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Fri 17th Jun 2022 - Friday Opinion
Subjects: The quick and the dead, abolish the SIA, opportunities still being taken, digital is not going away
Authors: David Abramson, Paul Chase, Sarah Travell, Glynn Davis

The quick and the dead by David Abramson

As we hit the halfway point in 2022, “where are we at?” is the question on so many people’s lips – not only for operators, but also consumers. No one knows what is ahead, but what is clear is there is a huge amount of uncertainty caused by inflation, rising costs and staff shortages, not to mention the political uncertainty in Ukraine.

It has been widely predicted that we are heading for the deepest recession in many decades, and we are all being told to brace ourselves as the worst is to come. It seems that for the hospitality industry, it really is a mixed bag. There are those who are benefiting from the pent-up demand post-covid, where consumers want to get out and have a great experience and do not want to be told to cut back after nearly two years of restrictions. 

There are, however, a huge number of businesses which simply cannot get back to where they were in 2019, and with the rising costs, the economics are simply not working. A recent survey by Cedar Dean found that more than 80% of commercial tenants had recently taken on additional debt, and 45% of those interviewed are considering insolvency or liquidating their business.

So, a bit like our political system, there seems to be a divide. The way I see it is, it’s really the quick and the dead. What I mean by this is that there are those who have moved quickly to change their operations, getting their price point right, offering more value to customers and keeping venues busy. The consistent theme with these operators is they are experiencing good sales numbers, better staff retention and increased buying power, which allows them to keep margins in check. Then there are those who are not moving fast enough and essentially, they are the dead. Because if you are not able to compete with 2019 numbers by now, then is it ever going to come back?

Let’s not forget that many city centres are suffering to fill the gap that have been left from office workers not doing a five-day week, especially in places like the City and the West End, together with tourism not being fully back to where it was. This combination of factors means businesses in city centres like London, Manchester and Birmingham must work extra hard to attract new customers outside of the office and tourist markets. 

Unfortunately, many of these businesses are going to go to the wall over the next six to 12 months, and the funders, who have historically been sympathetic to supporting these losses, we believe, are simply going to stop doing this. I once heard a phrase “you can make losses forever, but you run out of cash once”, and for so many businesses, this is the harsh reality that they are facing. Like in all recessions, there are going to be winners and losers, and there will be those that pick up some great opportunities and push forward when all this calms down, but the impact will be felt for some time to come.

When it comes to our speciality, which is rents and leases, it seems we’re now heading to a new dimension of discussion whereby rent-free periods are simply not going to cut it, and the headline rents are going to have to come down for a large proportion of businesses over the next 12 months just to see them survive, because the turnover to rent ratios are simply out of kilter for many businesses. This is especially predominant for sectors where sales are down and costs are up, such as health and fitness, fish and chip shops and many casual dining operators.

However, the brutal reality is a true capitalist economy does benefit from a fallout every now and again, and it really needs to be a survival of the fittest. While it will be hard to see operators go to the wall, there will be some benefits in terms of reducing inflation and the job market becoming slightly looser. Government support has been key for the last two years, but it can’t go on forever, and those with focused strategies and great teams will be the ones left standing.
David Abramson is chief executive at Cedar Dean and chair of the Commercial Tenants Association

Abolish the SIA by Paul Chase

The Security Industry Authority (SIA) is a creation of the Private Security Industry Act 2001 that came into force in 2005 – the same year that the Licensing Act 2003 was implemented. The Licensing Act 2003 set out the new licensing system for alcohol sales and other licensable activities, and the training requirements for personal licence holders.

The administration and enforcement of this Act was left to local authorities and various other local enforcement agencies, such as the police. But the new regime for licensing private security roles, such as door supervision, was placed in the hands of a new, centralised quango – the Security Industry Authority.

The SIA set about licensing and regulating private security and established a set of training courses and qualifications for all those working in front-line security roles, and a centralised process for SIA licence applications. This new quango was nearly abolished by the Conservative government five years later when they published the Public Bodies Bill in October 2010, in what was supposed to be a ‘bonfire of the quangos’. But it never happened, and unfortunately, the SIA survived.

Today, we have a major crisis of recruitment and retention of door supervisors in the night-time economy. This isn’t entirely the fault of the SIA, but they are one element in a perfect storm of problems that have been brewing for some time, and which were expedited by the covid pandemic and by Brexit. To quote leading industry figure Lord Smith of Hindhead: “Covid has led to an acceleration of the inevitable.” 

Let’s explore some of these problems. During the pandemic, around 40% of door supervisors were furloughed, and a further 20% redeployed to static security sites or to provide security at covid testing sites. Many did not return to door security – and who can blame them? The median wage is around £12 an hour, and for that you put yourself in harm’s way and risk not only injury, but also loss of licence if you respond to a violent situation in a way deemed inappropriate.

Brexit has also played its part, with many East European door supervisors who used to staff the doors in London returning home when we left the EU – reducing the total pool of labour by around 11%. But, according to the SIA, there are some 240,000 SIA door supervisor licences in existence. So, initially, I think their response was “staffing crisis, what staffing crisis?” No one knows how many of these licence holders have moved across to security guarding jobs or are still active in the security industry at all.

In the tight labour market faced by most hospitality businesses, we need a security licensing regime that takes down the barriers to entry rather than erecting new ones. There are two ways in which the SIA is making a bad problem worse. Firstly, its so-called voluntary approved contractor scheme (ACS) drives security companies towards directly employing door supervisors through PAYE, and away from a self-employment model. This automatically excludes a swathe of door supervisors who wish to be self-employed from joining an ACS-accredited company. Why insist on this? We don’t require plumbers working for an agency to be on PAYE – so why single-out security staff?

Secondly, over the years, in an effort to give itself relevance, the SIA has insisted on ever more onerous training and qualification requirements. This adds costs and complexity to those seeking to join the sector. A door supervisor must do a one-day Emergency First Aid at Work course before they can do the mandatory six-day SIA door supervisor training course.

This means that someone who is working full-time Monday to Friday, but wants to work as a door supervisor at weekends, has to take a week’s holiday to complete the necessary training in order to apply for a licence. The cost of training varies but is around £100 per person for the first aid course, plus £250 per person for the SIA licence course and the £190 SIA licence fee – so £540 in total. The application period takes at least 25 days to six weeks, but there is plenty of anecdotal evidence of it taking even longer. Is it any wonder we have a perfect storm and a recruitment crisis in this sector?

In the context of all of this, the role of the door supervisor has expanded hugely. From controlling admission and dealing with disorder to assessing whether customers are intoxicated by drugs, and from being aware of terrorist threats and child exploitation issues to offering first aid. But the wages offered haven’t kept pace with the expanded list of responsibilities.

So, what needs to be done? If we are to insist on these training and qualification requirements, not as a means of defining promotion and a career path but as a pre-requisite for even joining the industry, then we need to measure whether all this training actually improves the performance of those receiving it. But we don’t. In a survey done by the Night Time Industries Association, 57% of businesses surveyed thought the quality of door supervisors was poor. If training doesn’t improve ability to do the job, what purpose does it serve?

We need to define the role of door supervisors more narrowly and simplify the training accordingly – reducing time, cost, and complexity. If the SIA does little more than operate a licensing system then it should be abolished and that function returned to local authorities, who are closer to the local night-time economy where door supervisors operate. The era of over-weaning quangocracies has passed. Government needs to legislate minimum training requirements while encouraging security companies to provide further training as a means for staff to obtain promotion and employers to define a career path. It should recognise that joining the ACS scheme is of little benefit to security companies unless they offer services to local authorities who insist on it. 

Quangos are too often self-perpetuating bureaucracies that serve the people working in them, but tend to over-regulate the sectors they were designed to improve. Over-regulation is as bad as under regulation, but the tendency of quangos is always “more needs to be done”. But businesses pay a price for this, as do those who seek to join the sector. It is time for the SIA to go.
Paul Chase is director of Chase Consultancy and a leading industry commentator on alcohol and health

Opportunities still being taken by Sarah Travell

Last month, Roger Whiteside, the now former chief executive of Greggs, said: “London 90% full is still fuller than anywhere else I know. So, we’re busy opening shops in London because we’ve got lower rents now.” After years of focusing on regional expansion, the food-to-go retailer was now seeing an opportunity to take on the likes of Pret A Manger in its heartland. But while Greggs sees the opportunity to build its presence in the capital, other regional operators have taken Whiteside’s point on rents to improve their local positions, either by growing their existing businesses or launching new ones. 

The Propel Premium database of multi-site companies has now grown to include 2,481 companies, which operate 65,402 sites. An additional 42 companies, which operate 140 sites between them, were added during May 2022. Many of these new entrants are local operators, spread across the breadth of the UK but linked by a decision to take the recent plunge and add to their estates/portfolios, proving that smaller, independents can still thrive in the current environment. 

On such business is Chickpea Group, which was founded by Ethan Davids and Max Halley in 2021 when they opened The Five Bells in Salisbury, and now operates four pubs with rooms and two sites under pizza concept Nole across the south of England. The group’s pubs include the Bell & Crown in the village of Zeals, The Dog & Gun in Netheravon and the Pembroke Arms in Wilton, and the pair have now secured the Sam Weller’s pub in Upper Borough Walls, Bath. Davids recently secured a second site for his wet-led Great Boozers vehicle, with plans to add three to four pubs a year to the fledgling business.

They are not alone. Birmingham-based street food concept Baked in Brick, which was founded in 2015 by Lee DeSanges, opened its first restaurant, in the Custard Factory complex in Digbeth, in 2019. A bakery outlet in Erdington followed, and last month, a third Baked in Brick site opened in Sutton Coldfield. Chuck & Blade, which is a Kent-based burger restaurant concept, is led by managing director Alexander Hatzidakis. The company operates sites in Rochester and Canterbury, and has a third site opening in Camden Road, Tunbridge Wells, this month. It will be the first franchise site for the concept, which offers the “juiciest, filthiest handmade burgers in Kent”.

KoKoDoo Korean Fried Chicken was founded by Joseph and Mary Yoon in 2006, who initially launched a Korean restaurant and quickly grew to open two take-away shops. The company now operates four take-away and delivery shops and two food trucks. The business recently signed up for a unit at Cupid Way, a new development in Swansea city centre. Finally, Barnsley-based The Brook Group – which was founded by Jason and Martin Brook in 1993 – owns and operates several hospitality businesses across the north of England including hotels, pubs, restaurants and late-night venues. The company currently operates eight sites, three of them being hotels. The business has recently acquired the historic The Priest House Hotel in Castle Donington, Derbyshire, while a fourth hotel is planned in the south Wales valleys.

Expansion opportunities are all being explored by a swathe of regional-based leisure and competitive socialising concepts. Padel4all, the padel tennis concept which was founded three years ago, recently raised more than £3m from family and friends to fuel its expansion plans. The business, which currently has two sites, in Swindon and Southend, plans to open at least three more this year, including two at golf clubs. In five years’ time it is aiming to have 20 centres with at least 80 courts, turning over £8m.

More recently, Middlesbrough-based operator Level Up Entertainment has opened a second experiential concept in the town. The company, which opened its escape room attraction Project Escape in 2018 in the town’s Dundas Centre, has opened a new 18-hole adventure golf course, Putter Chaos, also in the Dundas Centre. The course takes up 9,000 square feet above a former B&M shop and features work created by local artists. Level Up also operates a second Project Escape venue, in Hexham, Northumberland.

Ascend Climbing Gym is a Louth-based climbing gym concept which is owned by Darren Thompson. The company, which opened its debut site in North Holme Road, is opening a second site, In Lincoln, following a £160,000 investment. And it is not just more regional expansion that is on the cards, with some operators looking further afield. Trib3, which is a boutique fitness brand, currently operates seven sites in the UK. The business, which is to launch a new site in Nottingham this month, has sites in Liverpool and Ealing “coming soon”, as well as four in Spain (plus another “coming soon” to Madrid) and one each in Finland and China. 

The next few months may again prove a challenging time for the industry – but if the past two years have proved anything, when opportunities become available, operators big and small, established and up-and-coming, and those from all corners of the country, are still looking to take advantage of them.
Sarah Travell is the founder and chief executive of Virgate, sponsor of the Propel Multi-Site Database. The database is one of the benefits Premium subscribers receive. The go-to database provides company names, the people in charge, how many sites each firm operates, its trading name and its registered name at Companies House if different. Companies can have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription.

Digital is not going away by Glynn Davis

When the internet emerged in the late 1990s, it had an almost immediate impact on the retail sector as it became an obvious alternative channel for sales. The problem was it sat uncomfortably with the existing store-based model, and there were worries that it was cannibalising revenues from this traditional channel.

Needless to say, senior executives were protective of their departments and hostile to recognising this new way of serving customers. For many years the channels were run separately, but as digital increased in importance and customers embraced these new ways to purchase, the retail industry worked hard to integrate them in order to deliver a seamless experience for the shopper. 

In reality, behind the scenes, there is still plenty of work to do for most large retailers. When you look under the bonnet, there remains much evidence of sticky tape and elastic bands still holding things together. The headaches still persist for many companies as they seek to build a fully integrated multi-channel business with a single view of the customer and stock.

Hospitality has been largely insulated from any painful disruption from digital as it continued to be predominantly focused on its dine-in business, while online/home delivery could be conveniently outsourced to the third-party aggregators. But covid-19 has rather changed things. It pushed consumers to fully utilise the digital channels, and hospitality operators had to cobble together solutions to address this demand or watch their businesses wither.

What this has done is force many companies to operate as multi-channel businesses – whether they like it or not. With this rapid, largely unplanned shift and adoption of new technology, it is maybe unsurprising that 50% of consumers think hospitality venues are behind other leisure and retail operators when it comes to their use of technology, according to KAM Media.

It is imperative that businesses address this perception, because the digital transformation of the sector is fully underway, and technology will continue to impact the way the hospitality industry operates. Evidence of this rapid change is the fact McDonald’s says it is now providing 11 ways for people to get a meal at its newly designed outlets, on which it is spending £250m. As well as good old walk-in there is drive-thru, self-service kiosks, the McDonald’s app, ordering through delivery firms and so on.

Across McDonald’s major markets, digital sales now account for around 30% of sales, up 60% on a year ago, while at US-based Panera, 49% of sales are digital-related. This has led to the JAB-owned company (which is also the parent company of Pret A Manger) to introduce a 100% digitally enabled store, ‘Panera To Go’.  Many others, including Taco Bell, Wingstop and Chipotle, are doing exactly the same.

Yes, these are all QSR brands, but there will be no escaping the impact of digital on all foodservice businesses, because the direction of travel of consumers is obvious. It is worrying, therefore, that 80% of companies don’t have a set budget for digitalisation, and 63% of operators feel they haven’t invested enough in digitalisation for their business to date, according to Vita Mojo.
 
Hospitality companies should avoid falling into the same traps as many retailers before them and underestimate the effect digital will have on their businesses. Leaders have traditionally been wholly focused on finding sites, dealing with fit-outs and sourcing extractor fans, but how much expertise do many of them have in the likes of SEO, data insights, social media, CRM and marketing strategies with Google and Meta? The other big issue that has stymied retail is the continued operation of their various channels in silos, which is incredibly damaging. All people within an organisation need to be fully engaged with the digital elements. 

There is no escaping the immediate focus on addressing chronic staff shortages and dealing with the rampant inflationary environment, but hospitality companies from across the whole industry should not stick their heads in the sand with digital. It is not going away, and if you are in any doubt, then take a closer look at the retail sector and ask your customers.  
Glynn Davis is a leading commentator on retail trends

 
 
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