? Until 18 months ago we didn’t have a marketing department; like most other originators I suppose we just did it ourselves at the outset! But, as the brand has got bigger and moved to areas outside London, we have had to "professionalise" the whole process. So, in reality, driving awareness of Byron can be subdivided into two phases and what we focused on during each stage. Phase one: creation (zero to 25 units) – during trial, start-up and initial roll-out, we concentrated on a few key factors to drive awareness and establish the brand. • Compelling concept – the first thing we devoted all our energies to was creating a compelling concept with soul and personality; an iconic brand that served American-style fresh burgers "done well" off a "small and sweet menu" in individualistic restaurants that all had different, intriguing designs. We sought to provide "consistently amazing and memorable experiences" so people would spread the word and keep coming back. • Clustering and concentration – one advantage we had was the benefit of capital investment from a large parent company; this meant that after the proof of concept stages we could launch almost simultaneously in different parts of London. As we opened we created "local pull" through giant billboard hoardings and "soft" house-warming launches, where we invited locals to sample our product as a thank you for the disruption we had caused during the build and fit-out process. • Constant innovation – while we were scaling up the brand we also kept listening to our customers and teams in the restaurants, continued to keep fresh and exciting through constant innovation (menu development, "proper" beer, monthly specials etc). This signalled to our new and existing customers we were intent on keeping Byron "interesting and relevant". • Founder-led PR – in the early days we spent very little on PR; the PR was mainly me telling the media the story behind Byron. This worked well, I think, because people like hearing from "real people" and are more apt to respond to authentic "personalities" rather than bland corporate speak.


• Broaden range – we have also thought hard about infrequent, lapsed and non-users. What, if in a party of four, one customer wants a healthier option? They may veto the visit for the whole group. While staying true to our "short and focused" menu, we recognise the importance of driving perceived choice, introducing well-balanced choices including salads, as well as striving to meet the needs of allergen sufferers. • Reward ‘loyals‘ – the Byron Burger Club has grown from strength to strength and we continue to ramp up the rewards we provide to its more than 90,000 members – our most loyal customers. We want to ensure we offer these guys "treats" or "enhanced experiences", such as interesting club events or one-off cook-off nights that enhance our "burger expert" credibility. • Leverage social media – in addition to all this we now dedicate resources to managing our social media communities. They are the new and fresh voice of Byron and create stimulating conversations. Indeed, we’ve had situations where we’ve been able to solve customer issues immediately "live" on Twitter. Having agreed some sensible ground rules, we purposefully picked an avid user of Twitter. We’re well placed to express our individuality and respond quickly in live environments. Corporates are often scared stiff of this stuff but at Byron we understand you can’t control social media but you can do a lot to shape a positive message. It’s my view the spontaneous feedback we get through social media is a great barometer of how we are doing as a brand. It provides a quick and easy way to get feedback and, because a lot of the rich narrative isn’t necessarily directed at us (we are merely "eavesdropping" on conversations), it has a higher degree of "realness and authenticity". What we are working on now are far more robust ways to filter and analyse this valuable data as a means of continually improving and enhancing our offer. In conclusion, as you move from "creation" through "scaling up" it is important, in my view, the brand leader is there to make sure the "brand personality always shines through". It is my job to grow and stretch the brand while preserving its core DNA, ensuring it is consistently articulated throughout the business in whatever we do.

This article contains extracts from the recently published book Effective Brand Leadership – Be Different. Stay Different. Or Perish, written by Professor Chris Edger, a multiple author on retail leadership, and Tony Hughes, a luminary of the European food service scene


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Site for sore eyes L

ike everyone in this sector, I know how incredibly important it is to have outstanding digital presence – and how critical it is to include digital as part of an integrated marketing strategy which, in itself, is driven by consumer insight. With all the talk about apps these days, it is useful to have a reminder every now and then about the importance of an excellent website and not just focusing on an all-singing, alldancing sexy app. Many operators feel the same way about apps as they do about physical loyalty cards – customers may use them once or twice but are quickly bored and then delete. Don’t get me wrong, a great app can generate really positive engagement and, if it solves a problem for your target audience, even better, but your website is still your shop window. An article in Nation’s Restaurant News ( late last year stated: “Restaurants no longer face a choice between operating as bricks-and-mortar retailers or having a digital presence. Today, it must be both – and the challenge ahead for any restaurant chain will be staying true to the brand, mission and values as they evolve with the times.”


Digital approach

Elliotts chief executive Ann Elliott says it is wise to remember the importance of having an excellent website and not just focusing on sexy apps


Having an outstanding website ensures hospitality brands can stay true to their original vision and values. With that in mind, I thought it might be useful to talk about the insight that is driving our approach to digital and, in particular, websites with our clients. Almost 60% of smartphone users think browsing websites on their device is useful but only 31% think browsing apps on their device is useful – once again proving having a great app is no substitute for having a great website. Ensuring a website is mobile-friendly is critical. According to research conducted by the Centre for Retail Research, restaurant and entertainment businesses are missing out on 26% of mobile sales because their websites aren’t properly enabled for mobile. Currently, 28% of online restaurant and takeaway food sales are ordered via mobile devices but this is expected to rise to 63% by 2017. There really cannot be any operator or supplier who doesn’t have a website (or who has moved entirely to an app-based business) can there? But just to reiterate – not having a website is business damaging. According to Mintel’s Eating Out: The Digital Consumer, 2015, 5% of diners strongly agree they’re unlikely to visit a restaurant that doesn’t ▲

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Insight have a website. Furthermore, restaurants without an online presence are missing out on the 33% of diners who like to browse restaurant websites in their leisure time. Websites, of course, need to be updated regularly and the range of content to refresh includes:

Example in practice: Choosing a specific blue over some other hues amounted to an additional $80m in annual revenue for Bing

Search results The final crucial point about websites, of course, is their effectiveness for a business is rapidly diminished if they can’t be found in search results. Search is still the numberone driver of traffic to content sites (websites containing useful information), beating social media by more than 300%. The first place we go to find what we’re looking for is Google, regardless of which device we’re using. It’s tempting once a website is up and running to think it will look after itself – for a while at least. SEO (the practice of optimising a website so it appears for the search terms you want to be found for) is vital. This means ensuring the website itself is technically able to be found in searches and constantly checking it has authority with all search engines. “Authority” is delivered from a number of activities. One of the most important is to ensure other great-quality websites are linking to your site (a mark of popularity). Another is to provide evidence to help Google or Bing verify your website eg Google business listing (“Google My Business”). Also check that your brand has other mentions across the web and your website has very strong content. Websites have to be well written, tell a story W and engage browsers.

Reviews: 55% of diners say they’d be interested in seeing customer reviews on restaurant/takeaway websites Pictures/food images: 49% of diners, particularly women, those aged 16 to 24 and those in full-time education, are interested in seeing more pictures of the food served on restaurant websites. Furthermore, 22% of takeaway/home delivery users say they’re more likely to order a takeaway/home delivery if they can see what the dishes look like first Video: 13% of diners would like to see videos of the food/drink venue on their websites. An article in The Guardian last year stated by 2017, video will account for 69% of all consumer internet traffic (to Cisco). Video, they said, was the future of content marketing – “that is if not the here and now”. The article went on to state: “When it comes to potential reach, video is peerless. YouTube receives more than one billion unique visitors every month – that’s more than any other channel, apart from Facebook. One in three Britons view at least one online video a week – that’s a weekly audience of more than 20 million people in the UK alone. Video can give you access to all this. Video done well can give you a slice of it. What other form of content can do the same?” Ability to book and see availability: 50% of diners agree they prefer restaurant websites that let them see booking availability online, with 11% of diners strongly agreeing with this statement The experience of others: 8% of diners say they’d like to see or watch pictures or videos of people’s restaurant experiences more than a written review. Conversely, poorly executed websites can act as a deterrent, with 12% of diners strongly agreeing a poor website would put them off visiting a restaurant/takeaway

Update regularly

“SEO should be continuous, not least because Google changes its algorithm on a regular basis”

Example in practice: Online sales accounted for 69% of the UK and RoI delivered sales (2013: 63%) at Domino’s Pizza Group UK in 2014. Its online system sales increased by 30% to £440m (UK and RoI). It stated tickets were higher online – the migration of customers to the channel contributing towards its like-for-like sales growth Example in practice: A sharp uplift in online bookings was reported by the managed pub and bar group TCG in April 2014. This followed a three-month project to improve the search engine optimisation (SEO) of its website and improve the effectiveness of its social media pages. The company used online offers such as food discount when fans signed up to its newsletter to increase its visibility online



It’s important to update website pages regularly and to provide in-depth content on your brand, your sites, your offer, your promotions, your menu (great food imagery is a must), your reviews and your uniqueness versus competitors. SEO should be continuous, not least because Google changes its algorithm on a regular basis, so sometimes it’s better to outsource this to make sure you maintain your position in the results. In the excitement around apps, new digital marketing and exciting social activity, it’s critical never to forget the basics – get your website right and everything else will follow. Sources: Mintel, Eating Out: The Digital Consumer, UK, April 2015. Mintel, Attitudes Towards Home-Delivery And Takeaway Food, UK, March 2015. Mintel, Eating Out: The Decision Making Process, UK, July 2014. Mintel, The Connected Consumer, UK, May 2015. Big Hospitality, Restaurants Urged To Invest In Mobile-Enabled Websites To Boost Sales, August 2015. Invision, 2015: http:// Outbrain, as seen in IronPaper, 2015 [ articles/2015-critical-seo-statistics-and-trends/]

Ann Elliott is chief executive of the leading sector marketing and PR agency Elliotts – Follow her on Twitter: @elliottsagency

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The quick and the good NPD Group industry expert Maria Bertoch looks at trends across Europe’s quick service restaurant market and offers forecasts for the rest of the year

Recovery and optimism Despite fragile economic growth, the migrant crisis and high unemployment in some countries, 2015 marked a turning point with customers coming back to quick service restaurant (QSR) outlets in four of the “Big 5“ European markets – the UK, Germany, Spain and Italy. The only exception was France, which maintained the same level of business as 2014.

“The typical Briton goes to QSR restaurants on average 8.7 times each month, or 104 times a yearâ€? Total consumer spend in Europe’s Big 5 in 2015 in the QSR segment was 104bn (ÂŁ83.4bn). With 2.2% growth for total consumer annual spend in European QSR, following a shy 0.3% in 2014, the key indicators have turned green in 2015 for the majority of European markets. The key difference for 2015 is that traffic grew in four countries out of five (in 2014 only Britain achieved positive traffic growth). Total Big 5 QSR traffic growth 2015 vs 2014 was +0.7% compared with the -0.8% decline 2014 vs 2013. In Britain, where the QSR market is worth 26.25bn (ÂŁ21bn), the typical Briton goes to QSR restaurants (including retail visits) on average 8.7 times each month, or 104 times a year. One-third of all visits are to retail outlets (retail cafeterias and food to go) and brands such as Marks & Spencer, Tesco, Waitrose and Sainsbury's play an active part in this business segment. These retail visits represent one-fifth of all QSR consumer spend in Britain, with a low average bill


per consumer of 4.60 (£3.70), a level that reflects competitive retail pricing. With a similar market size in terms of spend ( 24bn or £19.3bn), Germany’s QSR market appears to be moving towards healthier options with more freshly prepared meals. This trend has affected the QSR average bill per consumer (+3.5% in 2015). Germany is also an example of a market where the modern casual dining channel is growing through different premium burger offers, chicken products and healthy salads, as well as offerings from bakery-cafes and fancy coffee shops. Germans visit QSR outlets between five and six times per month, while Italians record an impressive ten visits per month. QSR visits in Italy are at a record high, boosted by morning coffee visits (which represent one-third of daily visits in Italian quick service). As a result, the average bill per consumer

is low ( 3.20 or £2.60). The value of the Italian QSR market in 2015 was 25bn (£20bn). This is three times the volume of the Spanish QSR market, which is worth 8bn (£6.5bn), with tapas classified as part of the Leisure segment (rather than part of QSR). The distinguishing feature of the Spanish QSR market is that independent cafeterias have the same importance in the overall market as the retail segment. With an average bill per consumer of 3.00 (£2.40), the least expensive of the Big 5, price wars are a fact of life. To take just one example, chains such as 100 Montaditos offer sandwiches at 1.00 and beers for 2.00! The French QSR market still faces difficulties and has yet to take off. The size and characteristics of France’s QSR market are similar to Britain’s, with the retail segment responsible for ▲

Chart 1: QSR annual spend (ÂŁbn) and average bill per visit (2015) Britain has the biggest QSR market in terms of spend. Italy (mainly thanks to morning coffee visits) is comparable in value to Germany. Spain (without tapas segment) is the market with the lowest bill in QSR.


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Insight one-quarter of all visits and consumer spend in 2015 and an average bill per consumer of 5.00 (ÂŁ4.00). But the French QSR market has a relatively low visit frequency of 58 visits per year, or between four and five visits per month, about 30% fewer than Britain's frequency. However, France has a high number of company cafeterias and canteens on-site compared with the British foodservice market and this means there are still opportunities to develop the quick-service market in France.

“The NPD Group expects +2.2% growth in visits and +3% growth in spend for the British QSR market for 2016�

Chart 2: QSR performance in Big 5 Trends in % Traffic growth in the European QSR channel in 2015 turned positive boosted by burger and chicken fast-food chains, coffee shops, bakeries, sandwich shops and Retail.




Total Spend


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-0.8% 2014/2013


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Great Britain British consumer confidence in 2015 was among the highest in Europe’s Big 5. Britain's QSR market benefited from this optimistic consumer outlook and grew by +1.9% in visit terms. This healthy growth was complemented by an increase in the average bill per consumer of +1.3%. Outperforming full-service restaurants in visit terms, the QSR market is a key driver of total foodservice in Britain. Promising economic indicators and the exceptional mild weather experienced in the last months of 2015 encouraged Britons to go out more often than usual. This was clearly beneficial for

the QSR market with contributors to QSR growth including the following segments: burger and chicken, sandwich shops, coffee shops and retail. Growing chains from the casual dining segment also attracted more visitors in 2015. 2016 forecast: The NPD Group expects +2.2% growth in visits and +3% growth in spend for the British QSR market. This forecast reflects increasing confidence among consumers and continued investment by the major chains to improve the experience they offer consumers.

Chart 3: Quick Service Channel in Europe in 2015

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Germany After a hesitant year in 2014, the German QSR market saw traffic growth in 2015 of +0.4% (versus -0.7% in 2014) and strong average bill growth (+3.5%) that boosted total consumer spend in QSR. This performance reflects the fortunes of the wider German economy, which was carried forward by cheap oil prices, healthy economic growth and increasing employment. In particular, casual dining chains – with their open kitchens and made-to-order policies – have been hugely successful. A good example is Vapiano, a casual dining brand with crisp, modern and spacious decor offering fresh pizzas and pasta made to order and served at the counter. Sandwich shops and bakeries also performed well. There were the same positive visit trends for coffee shops and retail brands offering ready-to-eat meals for consumption in-store or to take away. Perceived as wholesome and healthy, Asian concepts and chicken-based concepts are also growing in Germany. In contrast, burger chains suffered again in 2015. 2016 forecast: Offerings perceived as high quality and healthy will help to drive growth and there will be a further increase in the average bill value. NPD Group expects +1% QSR traffic growth in 2016.



With improving consumer confidence and its first GDP growth since 2011, Italy seems to be out of its long recession. As a result, Italian consumers feel more at ease and are spending a little more â–˛

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Insight on foodservice. There is also a new phenomenon in Italian QSR that is following global trends: the development of take-away and delivery businesses. Meals bought from QSR outlets and then brought home have shown a +5% increase in traffic in 2015. This was one of the drivers of the Italian QSR market, which has enjoyed a good performance recently. Morning coffee visits grew strongly and, as a consequence, boosted the total QSR market. In addition, burger chains performed quite well (even as a niche market segment traditionally dominated by pizza), followed by cafes and then the retail segment that is still a young and growing part of the Italian QSR landscape.

Britain: best visit growth in 2015 Chart 4: Visits in QSR channel trend in % 2015 vs 2014


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2016 forecast: Further general improvement in the Italian economy might boost QSR traffic and increase average bill values. Traffic growth for 2016 in Italy could potentially be +1%.

Spain With GDP growth up by +3.5% in 2015, the Spanish economy is in much better shape, despite the continuing high unemployment rate. This has had a positive impact on the Spanish foodservice industry overall. The QSR market is showing a quicker recovery, with traffic up +1% compared with full-service restaurants, which have seen traffic grow +0.6%. This progress is mainly driven by good results in the burger segment, as well as cafe-bakeries, retail, pizzas and frozen yogurt/ice-cream. 2016 forecast: Spain’s economic recovery should boost the foodservice market further, improving both traffic and average bill performance. The challenge in Spain? The independent players who command 66% of traffic but failed to win extra traffic in 2015. The independents face stiff competition from restaurant chains.

France France enjoyed +1.1% GDP growth in 2015, although unemployment is still high at 10.6%. French consumer confidence is still below its long-term average and the tragic events of November 2015 were a major shock for the foodservice industry. Nevertheless, quick service restaurants managed to stay afloat. In 2014, QSR visits were down -1.7% but in 2015 the losses were limited to just -0.3%. 2016 forecast: With 2015 having been such a difficult year, 2016 should bring relief for two key segments of the French foodservice market: QSR and full-service restaurants. The expected growth in traffic for 2016 is +0.3%. But the real growth in traffic is expected in 2017, which will be the first positive year since 2011.

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Casual dining The casual dining revolution is a trend that is having a strong impact on the QSR market. Casual dining – as well as fast casual – means chains and independent outlets with an average bill value above the classic QSR restaurants. In fast casual outlets customers are served at the counter, whereas casual dining outlets offer table service. They both sometimes offer delivery and take-away services. They often offer “made-to-order“ service and customisation (choice of ingredients, flavours, etc), and often operate an open kitchen. They highlight the quality and origin of ingredients and investment in decor to create an inviting atmosphere.

“Casual dining customers increased their visits by 6% in the year ending February 2016 compared with a year ago, while total foodservice traffic rose by 1%� In Britain, the NPD Group includes the following as casual dining brands: Gourmet Burger Kitchen, YO! Sushi, Le Pain Quotidien, Byron, and Patty & Bun. In France, casual dining brands include Vapiano, cojean, EXKi, Big Fernand, Bagelstein, Factory & Co, Boco, Vert Midi, Lina’s, Bert’s, Chipotle Mexican Grill, Francesca, and Class’croute. It’s still difficult to measure this young market in Europe. In the US, however, NPD Group data shows casual dining chains are continuing their winning streak. The number of casual dining restaurants rose by 5% to 19,043 (based on NPD’s YE Sep 2015 ReCount restaurant census, which includes restaurants open as of 30 September 2015). Casual dining customers increased their visits by 6% in the year ending February 2016 compared with a year ago, while total foodservice traffic rose by 1%. The top five casual dining restaurant chains based on number of units are Chipotle Mexican Grill, Panera Bread, Panda Express, Five Guys Burgers and Fries, and Firehouse Subs. This success story of casual dining in the US shows that in Britain and elsewhere in Europe there is room for growth for this winning restaurant concept.

Maria Bertoch is NPD Group industry expert (foodservice Europe and Russia), and director of client development ÂĄ WINTER 2015 ÂĄ PROPEL QUARTERLY


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Working with the thin blue line

The government’s Modern Crime Prevention Strategy at least signals alcohol is not as demonised as it once was regarding crime, says Paul Chase, but operators can’t end up as a surrogate police force micro-managing public behaviour


he government published its Modern Crime Prevention government’s report states “the evidence shows” that “in around Strategy in March this year. One of the positives is half of all violent incidents the victim believed the offender(s) to that alcohol as a driver of crime is but one section in be under the influence of alcohol at the time of the offence”. this report and there is no new stand-alone ”alcohol Leontaridi estimates it is 47%, and both numbers are derived strategy”, such as the one published in 2012. Why is this a from the British Crime Survey. positive? Because it at least signals that alcohol is not being The £11bn is a “cost to society“ figure and is made up of unreasonably singled out and demonised in quite the way it was. a number of elements that are not costs to the taxpayer, and The other interesting development here is that, despite perhaps not even economic costs in any real sense at all. For example, £4.7bn “emotional impact“ costs. How do you monetise the publication of the chief medical officer's new ”low-risk” the emotional impact of a crime? Take this one element out of drinking guidelines, the pendulum of government concern in the total and it reduces by 43%. All we can calculate with relation to alcohol use is returning to crime and disorder any reasonable degree of accuracy are the direct and not being seen purely through the prism of costs of alcohol-related crimes to the police and ”public health”. “A renewed criminal justice system. Leontaridi estimated the The government’s difficulty in assessing the emphasis on cost of alcohol-related assaults and woundings impact of alcohol-related crime and disorder effective local to be £1.1bn. If this is readjusted for inflation isn’t made any easier by the lack of reliable partnerships emerges and changes to the crime rate since 2001, some statistics; or indeed the continuing reliance on in the government’s interesting conclusions arise. old, and discredited, statistics. strategy as a key The Institute of Economic Affairs paper It is good to see the discredited “£21bn element in crime “Alcohol and the Public Purse” (C. Snowdon cost of alcohol to the taxpayer/economy/NHS/ prevention” September 2015) points out there has been a 39% society” (take your pick) is conspicuous by its decline in violent crime between 2001 and 2013/14, absence from the government’s published strategy, while inflation during the same period totals 47% but it still relies on numbers derived from that total “turning Leontaridi’s £1.1bn into £1,638,090,369 in today’s in some of the conclusions it reaches. For example, the money“. The report continues: “Lowering Leontaridi’s inflationreport states: “Alcohol misuse places a strain on our emergency adjusted figure by 39% leaves a cost to the police and criminal services and a significant cost burden on society; latest estimates justice system of £999,235,125” (Alcohol and the Public Purse/ show the cost of alcohol-related crime is £11bn.” To what – the page 12/ C. Snowdon 2015). If we factor in estimates of costs for emergency services or the much more nebulous ”society”? all the other alcohol-related crimes, it comes to just over £545m This £11bn figure was cited previously in the government’s at 2015 prices, giving us a total cost of alcohol-related crime of Alcohol Strategy 2012, but its original source is the study more than £1.5bn. conducted for the cabinet office in 2003 by an economist, Dr Inflation can take many forms, but problem-inflation has Rannia Leontaridi, which estimated the cost to society of alcoholdogged alcohol statistics for as long as I can remember. related crime and disorder as being nearly £12bn in 2001. If the revised figure is £11bn, based on a Home Office estimate of Local partnerships costs to society in 2010/11, then even taking the government’s At the centre of government concerns is the desire to reduce own figures at face value, this represents a real-term decrease in costs to the public purse of alcohol-related crime, and that is ▲ costs, after adjusting for inflation, which is to be welcomed. The ¡ SUMMER 2016 ¡ PROPEL QUARTERLY


Opinion “The employment of ‘club hosts’ to identify and intervene to support people – particularly young women – who are made vulnerable by drink or drugs is an example”

perfectly understandable however you calculate those costs. As the police withdraw from the front line as a result of government cost-cutting, they and the government are looking at new ways in which operators can do more. And a renewed emphasis on effective local partnerships emerges in the government’s strategy as a key element in crime prevention. This poses some opportunities and some threats. It is an opportunity for the trade to fend off further irksome regulation by demonstrating it can do more to address problems of alcohol-related crime; but there are limits to what the sector can do without it ceasing to be about hospitality and becoming a kind of extension of the police service.

it is floridly obvious a customer is drunk and incapable that staff can sensibly be expected to intervene, reunite her with friends or call a taxi for her. Expectations of venue staff interventions need to be realistic and carefully managed. The other area where we have seen some unwelcome developments is the growing police expectation that door supervisors will use alco-meters to vet customers for drunkenness, and the use of drug detection dogs or agreeing to let police do drug-swabbing to customers in the queue. Here there is a chasm between police understanding and that of operators. So I make this plea to senior police officers: please try to understand, our sector doesn’t do “service“. Petrol Supervision stations do service. We do “hospitality“ and What the sector can do is to supervise premises hospitality is a feeling not a function. The feeling “There are better so as to reduce the risks to vulnerable that customers are welcome; the feeling that limits to what the people that arise when a night out goes wrong. customers can be at ease in the space we sector can do without The employment of “club hosts“ to identify provide for them; the feeling that it is OK to it ceasing to be about and intervene to support people – particularly enjoy themselves; the feeling that they are hospitality and young women – who are made vulnerable valued as individuals and we want them to becoming a kind of by drink or drugs is an example. We live in return. You can’t create those feelings if you extension of the a society where during the past 40 years we turn the night-time economy into a fortress police service” have seen the development of an ideology of and treat customers as supplicants or suspects. recreational sex. That is what the police don’t or won’t understand, People coming in to the night-time economy because their default position is always to impose often do so to seek social or sexual adventures. Insofar as controls. There have to be some controls, but we need to get intoxication disinhibits people, and thereby gives them a kind of the balance right. permission to do things they might not otherwise do, this creates As a sector, we need to do what we can to address alcoholopportunities, but opens the door to a world of risk – for women related crime and disorder and to make our customers more and men. safe and secure. What we can’t do is act as if the night-time Campaigners argue that venue staff should intervene if they economy is a leisure ghetto in which our role is to act as a think a woman is in danger of being taken home by a man surrogate police force micro-managing the behaviour and who might be seeking to take advantage of her vulnerability. choices of the public. But venue staff can’t police the sexual/moral choices of their customers; and can’t possibly know whether a man who picks up Paul Chase is a director of CPL Training and a different women on several occasions is a predator, as opposed leading commentator on alcohol and health policy to being merely promiscuous. So it is really only in cases where



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LT Management Services Limited (LT) manages around 1,000 licensed retail and foodservice properties including restaurants, hotels, nightclubs and both managed and tenanted pubs, across the UK. LT provides a range of services to cater for the needs of each client, including full financial back office services, procurement, payroll, IT, telesales, credit control, operational support and caretaking services for closed premises. The company has been able to grow to the largest of its type in the UK through its policy and practice of open book management which assures the clients, ranging from property-owning companies through to banks and insolvency practitioners, complete transparency of all costs associated with its business. With its substantial buying power, LT passes on to its clients keen pricing for all goods and services supplied into client estates. Just recently, for example, LT won the contract to manage 43 Rileys Sports Bars for the new investor. Working with administrators has meant that LT has created a complete set of systems and controls that are centred around cash management, facility maintenance and compliance. LT also supports its clients with sales and marketing support and strong operational processes and practices. LT will react quickly and take on new business at short notice when required and will manage businesses for

clients on either a short term temporary basis or for the longer term. LT has been able to grow turnover and improve margins in most of the businesses that it has been asked to manage on behalf of clients. With a dedicated recruitment resource available, LT seeks to appoint strong managers into all clients’ units with a view to maximising performance. Hands on operational management and strong head office financial controls ensure that the client’s financial performance is maximised. What we do: We run managed and tenanted pubs and bars, restaurants, hotels and nightclubs on behalf of owners, banks and insolvency practitioners. We provide everything from business development solutions, independent business reviews on sites or whole businesses to closed site management and caretaker services.


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Staying alive The recent troubles at BHS are another example of where we have to stay relevant to survive, especially when it comes to technology, says Intelligent Business Systems managing director Gareth Powell


eadlines about the administration of fashion clothing retailer BHS in controversial financial circumstances masks an underlying inability or unwillingness to respond to changing consumer tastes and buying habits. A superb Retail Week opinion piece by George MacDonald explains: “BHS has not failed because of its pension deficit. It hit the buffers because it lost relevance… now 88 years old, the BHS name probably won’t make it to a century – it simply, sadly, no longer has the pulling power.” Watching and reading about BHS unravelling is another warning shot to all of us involved in hospitality retailing. Clearly, nothing ever stays the same. BHS is one of many once famous brand names that have vanished from the high street – C&A, MFI, Woolworths, Comet, Jessops, Phones 4u and Blockbusters are just a few that spring to mind.

brands with 25 to 99 outlets had grown outlet numbers by 36%. The biggest brands had grown numbers by only 21%. “It’s the small entrepreneurs who are really driving growth,” Martin said. “This is an incredibly dynamic market.” Dynamic is the operative word and is reflected within our client portfolio. The vast majority of our clients are growing businesses which are opening more outlets on a regular basis rather than downsizing.

“Watching and reading about BHS unravelling is another warning shot to all of us involved in hospitality retailing’” BHS, Leeds – picture by Michael Taylor

The hospitality sector is not immune to failure but because the cash shortfalls, pension deficits and job losses are much smaller, so are the headlines. Pulling power behind the bar, for example, is steadily in decline as the number of drink-led pubs in the country shrinks, according to the third issue of Market Growth Monitor from Alix Partners and CGA Peach, the pub and restaurant trade data specialists. On the plus side, restaurant operators saw a 1.6% rise in outlet numbers in 2015, equivalent to two openings per day, although there was a caveat to this growth. Operators have to be at the top of their games in a highly competitive market where, according to the Monitor, “every inch of market share is going to be hardwon this year”. CGA Peach vice-president Peter Martin told delegates at a conference, organised by Numis Securities in the City of London, that the branded restaurant chain is the fastest growth sector in the food and drink market. Small chains with less than 25 outlets lead the way, with outlet numbers growing 48% since 2011. Medium-sized

One of our most recent additions, Boparan Restaurant Holdings, has announced major expansion plans to open more than 300 Harry Ramsden’s sites in the UK and grow its FishWorks brand to a 50-strong estate over the next five years. This is alongside further planned expansion overseas in China, Dubai and New York. Sourdough pizza chain Franco Manca, owned by Fulham Shore, which also owns the Real Greek, currently has 20 stores and plans to open another seven by the end of the summer. The Revolution Bar Group, currently operating 60 premium sites, has three new outlets lined up over the coming months. All three are typical of our target client – ambitious expanding hospitality businesses benefiting from bespoke EPOS-based hospitality management solutions operating exclusively 100% in the cloud, a space where we get a lot of our pulling power. We were probably the first EPOS specialist in the UK to offer its entire product range via the cloud, beating even the dominant player in the EPOS sector, which claims to service 75%

of the managed house pub companies in the UK. Our decision to move exclusively to the cloud was taken several years ago and represented a substantial investment for us, especially as it was made during the biggest and most terrifying global recession in my lifetime, when we literally did not know what tomorrow might bring to the table. At the time, it could have been a real risk but it was one we had to take to stay relevant to the hospitality sector. Fortunately, we also took the decision many years ago to develop and support all our products in-house. This gives us unprecedented control over how we run and manage our business. Software development work, helpdesk support, site installations and training are handled by the IBS team rather than sub-contracted out to third parties. This enables us to make the right choices at the right time to benefit our clients and ourselves. For instance, we’ve recently added two new features to our kitchen video management system in response to client feedback. Desserts and Mains Away is the smarter, quicker way to prepare food for customers, while Priority Orders allows staff to queue-jump an order. For example, if they’ve missed a meal off the ticket. Both new features enhance the guest experience and improve efficiencies in the kitchen. We’re constantly upgrading and updating our software in response to client requests to ensure our technology works even harder for them in the future than it does now. EPOS is the core product while others, such as online shopping, loyalty and reporting, revolve around it. In the vast majority of cases, when we enhance our products we’re likely to offset part of the development costs as the new upgrades will be made available to other clients. But don’t take my word for it. Here’s what Rick Stein’s Martin Glinski said to us recently: “IBS has a very nice approach. We talk through the functionality requirements and then they tell me they’ll get back to me with a yes or a no. If it is a yes, they’re able to develop quickly, which is what we need as every site of ours is different with its own challenges. Each concept requires a versatile EPOS solution.

Gareth Powell is managing director of Intelligent Business Systems – ¡ SUMMER 2016 ¡ PROPEL QUARTERLY



Performance conversations – driving operational excellence

MMU founder Lee Sheldon says managers need to focus on the day-to-day essentials, and high standards will follow


ny operator worth their salt knows delivering without clear actions (for both parties) formally recorded. What consistently high operational standards requires a needs to be done, by whom, by when, with agreement on how relentless focus on getting the basics right. It may success will be determined is crucial for follow-up, especially not be super exciting or sexy to talk about this during those unscheduled meetings and conversations. I shiver at the thought of the dreaded words “SMART habitual focus on the daily need to ensure the operation is up objectives”, yet this simple acronym (specific, measurable, to standard, but I imagine training to be a world-class athlete achievable, realistic and time-targeted) describes all the requires a similar disciplined focus on the day-to-day essentials. elements needed to make a better goal – and one that can be Of course the operational or brand standard needs to be reviewed with ease. clearly defined and recorded to prevent people from interpreting I would suggest sometimes people find it difficult to identify their own version of “what good looks like”. In reality, though, all the action steps that will be needed to ensure the goal even with standards written down in black and white, there is is completed, right at the start of the goal-planning still room for people to misunderstand what needs to be process. In these circumstances, effective managers done or not to appreciate why it needs to be done don’t try to force out all the steps, and instead the way it does. “The focus on what needs to be done in the next The only sustainable way to cut through overwhelming week, fortnight or month – whatever time gap this and ensure clarity of understanding majority of true is appropriate – from now until the next followand expectations is to clearly and concisely ‘performance up conversation. communicate with others; never forgetting this is conversations’ take The second pitfall I often observe is managers a two-way street. I find too many managers have place at ad-hoc assuming their team member understands a definition of listening that fits along the line of what needs to be done and/or why? This can be “waiting to speak” rather than “waiting to hear”! moments” highlighted by the manager simply asking their team Many of the conversations managers have member at the end of the conversation to summarise with their team are necessitated by “set-piece” what actions each person is going to take, by when and to events such as monthly business reviews, site visits, team explain why things need to be done in a specific way? meetings and annual appraisals. However, the overwhelming Such questions can reveal immediately where the team majority of true “performance conversations” take place at admember has misunderstood what needs to be done or if they’ve hoc moments (whether in person or on the telephone) and in simply forgotten to note down an action they need to take. It unformal, unscripted ways. takes a few minutes at most to do this check-in with the team I argue that to be effective, managers must master the ability member, yet so many managers either summarise it themselves to have both types of conversation and be confident to do so or don’t bother at all. in a proactive way. Too often emphasis is placed only on the Isn’t it better to find out now they’ve forgotten or misunderstood more formal conversations, such as a monthly one-to-one, to the something, rather than waiting until the next meeting? detriment of the more frequent, yet less structured conversations.

Common pitfalls I would summarise two of the common pitfalls that afflict far too many managers. The first is a lack of structure and clarity regarding action points. In formal meetings, it is almost criminal that managers and team members leave a meeting together


Lee Sheldon is the founder of Mastering Multi-Units (MMU), which helps multi-unit managers execute operational excellence and deliver enhanced organisational performance





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