Nicholls – the Late Night Levy will turn back the clock on the market: Kate Nicholls, the strategic affairs director of the ALMR, has argued the impending arrival of the Late Night Levy (LNL) next year will turn back the clock on the late-night market. In today’s Propel Morning Briefing Friday Opinion section she states: “The reality will be to force operators to reassess their offering between now and then – and it is likely to turn the clock back on the market. Businesses will need to make a commercial decision as to whether they generate enough turnover post midnight to cover these costs. In reality, it is the profit margin in those extra hours which matters most, not turnover. For dedicated late night operators, this is likely to be a simple sum, particularly as the LNL costs have not been increased above £4,000. For pubs with late hours but no real late night custom, the option of a free variation to remove themselves from the levy threat will be welcome. Ironically, this may yet throw a lifeline to the traditional nightclub market, which has struggled to differentiate itself in the post licensing reform era. Once again, in some city centres, style bars and nightclubs will be the only place to get a post midnight nightcap. Those with longer memories will recall previous ministers arguing that created spikes in nuisance and disorder and created no-go areas. A youth and late night entertainment led market perhaps needs more policing - a more balanced one can be self-policing. The government seems sanguine about that now, but beware the law of unforeseen consequences, minister.” (See the bottom of today’s e-mail for Kate Nicholls full opinion piece)

McDonald’s new chief executive Don Thompson to put focus on chicken: The new chief executive of McDonald’s US Don Thompson is tipped is put more chicken items on the menu in the US and transfer popular menu items from the UK. “Some great examples include our large wrap in Europe and snack items like Chicken McBites,” he said. “Our customers have given us permission to stretch our brand, so we are entering new categories with new products.”

Kensington and Chelsea move to protect pubs: Kensington and Chelsea Council has decided to use its planning powers to block the redevelopment of pubs. The council’s report revealed that there are 110 pubs in the borough – compared to 181 in 1980. A council report stated: “With escalating residential property prices this trend is set to continue.” Public houses make a valuable contribution to the community and cultural life of the borough.” The authority faces a public inquiry after rejecting an application to convert The Phene pub, which footballer George Best referred to as a second home, into a house. It argued that the loss of the “historic” pub would “cause harm to the character, identity and distinctiveness of the conservation area”.

Smoking ban increases pub visit frequency: One in five customers are visiting pubs more frequently in the wake of the 2007 smoking ban, according to a survey of nearly 5,000 people by Market Force Information. The survey, of 4,817 UK customers, found that five years on from the introduction of the smoking ban, 22.4 per cent of respondents said they visited a pub more frequently. Of those 22.4 per cent, 92 per cent were non-smokers. In addition, 70 per cent of parents say they are more likely to take their children to the pub with them than they were before.

Marston’s to open rotisserie experience at Wales hotel: Midlands-based Marston’s is to re-open one of Wales’s best-known hotels, The Talardy at St Asaph, on 6 August with a rotisserie food offer. The 16-bedroomed hotel had been in the hands of Liverpool-based administrators Grant Thornton, who struggled to find a buyer for 18 months. The Talardy will offer 11 luxury en-suite bedrooms. The venue will offer three restaurants - the Cellars, Chestnut Tree and Oodles - and conference facilities. In its 1970s heyday, The Talardy was run by the late Louis Parker, from Rhyl, who went on to become a music agent, representing stars including Boyzone, All Saints and The Prodigy. The venue operated as a nightclub in the 1980s and 1990s.

Collyer – Greene King’s net promoter gains highest in the sector: Deutsche Bank analyst Geof Collyer has argued that Greene King has achieved the best net promoter score increases in the sector in the past four years, which is driving like-for-like sales growth. He said: “Analysts often fall asleep when companies start talking about training and service standards. However, the sector’s history is littered with companies and entrepreneurs who can design, and spend money but can’t operate. In a people business, failure to adequately train – and who wants to own and operate an adequate business – can destroy all the best design and concept ideas that go into a creating a business in the first place. For those analysts who don’t fall asleep on this topic, we saw in Greene King’s final results some quantitative pointers on what is a very qualitative issue. According to the company, there is a strong correlation between ‘seven percentage points of Net Promoter Score’ leading to ‘one per cent of like-for-like sales growth’. In the eight weeks since the start of the year, Greene King’s like-for-likes were up seven per cent, but more importantly, over the past four years they are +15.7 per cent in aggregate – the highest of the sector’s major quoted pub groups.”

Beds and Bars boss – we took out an interest rate swap this year: Beds and Bars managing director Keith Knowles has told Morning Briefing that his company took out a level of interest rate hedging when the company re-financed at the start of this year. The hedging formed part of the pre-conditions for the loan, although there was “flexibility around the exact product and level of hedging required”. Knowles said: “We have a good relationship with our banks, HSBC and Lloyds TSB, and they try to be supportive within their framework, but banks are simply not passing on low interest rates. We were told that we had to take out an interest rate hedge.” The FSA reported last Friday that it had found concerns over inappropriate sales of more complex varieties of interest rate hedging products – such as structured collars – and a number of poor sales practices used in selling other interest rate hedging products. A statement said: “We also found that sales rewards and incentive schemes could have exacerbated the risk of poor sales practice.”

Antic adds another site: Antic Pub Company, the London pub operator, takes over The Blithe Spirit on Balham High Road this coming Monday (9 July). The pub is an addition to the three sites it plans to open during the summer: The Bohemia, a former O’Neill’s in North Finchley, the conversion of The Redback pub in Acton to The Acton Arms and The Graveney & Meadow in Tooting Broadway, a bakery project that offers cakes and coffee in a café environment with alcohol where Antic is involved on a “collaborative basis”. Meanwhile, its planned opening Knowles of Norwood in Knightshill Road has been hit by structural issues. The company stated: “Knowles has some major underpinning concerns. We've not given up but a rethink (is) required on design.” 

YO! Sushi re-opens Heathrow outlet: Conveyor belt sushi firm YO! Sushi has re-opened its Heathrow Terminal Three airside restaurant after a complete refurbishment. Robin Rowland, chief executive of YO! Sushi, said: “Having expanded our operations airside in Heathrow T3, we are extremely excited to have the opportunity to present customers with a product that pushes the boundaries of the typical fast-casual airport offering. The decision to invest heavily in the designs of both our Heathrow and, soon to be open Gatwick restaurant, incorporating open-kitchens in both allows us to offer diners the choice of all 90 dishes from the YO! Sushi core menu – providing a quality high street YO! Sushi experience in an airport setting.”

The return of paternalism By Paul Chase: In the past couple of weeks we have seen industry heavyweights speak out on different aspects of what I would term “The Return of Paternalism.” Wetherspoon’s Tim Martin, in an interview on Radio 4’s ‘You and Yours’, took aim at CASH – Consensus Action on Salt and Health – claiming that the demonisation of salt was based on “inexcusably bad science.” Marston’s Ralph Findlay was moved to write to the Department of Health after it added two new pledges to its Public Health Responsibility Deal, including one persuading younger employees to exercise, stating that the company was “not their parents; we’re a business.” Meanwhile Stonegate’s Ian Payne, in a sparkling intervention on the pages of Propel, spelt out the dangers of minimum pricing for our sector – a government proposal that Tim Martin has also opposed. The coalition government has embraced the notion of what is quaintly termed ‘nudge theory’. The idea is that moral suasion and legislative reform can be combined to “nudge” people into making the “right choices” in respect of lifestyle and health. They’ve even formed the ominously titled Behavioural Modification Unit to promote this agenda. The narrative that underpins ‘The Return of Paternalism’ is that Big Food and Big Alcohol have a powerful vested interest in resisting change in order to carry on making profits regardless of the harms they cause; but they should be given one last chance to redeem themselves by buying-in to a false consensus constructed by those that craft their doom. I’m no expert on the health aspects of salt, and I don’t seek to claim that there are no problems associated with excessive alcohol use, obviously there are. The issue, certainly in relation to alcohol, is how and why these problems are exaggerated by the Health Lobby. The ‘how’ of this we know about – inflating the costs to the NHS arising out of alcohol-use by using the smoke and mirrors of ‘alcohol-attributable fractions’, and the remorseless hocus-pocus of all their other statistical misrepresentations. More interesting is why. It’s easy to caricature the private sector as being comprised of one-dimensional, wicked capitalists who lack any ethical sense. It’s also easy to caricature the public sector as being comprised of woolly-minded idealists who believe that the ethos of ‘public service’ must trump everything else, whilst being heedless of the private sector wealth creation that pays for it. Neither of these stereotypes is accurate. Most people just get on with it. But the notion that only businesses have vested interests that need to be defended is both crass and naive. The British public, as consumers, spend some £40 billion a year with the food and drinks’ industries combined. The British public, as taxpayers, through the government, spend almost three times that amount – just south of £120 billion every year on our public healthcare system. The food and drinks’ industries are comprised of thousands of businesses, large and small, and are famously fragmented in their interests and their lobbying. The NHS is a huge, monolithic public enterprise that was once famously described as employing more people than the Red Army. Now, the Red Army has been reformed, but every attempt to reform the NHS has been resisted by the vested interests that benefit from the huge inefficiencies within it. Whether the reformers were Tory or Labour governments their reforms have been denounced either by the Royal Colleges, or the public sector health unions, or both. And always on the same basis: reform = privatisation by the back door. Change is only ever equated to existential threat; never to improvement. When government pushes these vested interests to reform, their response is to push back. By exaggerating the cost of alcohol to the NHS, the vested interests within it hope to locate the spiralling costs outside of the service and their control. If only government would rein-in public consumption of alcohol and fast food then the cost-push on the NHS would subside, and highly paid consultants could sleep more easily at night; hence the need to conjure-up moral panics about ‘binge-drinking epidemics’ and ‘obesity time-bombs’. I’m not proposing a conspiracy theory here, but I am tired of our sector being caricatured as being one. As long as nearly £1 in every £5 spent by central government is spent on a health service committed to a form of public health utopianism that just happens to serve a huge vested interest, we will have to contend with the politics that generates.

The benefits of upselling by Ann Elliott: One of the presenters at the Tenanted Pub Summit last week made the point that pubs are missing out on serious up-selling opportunities compared to fast-food outlets and coffee shop. She said that the average pub customer spends 78 minutes in a pub or bar at each visit. That compares to just five minutes in a “food-to-go” outlet where the average spend differs by just £1. She commented: “It is worth reminding ourselves of this golden opportunity. If customers are willing to give us 78 minutes, then shouldn’t we be using them?” Do customers really only spend £1 more in a pub versus a fast food outlet? I can believe the 78 minutes but only a £1 more? That’s a bit scary really - less than 1p a minute for all the added value a pub can bring in terms of ambiance, hospitality, range and quality - in fact the whole experience. It is food for thought. How can pub operators increase their spend-per-head without causing bill shock (like £27.50 for a glass of house champagne and an ordinary gin & tonic at The Grosvenor for the Cateys this week)? How can they nudge their spend-per-head up by a few percentage points and still be perceived as delivering outstanding value for money, customer satisfaction, recommendation and ‘repeat visit ’ scores? Last week I went into the Apple store in Milton Keynes determined to buy the lot – a new iPhone, a new iPad, a MacBook Air and some snazzy new headphones to use on the plane on my next ALMR Chicago trip. I know everyone reading will have been in an Apple store but the level of customer service, genuine customer service, in there never fails to amaze me. They treat you with respect, they listen, they don’t belittle your (my) lack of technological skills and they don’t try and sell you anything. Ever. I begged and pleaded for a new iPhone and iPad but was told (nicely but in no uncertain terms) ‘I don’t really think you need new ones. These are perfectly ok.” They just don’t have to push anything. Customers spend regardless (or perhaps because of) a team who don’t sell to you. I was wondering if there is any equivalent in our sector? Signature dishes on a menu can make you feel like that. The mini burgers at The Opera Tavern, the eggs Benedict at Cote, the Hebridean lamb at The Ledbury, the breakfast at The Riding House café, the porridge at The Wolseley and the Bacon and shrimp balls with grain mustard aioli at The Jugged Hare. I could go on. I want to spend money on dishes which are a joy and in places where I know they love the food they put in front of me- I am not counting the pennies then. Fantastic hospitality (as opposed to great customer service) can make you feel like that. I have had outstanding hospitality recently at Byron, The Delaunay, The Thatch at Adstock and The Three Fishes near Oxford. I spend more then too. We recently developed and delivered a ‘selling skills’ workshop for the Carluccio’s deli team that achieved a considerable, over budget sales performance for them. Sarah Murray, operations director for Carluccio’s, said: “This was a really effective piece of activity which delivered a significant increase in like-for-like sales – so much so that we are committed to running it again this year!” It was a real opportunity to coach a team into delivering a whole retail experience that customers valued and then paid for (without having bill shock). Food for thought perhaps and worth more than 1p a minute.

Back to Life, Back to Reality by Kate Nicholls: Spring seemed like such a long way away on Wednesday when the government confirmed its latest plans for late night licensing – we are back to an Autumn of discontent. Back in March, the Prime Minister and Home Secretary fell over themselves to say that pubs were the “safest and friendliest places to drink” – the PM even going so far as to leave his daughter in one – and that we should do more to encourage and support them. They acknowledged that it was the pocket money prices in supermarkets and irresponsible practices that fuelled pre-loading and were the source of the problem and that had to be tackled. Music to our ears, indeed. On Wednesday, there was no sign of this modern enlightened approach. Instead, the Home Office landed the industry with a hefty £28 million-a-year price tag for the introduction of EMROs and the Late Night Levy (LNL) from October – estimating that up to a third of licensed premises may be affected. Once again, pubs and bars will bear the brunt of the clean-up costs. We all know the headlines, but what will the introduction of EMROs and the LNL mean in practice? Well firstly, it is clear that the Home Office expects few local authorities to introduce an EMRO and that this is a weapon in their armoury against The Daily Mail’s allegations of “24 hour booze Britain” rather than a serious attempt to remove licences. Local authorities will act cautiously to avoid legal challenge, and the government expects no more than 16 local authorities to use the power, affecting fewer than 30 premises. The government has back-tracked on initial plans for exemptions from the EMRO and, more importantly the LNL, for casinos, formal restaurants, working men’s clubs and theatres and now said that there will be no exceptions, other than New Year’s Eve. The steer is clear - EMROs should be targeted, precise and incisive in their scope and there must be strong evidence to support their introduction; guidance is due to be published in October concerning their use. They have, however, accepted that this is such a serious penalty businesses need more notice and time to prepare arguments against its imposition – from 28 working days to 42 - and with a planning style hearing. Again, the steer is towards precision in application so as not to catch the responsible operators. The contrast with the LNL is stark. Here the government expects widespread take up – around half of local authorities – and a blanket approach to all premises selling alcohol late at night across the borough. They have accepted ALMR arguments that it would be wrong to label certain types of late night drinking ‘good’ by granting automatic exemptions based simply on whether you are a restaurant or a casino. So was there any good news in Wednesday’s announcement? Well, the trade did successfully lobby for a total exemption from the LNL for BIDs with a late night focus. There are currently only three such schemes in the country, so pub operators will need to work closely with their local BID teams to make sure that measures to deal with the night time economy are included in their schemes and that it is made explicit that measures to tackle street cleaning, car parking, lighting and CCTV are not just beneficial to day-time businesses. We also successfully fended off outright exemptions for certain types of business, which would have placed pubs and bars at a competitive disadvantage. We also secured a larger discount of 30 per cent for membership of a Best Bar None, BID or Purple Flag scheme. Whilst this is discretionary, it is clear that local authorities do not want to undermine existing initiatives and are likely to exploit this. And the fees are confirmed as being set nationally, according to rateable value and capped. The smallest businesses will have to pay an additional levy charge of £299 alongside their annual licence fee, whilst the biggest will pay £4,440. The overall cost won’t be known until the government confirms plans for cost recovery. The government on Wednesday explicitly recognised that pubs and bars would have to put up their prices and take a hit in profits as a result of these measures. They also acknowledged that, once again, it is the consumer who will suffer with less choice of late night venues and higher prices. There is no recognition, however, of the impact of widening the price differential on public health and policy objectives. The legislation to implement these measures will be in place by October 2012, but the earliest an EMRO could be up and running is March 2013 and the LNL is June 2013. So, the reality of what this all means in practice will be to force operators to reassess their offering between now and then – and it is likely to turn the clock back on the market. Businesses will need to make a commercial decision as to whether they generate enough turnover post midnight to cover these costs. In reality, it is the profit margin in those extra hours which matters most, not turnover. For dedicated late night operators, this is likely to be a simple sum – particularly as the LNL costs have not been increased above £4,000 – and for pubs with late hours but no real late night custom, the option of a free variation to remove themselves from the levy threat will be welcome. Ironically, this may yet throw a lifeline to the traditional nightclub market, which has struggled to differentiate itself in the post licensing reform era. Once again, in some city centres, style bars, nightclubs will be the only place to get a post midnight nightcap. Those with longer memories will recall previous ministers arguing that created spikes in nuisance and disorder and created no-go areas. A youth and late night entertainment led market perhaps needs more policing - a more balanced one can be self-policing. The government seems sanguine about that now, but beware the law of unforeseen consequences Minister.