12 minute read
Hospitality restart met with growing economic uncertainty.
On 23 June, the government announced a change in the social distancing measures from two metres to “one metre plus”, alongside the proviso of “where it is not possible to stay two metres apart”, in turn meaning that one metre social distancing is now permitted as long as other Covid-19 preventative measures have been put in place in line with the government’s specific guidance document for the hospitality sector (Keeping workers and customers safe during COVID-19 in restaurants, pubs, bars and takeaway services).
At the same time, the government confirmed that as of 4 July - dubbed ‘Independence Day’ by many - bars, pubs, cafés, restaurants, hotels, campsites, cinemas and museums could re-open in England, with similar re-openings now taking place in Scotland and Wales this month (links to the government’s re-opening guidance, what applies in Wales and Scotland, as well as any updates, can be found at https://www. gov.uk/guidance/working-safely-duringcoronavirus-covid-19).
“This guidance applies to any food preparation or service setting where food and drink is sold for consumption at venues or for takeaway or delivery,” states the government in its guidance document. “For example, restaurants, pubs, bars, beer gardens, food to go, cafés, social and similar clubs operating as bars and restaurants, mobile catering and contract catering or similar environments where food and drink is purchased and consumed at a venue in their indoor or outdoor areas or offered for takeaway or delivery.”
All hospitality indoors should be table service only, with contact between staff and customers limited, the guidelines propose.
For many operators with indoor seating and serving areas, the timely, ‘save our summer’ permission to re-open and reduction in the social distancing recommendation could prove to be the difference between being able to re-open a viable business and an unviable one when it comes to the number of tables, chairs and customers they can accommodate in a ‘Covid-secure’ manner. However, some might decide not to re-open at all, or re-open to discover that sales are down so significantly that their businesses are no longer financially sustainable.
In the pizza, pasta and Italian food sector, many have been forced to close their restaurants in recent months, switching, or limiting themselves, to takeaway or delivery only.
“On 20 March, we were told to close, not knowing if it would be for a week or month, or even longer. We went straight to takeaway and click and collect which has worked well for us, and we will keep this going. It’s efficient, customers pay in advance,” reports Domenico Crolla, director of Oro restaurant in Glasgow.
“Normally, we are a 180-seater restaurant and to re-open we have spaced our tables out more. We’re fortunate to have a large space to do this, but we are also putting tables outside. I’m pleased to say we’re fully booked. We require one person in each group to provide their contact details, and as people tend to book in advance or online, we already have their details. People have been on furlough, cancelling holidays and not going anywhere much, and spending less in recent times, so I feel the cash is out there, and people want to get back to normal. But consumer confidence will be the decider.
“We’ve not put barriers between tables, but we are offering QR codes to people so that they scan their order selection by phone if they want to. We have also put tent cards on tables saying that the ‘theatre’ of pepper and cheese is not available unless specifically requested. The worst thing that could happen now would be a second wave and people being told to stay at home and isolate all over again.”
According to the government’s ONS figures, at the height of lockdown in April, GDP in the UK fell by 20.4% - the largest fall since monthly records began in 1997 – and reflecting record widespread falls in services, production and construction output.
Global information company, the NPD Group, reported that weekly spend in British foodservice in April 2020 was just over £200 million, compared to April 2019’s weekly spend level of around £1 billion pounds – a fall of 80%. In addition, the decline in British out-of-home (OOH) foodservice visits in April 2020 was almost three times as severe as the collapse seen during the financial crisis of 2008-2010.
ONS figures for May, announced this month, suggest that the UK economy has started to grow again, but by just 1.8% (a surge in online retail sales and signs of a recovery in construction resulting in a small increase in GDP).
Jobcentre claimants have risen by 23% to 2.8 million, say HMRC, with unemployment estimated to rise to 3.5 million once furloughing winds down, and in light of slower than expected growth in some sectors, according to a recent Bank of England survey.
According to
, spending on hospitality and leisure, entertainment, hotels and resorts, and travel fell heavily in May due to ongoing restrictions. The fall in eating and drinking spend slowed to 70.3% from 79.1% in April, they found; coinciding with more pubs, restaurants and cafés adapting to restrictions to offer takeaway services, they felt.
Lockdown officially started on March 23. However, many people were already avoiding eating out, meaning that by the end of Q1 2020 there was already a 10% year-on-year deterioration in OOH visits. This decline accelerated dramatically in April and for the two-month period of March and April 2020 the fall was 54%,
point out NPD. With the sector at large only having been given the green light to open more fully this month, it now remains to be seen who the eventual winners and losers will prove to be.
“Delivery is doing well, particularly if you have been able to do this throughout – Domino’s share price is up, for example - but if you closed then re-opened to start delivering, you might well have lost out,” says Maurice Abboudi, executive director of K10 restaurants.
“In general, pizza is OK, but upon re-opening, some operators are experiencing a 50% or more reduction in sales. It’s going to be all about if you have enough working capital to carry on, once you’ve paid your rent, tax and bills. But when there’s no more furloughing, grants, what then? Many might have to close, and if there’s a second wave, then many will just shup up shop for good. I can see a lot of CVAs, loss of jobs – up to a third, perhaps. This has already happened to some big names - Pret, SSP Group, for instance.
“March next year will be the big test, when the next round of bills is due. Much will have been covered until then, but then it will back to normal but in a challenged, much reduced market unless the economy somehow recovers. Up until 30 September this year, no-one can be evicted from their premises. However, it’s important that operators establish agreements with their own landlords going forward. They can’t rely on government intervention, and the National Time Out campaign has not made much progress, although more campaigning is planned.
“The VAT reduction is only for six months, furlough ends soon, offices are still quiet (in London). Much will depend on marketing skills – Domino’s, Pizza Hut, Just Eat, Papa John’s and alike able to advertise on television.
“Arguably, you could say that food quality has gone down in recent years and we’re due a reset - a chance to rebuild - the positive thing being that if you can survive this, you will be well placed and much stronger and able to overcome the competition in the future, when I think we’re likely to see higher prices, but better quality.”
Of particular help to food-serving businesses could be the fact that they will be able to serve customers on pavements, terraces and even potentially in car parks under a relaxation of planning laws proposed by parliament towards the end of June in preparation for the hospitality sector’s restart this month.
The Business and Planning Bill includes changes to allow venues to spread out into pedestrianised areas, terraces, and even car parks, and also temporarily allow them to sell alcohol (to be consumed off the premises). The government have also announced plans to fund a £96 million investment in town centres and high streets through the accelerated Towns Fund.
“Pubs, restaurants and cafés are the lifeblood of high streets and town centres across the country and we are doing all we can to ensure they can bounce back as quickly and safely as possible,” said business minister, Alok Sharma.
It had also been proposed that Sunday trading laws would be suspended for a year. However, in order for the main Bill to pass through Parliament quickly, these plans have since been dropped.
Delivery and click and collect has sustained many Italian food businesses in recent times and looks set to become even more well established in the future.
Casual Dining Group appoints administrators
Casual Dining Group, operator of restaurant brands including Las Iguanas, Bella Italia and Café Rouge, has appointed Clare Kennedy, Peter Saville, Daniel Imison and Catherine Williamson of Alix Partners LLP as joint administrators ahead of an expected sale of the business.
The company’s board has determined that in today’s extreme operating environment it is in the best interests of all stakeholders for the group to enter administration, to enable them to conclude negotiations with landlords regarding the estate. This is a critical step to resolve, prior to the conclusion of the ongoing sale process, say the company, the board and its advisors having received multiple offers for the business, and the administrators now seeking to progress them.
Given that all offers received for the business envisage a reduced restaurant estate, the administrators have announced that they have also taken the extremely difficult decision to permanently close 91 restaurants with immediate effect, and meaning that there will be a number of redundancies across the group.
James Spragg, CEO of Casual Dining Group, said: “After reviewing all our options with advisors, it became clear that we needed to take this action in order to protect the business and secure the best possible future for Casual Dining Group as we look to conclude a potential sale. We are acutely aware of our duty to all employees and recognise that this is an incredibly difficult time for them. Working alongside the Administrators we will do everything we can to support them through this process with a view to preserving as much employment as we are able to.”
Joint Administrator Clare Kennedy, of Alix Partners, added: “We appreciate that this is an extremely difficult time for all those associated with Casual Dining Group. Our immediate priorities are to assist those whose employment has been affected by today’s announcement and to secure a sale for the group in order to protect jobs and provide the Group’s much-loved brands with a sustainable platform for the future.”
HMRC invites hospitality industry to register for Eat Out to Help Out
Restaurants and other establishments serving food for on premises consumption can now sign up to a new government initiative aimed at protecting jobs in the hospitality industry and encouraging people to safely return to dining out.
The Eat Out to Help Out registration page went live on 13 July on GOV.UK, allowing businesses to join the scheme announced in the Budget by Rishi Sunak MP, Chancellor of the Exchequer as part of the government’s Plan for Jobs 2020 update.
Restaurants, bars, cafés and other establishments who use the scheme can offer a 50% reduction - up to a maximum of £10 per person - to all diners who eat and/or drink-in throughout August, say HMRC.
Customers do not need a voucher as participating establishments will just remove the discount from their bill. Businesses simply reclaim the discounted amount through an online service, supported by HM Revenue and Customs (HMRC). Claims can be made on a weekly basis and will be paid into bank accounts within five working days.
The scheme is open to eligible establishments across the UK and can be used all day, every Monday to Wednesday, between 3 and 31 August 2020.
Businesses will also receive a window sticker to show they are using the scheme, and they can download promotional items from GOV.UK.
“HMRC’s quick and easy registration page will soon have you on your way to welcoming back your customers with discounted dining on every Monday to Wednesday throughout August, with a simple process to reclaim these discounts back from the government each week,” said Rishi Sunak.
Jim Harra, chief executive and First Permanent Secretary of HMRC, added: “The hospitality industry is among the sectors worst affected by Covid-19. The Eat Out to Help Out Scheme will deliver support to around 130,000 businesses, including restaurants, cafés and bars serving food and drink, helping to protect 1.8 million jobs across the UK.
“Registering is easy, and we urge businesses to sign up early so they are ready to use the scheme when it starts on 3 August.
“Businesses have made great efforts to re-open their sit-down services safely in line with social distancing guidance, so people can feel confident to dine out again.”
Operators can register for the Eat Out to Help Out Scheme if their establishment sells food that is intended for consumption on the premises when purchased, it provides its own dining area or shares a dining area with another establishment for eat-in meals, and has registered as a food business with the relevant local authority on or before 7 July.
Businesses can register to be part of the scheme online at GOV.UK, and a searchable restaurant finder tool will be available to the public before the scheme launches on 3 August, say HMRC.
The scheme can be used by diners who order food and/or drinks for consumption on the premises (alcohol is excluded from the offer).
Also announced in the Budget was a Job Retention Bonus Scheme (a oneoff £1,000 payment to employers for each furloughed employee who remains continuously employed until 31 January 2021) and a VAT reduction from 20% to 5% on particular business activities (any eat-in or hot takeaway food and drinks from restaurants, cafés and pubs, excluding alcohol; all holiday accommodation in hotels, B&Bs, campsites and caravan sites and attractions such as cinemas, theme parks and zoos - valid from 15 July until 12 January 2021). A new £2bn scheme to create thousands of job placements for young people was also proposed.
