Putting Politics Aside: Hospitality Industry Remains Positive And Says “Let’s Start Implementing Plans for Dealing with Brexit”

AETHOS Consulting Group_GRIF London Briefing_Thomas MielkeThis week’s briefing jointly organised by Dentons, Horizons and the Global Restaurant Investment Forum/Bench Events proved to be as insightful as expected. It was a mix of market updates and intelligence, news on up-and-coming restaurant concepts as well as a talk on the do’s and dont’s when expanding internationally and an earnest discourse on Brexit.

Here are some of my personal highlights as it relates to the general market commentaries / industry sentiment:

  • The UK Is Open for Business: Kick-starting the event was John Quilter, co-founder of Cru Kafe. John’s very engaging presentation focused on one key message – the barriers to entry within the UK Food & Beverage sector are lower than before. Consequently, industry disruptors are shaking-up the sector. But what has lowered the barriers to entry? Firstly, social media: plugging into the social economy has provided a direct link to the consumer and allowed for companies to build a solid customer base at a relatively low cost (and get “free” marketing and branding in return!). Secondly, short-term leases: yes, although property and access to sites are still major problems across key gateway cities, street markets and savvy investors with large property portfolios have helped to alleviate some of the pain. Flexible terms are allowing for entrepreneurs to “try and test” the market. John did however also issue words of warning: you cannot ignore the delivery companies and you better “put on a show” and “entertain” your customers – because let’s not forget, authentic experience-led concepts trump it all!
  • The UK Consumer Wants Diversity: Nicola Knight, Director of Services at Horizons, gave an overview of the UK’s fastest growing small brands. It was interesting to see that out of the “Top 10”, five brands are targeting the casual dining sector: Cau (Steak), The Stable (Pizza), Wahaca (Mexican), Coast to Coast (American) and Chozen Noodle (Asian). It seemingly proves that we as consumers continue to value convenience and a down-to-earth environment. However, those five brands also represent an eclectic mix of food from all over the world – gone are the days where consumers were looking for a “plain vanilla” experience.
  • The UK Businesses Want to Grow Internationally – in the Right Way and with the Right Partners: Dentons’ very own Babette Marzheuser-Wood (Partner and Franchise specialist), Jamie Oliver’s Nick Shapira (Director International Strategy & Development) and Busaba Eathai’s Jason Myers (Chief Executive Officer) talked about the potential pitfalls of a too rapid expansion strategy. They highlighted that when looking to roll-out a restaurant portfolio through franchising, companies better focus on finding the right partners. Preferably those with an ability to provide local expertise, an established reputation and an ability to handle a speedy go-to-market strategy. Yet, Nick specifically cautioned not to focus too much on a set development schedule as it would focus everyone on the wrong elements (“grow fast” instead of “grow in the right way”). Jason and Babette agreed and warned not to be persuaded by “the guy writing a big fat cheque”. More important matters include aspects such as knowledge of and access to the supply chain in the respective markets as well as an ability to handle (and understand the significance of) recruitment. What it all boiled down to was achieving international growth through localisation and adaptation without compromising brand integrity and losing the human touch.

As it relates to the “Brexit”-discussion, it seems most parties agreed that presently there is a conflict between politics and economics. Nicola Knight, like many other, highlighted the current concerns of operators: managing staffing, food costs and property. But what were some of the other snippets from the Brexit-discussion picked-up on during the event?

  • Conservative estimates put the number of foreign workers within the hospitality industry at up to 30% – half of those are EU foreign workers, representing a staggering 700,000 people.
  • Given current unfavourable exchange rates and the relative weakness of the pound, imports are getting more expensive and are really starting to hurt the bottom line. For some foreign workers, the weakness of the pound has also made it financially less attractive to come to the UK for jobs in the hospitality sector.
  • Given the legal “untangling” needed from the EU, protecting one’s IP might become harder and more expensive and require additional filing.

So, should curbs on unskilled labour be implemented by the government, all signs indicate that the hospitality industry will have to face a future shortage of talent as well as potentially higher operating costs. What are some of the measures suggested by delegates to alleviate the pain? Babette Marzheuser suggested to consider the “Domino’s Pizza”-model where employees are encouraged to become franchisees and thus become owners of the business – making the profession more rewarding from a financial point of view and thus hopefully also attracting more “local” talent into the industry. Ufi Ibrahim, Chief Executive of the British Hospitality Association, has equally been quite outspoken about the key priorities to help cope with the current situation: (1) provide clarity to the legal status of all EU foreign workers currently in the UK (after all, they are right now the backbone of the industry), (2) developing and running a campaign targeted at changing the poor perception of the hospitality sector and attracting more “local” talent into the industry (highlighting that there is in fact a career in hospitality) and (c) securing a ten-year “grace period” for the campaign to take affect and for the industry to train, develop and build a new “local” workforce.

With all being said, people remain very positive about the industry and its growth potential – but it seems that there is still a long way to go to figure out the Brexit “situation”. Good for all of us then that the top two spots of Horizons’ fastest growing small brands are occupied by Kaspa’s and the Red Kiosk Company – coffee shops which will provide us with the energy/fuel to continue pushing ahead with our plans to grow, improve and future-proof the industry and sector.

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