Many hospitality businesses can reopen this weekend, but safety concerns, rising prices and cautious customers will force some to stay closed. By David Burrows.
“I can tell the House that we will … reopen restaurants and pubs.” After those words from the prime minister last week one might assume the hospitality sector breathed a collective sigh of relief – provided they were now no closer than a metre apart.
Indeed, having “scrupulously weighed the evidence”, Boris Johnson not only gave the green light for many of England’s hospitality firms to reopen on Saturday July 4th, he also reduced the social distancing rule (it was never actually a rule, merely a guidance) from two metres to “1-metre plus”.
This is a big risk. The biggest of his tenure. Forget all the miles his top advisor drove to check his eyesight – this 100cm matters more.
Commercially, the move suits cafés, pubs and restaurants: the two-metre rule would have capped capacity for most venues at “around 30%”, according to UKHospitality, but reduction to one metre should result in most venues able to trade at “around 70%” of capacity.
The British Beer and Pub Association said 75% of pubs in England (28,000 in all) could now reopen. Consultancy CGA reckons the reduction will result in an extra 145m pints of beer being sold through the pub sector.
“I can’t wait to get back to the pub... and I don’t even drink,” tweeted the chancellor Rishi Sunak, one of those reportedly pushing hardest for hospitality to reopen and for a cut in the two-metre guidance. “Good news for business today and glad we’ll all have a chance to enjoy the summer safely,” he added.
But will we? Some operators clearly think so: JD Wetherspoon has reportedly committed to reopen all its pubs this coming weekend, while Greene King is going for two-thirds. Marston’s said it would open about 85% of its sites. “We will open and see what happens and get a feel for it,” chief executive Ralph Findlay told the FT.
Others are prepared to wait. Indeed, amid all the rush to reopen safely there is a more cautious camp. “I make no judgements on those who choose to open at the earliest possible opportunity. But our own approach is going to be more cautious,” wrote Alex Rushmer, owner of the Vanderlyle restaurant in Cambridge, in a blog last week. He suggested the social distancing change could be a red herring: “Halving the social distancing measures will not halve the difficulties that we will all face when we reopen.”
There is much for landlords, coffee shop owners and restaurateurs to weigh up: what capacity is possible and how will that affect profit margins; are the staff safe and happy with procedures; are suppliers prepped and the prices right; and, critically, will customers come?
The government’s guidance does little to steady the nerves of operators. The 40-odd pages released in updated form last week cover a lot of ground – UKHospitality chief executive Kate Nicholls called it “pragmatic”, allowing businesses “flexibility”. Others would have preferred tighter lines and fewer vague phrases like “where possible”.
“There are as many questions as there are answers,” tweeted the owner of the Red Lion & Sun, a gastropub in London. “Therefore, I have taken the decision to wait. We’ll see how the great British public react to the reopening of pubs.”
In Scotland, meanwhile, 85% of hospitality businesses, including cafés, hotels and restaurants, have said they won’t open next month if two-metre guidance remains in place and there is no further financial support. The Scottish Government is currently reviewing social distancing guidance, with an announcement due before a planned reopening on July 15th.
GIVE THEM A METRE…
Surveys suggest there is so-called “pent-up demand” for beer, flat whites, and dining in as well as (preferably) outside – the government announced at the end of last week that the rules on outdoor seating and stalls are also set to be relaxed. The signs from other countries are, largely, positive in terms of returning customers. The half a million people that headed to Dorset beaches this week has also prompted some to suggest that Brits are keen to return to “normal life”.
That isn’t possible, nor is it desirable currently. As Chris Witty, England’s chief medical officer, said of the July 4th announcement: “If people hear a distorted version of what’s being said, that says ‘this is all fine now, it’s gone away’ and start behaving in ways that they normally would have before this virus happened, yes, we will get an uptick for sure.”
A few days later, data emerged as if to prove his point. Analysis by the University of Oxford’s coronavirus government response tracker and The Guardian found that of the 45 countries to have recorded more than 25,000 coronavirus cases to date, 21 currently have relaxed responses to the pandemic, and of these 10 are reporting a rising number of cases.
Given that the “cumulative stringency” of the UK government’s lockdown is “about 10% higher than the rich country average”, according to data from the same tracker presented in The Economist, there is a chance people will be keen to make up for lost time and forget their way – especially after a couple of pints and with 100cm rather than 200cm to play with.
Indeed, the date on the minds of hospitality operators may well be July 4th but scientists are watching hospital admissions around July 20th – 16 days on from this next phase of lockdown easing will be enough time for people to become sufficiently ill to be hospitalised. If the country goes crazy, the risk is that Super Saturday could be followed by Morbid Monday.
There is some consternation that the UK government has gone for a Saturday to throw the shutters up. Whoever had that idea “needs a talking to” tweeted the Red Lion & Sun. Some pubs are likely to wait and reopen during the week. Scotland has opted for a Wednesday reopening.
CAN PRET MANAGE?
By this coming Wednesday, Costa hopes to have reopened 1,100 of its stores (less than 50%). Brits will be relieved given their addiction to caffeine: in a poll of 4,000 UK consumers conducted by Allegra, visiting cafés and coffee shops was second only to seeing family and friends from a list of 17 things people miss the most during lockdown.
Still, sales are stubbornly low so far. Pret has reportedly told landlords that it will pay only 30% of rent over the next quarter. A leaked video seen by the BBC revealed how sales for the food-to-go chain had plunged, with an announcement on the “job situation” expected next week.
London’s city branches, which were heaving from dawn ‘til dusk as they catered for coffee and tapped into trends for vegetarian food, will undoubtedly have found customers harder to come by. In an open letter, a handful of chefs and restaurateurs in the capital warned: “[Working from home] has been successful, many significant offices will not open again until the autumn, some not until the New Year, the City is a ghost town with Fridays, once buzzing, particularly now empty, with many restaurants not reopening yet.”
Also, consider these reader comments on the FT site last week:
“Everyone's got the hang of planning for the week ahead on the food front and learnt to cook a few favourites. Some might go back to old habits but many won't.”
“When my office in the City reopens after the summer I will go in two days initially and then no more than three for the foreseeable. I will cycle there and back and I will take lunch with me or if viable use the canteen when it reopens. Public transport and convenience food are both out of the question until spring next year and then we will see where we are.”
Whether work-from-home or pack-your-own lunch becomes the norm is hard to say (analysts suggest the pandemic has certainly fast-forwarded remote working trends). What is clearer is that brands will need to work harder than ever to regain anywhere near the footfall they did before the coronavirus.
Food-to-go has been growing at twice the rate of grocery for the past few years but lockdown has put the brakes on and it’s hard to say how quickly things will accelerate. Rosalind Hunter, partner at consultants Simon-Kucher & Partners, said earlier this month that, as takeaways, deliveries and drive-thru services opened, demand was not returning quite as expected. However, the only certainty at the moment is “the constant shift in customer demand”.
The chancellor is reportedly seeing how things go before he decides on his stimulus package. Support from the Treasury has saved thousands of businesses so far. But there is concern that having set a date for sites to reopen, the chancellor may now want to close his wallet.
Businesses struggling to survive will need support as they look to innovate. “Many have been consumed first by the need to fight fires and then by challenges raised by reopening,” noted foodservice consultant Peter Backman in his most recent weekly bulletin. “But many others have been looking at doing things better, doing things differently or doing new things.” Patrick Mitchell-Fox, senior business analyst with industry researchers IGD, suggests there are opportunities for those that can establish businesses models for “the here and now”.
So, what of the future for foodservice?
Experts at Shore Capital reckon somewhere around 37-38% of calories consumed were outside grocery before the onset of Covid-19. That dropped to 10-15% and is now creeping up but will land at around 15-20%. “We are absolutely worried about how long it’s going to take to unlock foodservice,” Clive Black, an analyst at Shore Capital, told me recently. "There could be hundreds of thousands fewer people going into city centres. That's people not buying coffee, not buying sandwiches, not using work canteens.”
This spells trouble for contract caterers too, who will need to innovate and invest to help the office maintain its appeal. Compass, the largest of the big four catering groups, reportedly had half its 600,000 staff on furlough in May. A chart in The Economist this week showed how losing a few diners eats into catering service companies’ wafer-thin margins (“36 cents per meal or $100 per site per day” in the case of Compass). “Rising expenses, such as hiring more staff to enforce stricter cleaning protocols, will not help. Passing the costs on to clients is tricky in a recession,” the weekly newspaper reported.
THE PRICE IS TIGHT
With unemployment expected to rise and consumers cautious about spending, now is not the time to put up the price of a burger or a beer. However, it’s hard not to see some increases given that businesses are facing the costs of implementing Covid-19 safe measures as debts mount. Menus are also being slimlined and footfall is likely to be considerably lower than business as usual.
It has been reported, for example, that pubs expect to make a profit from 10% of reopened sites. The country’s 7,000-plus independent cafés, that up until late March were serving 10.5m cups of coffee each week, are also exposed. An Allegra World Coffee Portal study, published in May with Alpro, showed 31% of café owners were worried about a “future increase in price-consciousness” as they called for minimal increases in costs passed on by suppliers and lower minimum purchase totals. “There is a growing realisation that, even when lockdown ends, several restrictions will still be in place and consumer behaviour will be very different,” the authors noted.
For example, people won’t want to hang around for long. In some countries, like Ireland, they are not allowed to: customers will have 105 minutes to eat and drink, with pubs required to serve a “substantial meal” for which it would be reasonable to charge not less than €9, reported the Irish Times. This is hardly conducive to the craic, as the FT’s leader noted.
The Allegra/Alpro report detailed how owners are now gearing up for a second wave of disruption (the first was closing down and the third will be “living in a fully safe world again”). This “will see the majority of owners grapple with the benefit of implementing initiatives such as takeaway and delivery, but the loss of what makes their experience so unique: their physical space and the experiences people can have in them”.
Cafés, bars and restaurants will certainly look very different. There are Perspex screens, stickers on the floor showing new one-way systems, extra cleaning shifts, and PPE-wearing baristas. “It makes going for a coffee look dangerous,” Scott Bentley, founder of Caffeine magazine, told Footprint recently.
The challenge of creating a safe environment that will bring consumers back cannot be underestimated. Some feel it’s not currently possible. “I want to make sure that for the two or three hours you are in our restaurant you feel cosseted, safe and embraced by our interpretation of hospitality,” Vanderlyle’s Rushmer wrote. “Can all this be done from behind Perspex screens, gloved and masked, and incessantly worried about finances or whether or not the restaurant will have to close for two weeks because of a single phone call? For now – for me – the answer is no, it can’t.”
Bosses will certainly be mindful of reports in the US last week showing that in some states businesses are locked in a very costly cycle. “A restaurant reopens, a case of Covid-19 is detected, the restaurant closes to sanitise, employees are tested, and the restaurant excitedly announces a reopening plan – again,” explained Eater.com.
Data from the Office for National Statistics has already showed that male chefs were among a handful of occupations that were found to have raised rates of death involving Covid-19 (35.9 deaths per 100,000). Low-skilled workers in service operations, including kitchen and catering assistants and waiters, also had high rates.
Brands certainly need to watch their reputation, which is why some will remain closed. “I think I need a better understanding of the new landscape before putting my team and you, my customers, at any unnecessary risk,” noted the Red Lion & Sun’s landlord.
Heading to a pub, restaurant or café this coming weekend will be new and far from normal. There is also more than just the prime minister’s reputation at stake.