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Mon 27th Apr 2020 - Propel Monday News Briefing

Story of the Day:

Gaps in level of support for sector businesses highlighted in UKHospitality survey: Gaps in the level of support being provided to sector businesses has been highlighted in a new survey by UKHospitality. About half (48%) of businesses have applied for loans, but the majority of those receiving a response (57%) have had their bids turned down. Government-imposed state aid rules account for more than a quarter (26%) of rejections, alongside banks telling businesses they have sufficient capital (28%). Almost three-quarters (74%) of businesses have claimed, or intend to claim, for business interruption insurance. However, fewer than 1% that have claimed have received pay-outs. Only about a quarter of eligible businesses had received hospitality grants, which UKHospitality has been urging to be expedited and extended to more companies. In terms of workforce, redundancies have been kept to a minimum (2%), with the majority of businesses furloughing staff, accounting for 84% of sector employees. UKHospitality chief executive Kate Nicholls said: “These findings lay bare the extra work that needs to be done by governments, banks and landlords to make sure as many businesses as possible can survive this crisis. Hospitality was the first hit, the hardest hit and will suffer for the longest, and government support needs to reflect these facts. We are in this for the long haul. Everyone is rightly looking to how the economy and the industry restarts in a way that avoids a return of this horrific pandemic. Before we get to recovery, we need to make sure the support measures already announced are getting through to business. Loans must be fast-tracked with minimal restrictions, grants must flow to all businesses that need them regardless of size, and the job retention scheme must be amended to reflect actual earnings.”
UKHospitality is a Propel BeatTheVirus campaign member

Industry News:

Propel and Digital Blonde to host free webinar covering returning to business in the ‘new normal’ and use of social media: Propel and Digital Blonde are partnering to host a free webinar covering returning to business in a “new normal” and planning social media for that time now. The webinar will take place on Friday (1 May) at noon and last for about 45 minutes. Following on from the first webinar in this series, which looked at what businesses should be doing now, in this session the Digital Blonde team will look at the principles of consumer psychology and likely customer behaviour as we transition into a new period. Participants can expect consumer insight, social media behaviour statistics and sound storytelling advice. They will come away with plenty of ideas to help them plan for the next phase of the pandemic. To register, email

Red Engine co-founder Steve Moore to feature in next ‘navigating the coronavirus’ interview: In the latest of Propel's video interviews with leading operators about how they are “navigating the coronavirus crisis”, Propel insights editor Mark Wingett talks to Steve Moore, co-founder of Red Engine, the operator of Flight Club and Electric Shuffle, about planning for the “new normal” as a competitive socialising business; taking learnings from its US sites; and making sure his teams stay engaged. The video will be released on Monday (27 April). Meanwhile, readers can support independent sector journalism and get their news 12 hours early (at 7pm each night) with a Propel Premium subscription. It costs £395 plus VAT per annum for operators and £495 plus VAT for suppliers. Email to sign up.

Reilley – ‘If we’re told to reopen with social distancing measures I doubt many of us will’: Alex Reilley, executive chairman of cafe bar operator Loungers, has said if the hospitality sector is told it can reopen, but with social distancing measures in place, he doubts many will. He said despite the “unbelievable challenges and turmoil” the sector has been through in the past few weeks, “we should be in no doubt the greatest threat still lies ahead”. Reilley said: “I went and rearranged the furniture at a (large) Lounge to have a look at what two metres between tables looks like. It was depressing. Aside from it looking very odd, it’s clear without lots of well-configured space the cover count is massively reduced. In my opinion, if you have 150 square metres of trading space or less it simply won’t be worth reopening under social distancing rules. As a sector we’ve been through unbelievable challenges and turmoil in the past few weeks but we should be in no doubt the greatest threat still lies ahead. If we are told we can reopen but with social distancing measures in place I doubt many of us will. If the government decides because we have been told we can reopen it can end the furlough scheme it will be catastrophic. We all had a flavour of what minus 50% like-for-like sales feels like. We don’t want to be reopening at these levels – it will push some businesses that have battled through under, and it will regrettably result in job losses. As a sector the more we entertain social distancing measures the more we give government a sense we are prepared to live with them. We’re better being closed for longer if it means we can safely reopen being able to do what we do best, in as near to an uncompromised form as possible.”

Tronc not included in CJRS: The government has clarified employers cannot include tronc when claiming under the Coronavirus Jobs Retention Scheme (CJRS). Under new guidance, the government stated: “You cannot include the following when calculating wages – payments made at the discretion of the employer or a client where the employer or client was under no contractual obligation to pay, including any tips, including those distributed through troncs.” Andrew Ball, partner at sector accountancy specialist haysmacintyre, said: “While technically the tronc is made at the discretion of the troncmaster not the employer, I think this is pretty black and white. I’m sure there will be continued lobbying to get this changed but this is disappointing news. It is unclear what those who have already claimed tronc via the CJRS are required to do – hopefully there will be some guidance on this in the coming days.” Jonathan Downey, London Union chief executive, said: “Instead of targeted support for hospitality, this is a targeted penalty. I know one restaurant group operator for whom tronc is £1m a month of team earnings. We may yet get nine months of this.”
haysmacintyre is a Propel BeatTheVirus campaign member

Hospitality companies take on insurers over business interruption claims: Hospitality businesses have launched a campaign to force the insurance sector to honour business interruption policies. Headed by Rob Atkinson, a hospitality lawyer from Black and White Hospitality, which operates the Marco Pierre White group of franchised restaurants and manages a portfolio of hotels across the UK, a crowdfunding campaign has been launched to take legal action against insurers failing to pay out. The campaign is initially supported by Best Western Hotels, Vine Hotels and trade body UKHospitality, and other businesses are invited to join. The crowdfunding campaign aims to raise enough money to initiate a three-phase plan to support hospitality businesses that have had claims rejected. The first is a review of policies and insurers’ reasons for declining claims, followed by the preparation of advice on coverage under each category of policy. The second phase focuses on pre-action representation with formal letters being sent to insurers setting out the position on coverage. Responses will be reviewed and reported with settlement, in principle, being attempted. If this fails to bring results, phase three will be implemented in the form of litigation. Despite having taken out policies in good faith, many companies have had business interruption insurance claims rejected by insurers even though closures were government enforced. Business that wish to have their specific policy reviewed are asked to make a £200 contribution and donations from other businesses, or anyone with an interest in hospitality, are welcomed. The funds will be held by a legal-specific, fully regulated crowdfund page called CrowdJustice and any surplus funds generated will be given to charity.

Beer duty deferral refusal is ‘huge blow’ to pub and brewing industry: The government has rejected calls to defer beer duty, which has been described as a “huge blow” to the pub and brewing industry. Trade bodies, including the British Beer & Pub Association (BBPA), had urged payments due on Saturday (25 April) relating to beer produced in March, when pubs were forced to shut overnight, and for the next quarter were deferred. They said this would provide vital cash flow support to the UK’s 2,000 brewers that supply the UK’s pubs. The decision taken will instead put all brewers under more financial strain, the BBPA added. Some brewers have been able to achieve duty deferments with HM Revenue & Customs through their helpline. The BBPA is encouraging all its members that urgently need a duty bill deferment to contact the helpline. BBPA chief executive Emma McClarkin said: “The government’s failure to defer beer duty is a huge blow to pubs and brewers. The chancellor had said he will do ‘whatever it takes’ to help, so it’s a shame not to see him put his words into action.”

High Court clarifies Pubs Code framework relating to MRO as PCA ‘oversteps the mark’: The High Court has provided clarity over part of the Pubs Code framework relating to Market Rent Only (MRO) following a landmark case where Pubs Code adjudicators (PCA) “overstepped the mark” by trying to impose a tenancy length. It comes after a tenant referred a proposed MRO tenancy to the PCA that was found to be “non-compliant” with the code on two occasions. On the second occasion the PCA determined the revised MRO tenancy was non-compliant because the duration of the term offered by the pub owning business (POB), which was not in line with its policy on MRO lease length, was unreasonable. They ordered the tenant should be given a MRO tenancy of at least five years. The POB challenged this in the High Court, which has just handed down and published its judgement. As part of this, the court said the duration of the MRO tenancy a POB must offer to a tied pub tenant “must be reasonable in the circumstances and it is not automatically reasonable just because it is the same length as the remaining term of the existing tied tenancy”. However, the court said an arbitrator who finds a MRO proposal is non-compliant does not have the power to order specific terms to be included by the POB in its MRO revised response. The arbitrator can identify an offer is unreasonable because it does not contain a particular term, such as a specified tenancy length, but cannot order a particular term, such as a minimum tenancy length, must be included in a proposed MRO tenancy in the revised response. The PCA argued the judgement meant “arbitration proceedings may not bring finality to the tenant in respect of MRO compliant terms”. 

Sector lawyer calls for industry approved turnover rent deal: A sector lawyer is calling on the industry to back a “long-term solution to the rent conundrum”. David Roberts, corporate partner, head of leisure at CMS, is seeking endorsement from across the sector for “an industry approved turnover rent deal”. Roberts, who is also the co-founder of Blacklock, said: “Turnover rent was originally designed to represent a fair sharing of risk and reward between landlord and tenant. The issue here of course is it may be more than 18 months before 2019 revenues return and hence virtually every commercial premises in the country has become over-rented overnight. I suggest there be an industry approved turnover rent deal, endorsed by UKHospitality, which promotes a fair approach that can be easily and cost effectively implemented via a side letter. Rent-free for up to two quarters after reopening and then a fixed rate monthly in arrears turnover rent (say 5% or the relevant percentage of turnover to rent for 2019) until the business delivers two quarters of like-for-like sales figures that are equal to the 2019 quarter sales figures; at which time the ‘patient’ is back in financial health and the normal rent resumes. I hope an industry approved side letter will be the right starting point for tenants and landlords which, if agreed, will save parties legal fees they can scarcely afford from otherwise protracted negotiations. The side letter would not be government backed or mandatory; just a fair starting point for the discussion. While landlords might object, and I certainly understand their concerns, the reality is they don’t want properties handed back empty just as much as banks don’t want to become asset managers again like in 2008.” Roberts has prepared a draft letter setting out his proposed terms, which he is circulating to relevant stakeholders for their input and comment.

Yumpingo waives fees on review platform to restaurants providing delivery and takeaway: Restaurant intelligence platform Yumpingo has made Everywhere, its web-based one-minute review platform, available as a free solution to all restaurants providing delivery and takeaway services amidst the industry’s coronavirus closures. The platform is triggered wherever a restaurant is digitally engaging its customers whether via email, text, or app. QR codes can also be provided as printed collateral within the delivery. Consumers complete a one-minute review and the resulting data allows operators to understand what their customers think about the delivery experience – be it product, packaging or service-related. Yumpingo then adds machine learning to produce insights that enable operators to keep track of what matters to their diners at-home. Yumpingo Everywhere is the first phase of a range of products the company is launching “to enable the industry to come back better”. Chief executive Gary Goodman said: “Offering a free and easy way to keep meaningful conversations in place with customers is just the first step. The role of technology will move from being a silent facilitator of hospitality to now creating meaningful but largely contactless touch points across the guest experience.”

Younger Brits ready to return when hospitality venues reopen but change behaviour: Younger Brits are ready to return to hospitality venues when they are allowed to reopen, but are very likely to change their behaviour, according to new research. The findings by mobile order and pay company Wi5 showed 64% of people aged 16 to 34 plan to return to fast food outlets within a few weeks of reopening, compared with 56% of over 45s. Similarly, 59% of 16 to 34-year-olds plan to return to restaurants compared with 47% of over 45s. All age groups were shown to be likely to change behaviour when they return, with 58% saying they’d be likely to avoid getting in close contact with waiting staff, 57% keen to avoid using shared ordering kiosks and 56% saying they will avoid standing in queues at bars and counters. When asked what activity they’d be more likely to do after lock-down measures were lifted, again, there were key differences by age group. A total of 65% of under-45s said they would now be more likely to collect for takeaway than eat in, compared with 47% of over-45s. And there was a huge shift towards mobile ordering for younger audiences with 72% of under-45s saying they’d be more likely to use mobile ordering for click-and-collect, while 49% of over-45s said the same. For 16 to 34-year-olds this rises to 78%. When asked about what would make them more likely to re-visit, over-45s were 50% more likely than under-45s to be concerned with having venues deep cleaned or having hand sanitiser throughout the venue.

Company News:

Kerb founder – 50% of our traders may not make it through: Petra Barran, founder of London street food collective Kerb, has said 50% of the traders the business works with may not make it through the impact of the coronavirus. She told Propel: “Some of our traders are just hunkering down, using their relative flexibility to retract and try to ride it out. A lot are on the edge though. Despite growing to take on prep space, staff, vehicles and other business costs, few of our traders can benefit from business rates relief. Few can get access to the retail, hospitality and leisure grant (street food doesn’t comply). Many employ freelancers they can’t help. But loan repayments continue, as do kitchen hire costs and insurance bills. What we’re looking at is potentially 50% not making it. The implications for them, individually, for Kerb as a trader platform, and for London food as a whole are terrible. But damn, if there’s one thing you can say for our industry is it’s got some grit and it knows how to swivel – to seek out opportunities even when there appear to be none.” Barran said with no lunch markets, no private events and no food hall, “our mantra now is to Keep the Wheels Turning – to gather our community and act as a platform and support system, for them personally and as businesses”. She said: “And we are getting ready to bounce back on the kerb as soon as it is safe and we are able – that’s the beauty of street trading. We can move fast and we stay ready.” Meanwhile, two-thirds (66%) of mobile and independent caterers believe their business will permanently shut as result of the coronavirus crisis, according to new research. The findings by the Nationwide Caterers Association (NCASS), which represents businesses in the mobile catering, festival, street food and independent restaurant sector, showed almost half (49%) are using their savings to survive. 

Sector operators begin ramping up reopenings, Greggs plans limited trial: A number of sector operators, including Burger King, Pret A Manger and healthy fast food brand Leon, have begun ramping up reopening parts of their estates. The Alasdair Murdoch-led Burger King, which earlier this month reopened four drive-thru sites, plans to reopen ten more sites a week for deliveries, including sites in Edinburgh, Aberdeen, Glasgow, Dundee and London’s Merton. The brand, which operates circa 550 sites in the UK, has seen strong demand at the sites it has so far reopened. The Sunday Times reported Leon plans to reopen six London restaurants for delivery and click-and-collect, in addition to the 16 it has kept open and in part turned into grocery stores. Propel understands the John Vincent-led brand is also gearing up to open its third delivery kitchen in a link with Deliveroo Editions, in Manchester. Leon opened its first delivery kitchen in Reading last month, with a further site opening in Leeds a week ago. Pret reopened ten of its London-based sites earlier this month and now plans to open a further ten nationwide this week. Mexican restaurant brand Taco Bell has reopened sites in Plymouth, Cardiff and in Devonshire Street, Sheffield, for delivery only through Deliveroo, having shuttered its 46-strong UK estate in March. Responding to reports it will reopen some of its sites in a limited capacity in the UK and Ireland in May, McDonald’s said on Facebook: “We promise we will update you here as soon as we have confirmed our plans. Stay safe, stay at home and we will see you soon.” Greggs is also looking at ways to reopen select sites. A spokesman told The Sun: "We want to play our part in getting the nation back up and running again so we are planning to conduct a limited trial with volunteers to explore how we can reopen our shops with new measures in place that keep our colleagues and customers as safe as we can when we reopen at scale.” 

Admiral Taverns to start collecting rent again from tenants in receipt of government grant but caps amount: Admiral Taverns is to start collecting rent again – but only from tenants that have received a government grant and the amount will be capped. The company cancelled rent and associated non-beer charges until the end of April to “give licensees time to apply for the relevant financial assistance under the retail and hospitality grant scheme”. Where licensees receive a £10,000 grant, rent and other charges will be capped at £1,500 per month in May and June – inclusive of VAT. Any charge above the cap will be cancelled, to ensure debt does not build up for licensees during this period. Where licensees receive a £25,000 grant, rent, insurance and service charge will be charged for May and June “but licensees will be left with the majority of their grant in their hands”. Admiral Taverns did not specify the capped level for those licensees. For all licensees, other rental charges, including fixtures and fittings rental and tie release fees, will be cancelled for May and June. If grants have been confirmed but not yet received, Admiral Taverns will defer collection until the grant has been received. A spokeswoman told Propel: “We continue to monitor the situation closely and will review our support again as we approach the end of June. Our primary focus remains on ensuring our licensees can emerge from this crisis energised and motivated to re-establish great community pubs, not weighed down by debt and fear about the future. We are closely following the government advice regarding the lock-down restrictions but would urge the government to consider more targeted support to the UK pub industry.” 

Merlin aims to raise €500m lifeline through bond market: Merlin Entertainments is raising €500m in new bonds, with the private equity-backed company seeking urgent funding to see it through a near total shutdown of its theme parks and attractions. The company announced plans on Friday (24 April) to raise money from debt investors, with the proceeds earmarked for working capital, funding operational costs, capital expenditures and paying the £12m-a-month interest bill on its debt pile of more than £4bn. The funding would represent a liquidity lifeline for a company suffering from the coronavirus pandemic that has closed all but nine of its 130 sites. Merlin has already made use of government schemes to lessen its cost burden. Last year equity firm Blackstone, Canadian pension firm CPPIB and Kirkbi, a company operated by the Danish family that controls Lego acquired Merlin in a £6bn deal. But the bond’s documents include stark warnings about the company’s ability to weather the coronavirus crisis, including a so-called “going concern” warning from auditors KPMG. Merlin has already secured benefits worth more than £20m from a UK government scheme to cut taxes for companies hit by the coronavirus pandemic, according to an investor presentation seen by the Financial Times. It has also deferred paying rents, introduced voluntary pay cuts and furloughed about 80% of its staff around the world. Merlin is burning through £50m a month. It plans to use the extra funds from the bond sale to buy itself more time, as the money raised should leave the company with about £1bn of cash in hand.

Burger & Lobster reopens Bond Street site for delivery: Burger & Lobster has reopened its Bond Street restaurant for delivery. The company, which shuttered its sites on 19 March, has reopened the outlet in Binney Street. The original burger, 1.25lb lobster and its lobster roll – all served with fries – are available via Deliveroo, reports Hot Dinners. Meanwhile, George Bukhov-Weinstein and Ilya Demichev, who are behind Burger & Lobster and Goodmans, have launched a takeaway service for their Mediterranean concept Wild Tavern in Chelsea. The menu is available from the Elystan Street restaurant between Wednesdays and Saturdays from noon to 6pm. It includes cuts such as USDA prime rib-eye on and off the bone and a rack of lamb alongside its fresh pasta and sauce for cooking at home. Drinks feature wine and ready-made cocktails. Bukhov-Weinstein and Demichev launched the concept in December.

Titanic Brewery secures £1m through CBILS: Titanic Brewery has secured a £1m financial lifeline to help it survive the coronavirus pandemic. The company has received the loan from Barclays as part of the government-backed Coronavirus Business Interruption Loan Scheme. Bosses at Titanic said the funding would help them to “reboot” the business after the crisis – and secure the jobs of about 200 staff. Co-founder Keith Bott said: “Coronavirus struck just as were moving into the busy spring season and suddenly all our income disappeared overnight. The bank loan has helped us ensure supplier relationships are maintained as well as helping us pay our staff and creditors. I think it’s important during this difficult time to make sure our whole supply chain stays on its feet. As well as honouring our payment terms, it means we will all be better placed for when the time comes to reboot our business after the crisis.” Titanic Brewery was founded in 1985. It operates 13 pubs and cafe bars across Staffordshire and produces in excess of three million pints every year. 

Landlords of 150 Travelodge hotels unite to organise payment proposal after rent cuts rejected: The landlords of about 150 Travelodge hotels have united to come up with a payment proposal after the hotel operator’s call for rent cuts was widely rejected. Travelodge, owned by investment bank Goldman Sachs and New York hedge funds Avenue Capital and GoldenTree Asset Management, asked landlords for rents to be slashed by between 25% and 80% at its most exposed locations. A number of landlords rejected this plan, with Secure Income Reit saying it “was not in keeping with either the nature or the spirit of the proposals made by any of our other tenants who all engaged with us constructively and at an early stage”. Viv Watts, managing partner at Oasis Holdings and a landlord for Travelodge, is working on behalf of other owners to reach a workable solution with the hotel operator, reports Property Week. In the original proposal, seen by Property Week, Travelodge divided its properties into three categories based on economic performance, recovery prospects and strategic importance. It proposed paying 50% of the rent on the most vulnerable “category C” hotels until December 2021 if it could reopen its hotels by 1 July. If it could not reopen them until after that date, it demanded rent cuts of 80% until the end of 2020, moving to 50% in 2021.

Company holding various freehold and leasehold interests of Signature Living goes into administration: Signature Living Hotel, which holds the various freehold and leasehold interests of aparthotel developer and operator Signature Living, has been placed into administration. Matthew Ingram and Michael Lennon, of Duff & Phelps, have been appointed joint administrators. Earlier this month Duff & Phelps was appointed as administrators of Signature Shankly, which is the firm holding the leasehold interest of the Shankly Hotel site in Liverpool. One of the company’s lenders, Henslow Trading, called in administrators. Signature Living Hotel includes the building from which the Shankly Hotel trades, Millennium House, in Victoria Street. The company also provides corporate guarantees to various secured and unsecured creditors of the group, including the various bedroom investors. Lennon said: “The steps taken by Henslow Trading to protect its investment in the Signature Shankly has necessitated a need to appoint the joint administrators to protect the freehold interest in Millennium House. The trading operations of the Signature Living Group are unaffected by the various administrations and we understand all trading will recommence at the earliest opportunity.” 

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