Last month, we sold Genuine Dining to WSH, a much larger contract catering business, best known as the owner of BaxterStorey. I backed Chris Mitchell, the founder of Genuine Dining, almost 14 years ago, on its inception. It has been a fairly long journey, but enormously successful and very satisfying. The company has grown steadily – mostly organic – and should generate around £50m of revenue next year.

Inevitably when you sell a business for a decent profit, you try to analyse why it worked so well. Of course, each situation is unique, and any learnings must be applied elsewhere with caution. Nevertheless, I think there are three broad conclusions that stand out to me from our Genuine Dining experience.

The first lesson is the overwhelming importance of the founder. The business was, at heart, the extended effort of an outstanding entrepreneur in Chris. He grafted away over the years to build a great operation with blue chip clients. He recruited a first-class team to develop the business with him.

He evolved its activities and the model as the market changed. He made a few astute acquisitions. He made the most of the good times and displayed incredible grit during grim episodes like lockdowns. He adapted and matured as a leader during the years I have known him – after all, he started the business when he was in his 20s! Of course, many investors say management is the most important ingredient in any business opportunity. I’m not convinced this is always the case, but it certainly was on this occasion. Without Chris and his vision and stamina, none of it would have happened.

The second lesson is that winners take time. I would say that 14 years is a long holding period for an investment – but it has been a great ride, and that is the time it took for the business took to truly mature and become extremely valuable. If you invest but set short deadlines to exit – say three or four years – you may well be disappointed. Great entrepreneurs need patient capital to grow great businesses – quality needs to be nurtured across the inevitable economic cycles.

I was lucky, because I didn’t need any income from my investment during our ownership – essentially, the company never paid a dividend but reinvested its retained profits in growth. Moreover, I invested my own cash, so there was never a fixed time horizon – unlike, say, conventional institutional private equity funds, which almost always have an absolute requirement to sell after a maximum of ten years of ownership. Consequently, we could wait until the time was right to find the appropriate buyer.

The third lesson is that unsexy activities can offer wonderful returns. Contract catering might be seen as the ugly duckling of the hospitality industry. It rarely gets a fraction of the publicity accorded to sectors like restaurants, pubs or hotels. Operating margins are typically much lower than in casual or fine dining. But in truth, it is a huge sector, and in fact Compass Group, a British business, is the world leader in contract catering and is valued at more than £40bn. Providing staff meals in offices, factories, schools, hospitals, warehouses and the like isn’t as glamorous as running smart restaurants, but it can still be lucrative – and it offers real scale.

Indeed, one other advantage of contract catering, unlike, say, rolling out a chain of pubs or restaurants, is that it doesn’t really require much funding. Suppliers are not expected to put capital into their clients’ facilities. An operator needs to finance the working capital of a new contract, but that is far less than the significant investment in premises and equipment needed to open a new restaurant. 

I never intended to invest in the contract catering space. I felt it was dominated by giant operators who suffered low margins. But I was ignorant about the opportunities and my prejudices were plain wrong. It is a terrific segment if you do it properly. Luckily, I met Chris and decided he had a confidence and focus rare in someone so young, and consequently, I took a bet on what was effectively a start-up.

I will be forever grateful to him for giving me the chance to partner with him and contribute towards a fabulous business in Genuine Dining. I am extremely proud of what it has become. I hope it goes to ever greater heights in the future under the capable stewardship of Chris and his team and its new owners.

It’s Friday, so I think it’s time for some sexy chat, don’t you? Well, in that case, let’s talk financial stability. Sounds ever so exciting, yes? Well, actually it should be a crucial topic in every boardroom in hospitality. This week, I had the pleasure of presenting some exclusive research at the Propel Talent & Training Conference. The research that I talked the audience through was focused on attracting and retaining talent in the hospitality industry.

 

I started off by sharing some recent CGA data that showed that staff churn in hospitality remains at a high, with 20% of the workforce leaving a role in the last three months. We all know that it is far cheaper and far less hassle to retain team members rather than recruit new ones, so what are we doing to increase that retention rate? And if we are losing employees at this rate, what are we, as a sector, doing wrong?

 

Obviously, there are a number of contributory factors – some external (Brexit, the gift that keeps on giving, for example). But many are, I’m sorry to say, of our own making – or at least, the making of the people who came before us. And, while I’m talking about previous generations, I’d also like to mention that when we recently asked a sample of UK parents: “How pleased would you feel if your kids wanted a career in hospitality?” – only 52% told us they would be pleased. 

 

That percentage has decreased year on year, so there’s a fair bit of external PR also needed, I believe. But, external viewpoints of the industry aside, why are we losing employees and why is there such a high level of churn? Let’s start with the fact that 42% of people we spoke to as part of this research said that they left the hospitality sector due to a lack of focus on financial well-being from employers (a further 34% say this factor partly influenced their decision).

 

We know that a lot of operators are doing good work in the area of pay/benefits, and that the new legislation that dropped this week will also help to increase renumeration – or at least the fairness of that renumeration for team members. But people are still leaving us because of pay/benefits, and the solution is not just whacking up salaries. Recent research we’ve conducted with our friends at CJS has looked at how well hospitality is doing at providing financial wellness as a whole – and the results were actually pretty shocking.

 

They said 63% of hospitality workers are much more worried about their long-term financial position now than they were three years ago. Given the financial situation we find ourselves in, it’s not new news that Brits are increasing their focus on financial stability. This reflects the results we see from broader economic and consumer confidence studies – people are genuinely concerned about their financial well-being.

 

In fact, more hospitality employees are worried about their medium and long-term financial well-being than their short term, which is not surprising when we see that 52% of hospitality workers believe that hospitality employers care about the “short-term” financial well-being of their employers, and only 38% feel they care about their “long-term” well-being.

 

As an industry, we’re very vocal about our commitment to positive culture, mental wellness, physical wellness, flexible working, a fun work environment etc. We have so much to offer our employees, but a significant proportion feel we are genuinely not delivering on financial well-being. To put it bluntly, we are not doing enough from a financial point of view to look after our teams.

 

Maintaining a “healthy” life/work (yes, let’s get used to saying it that way round please!) balance is crucial to ensuring positive mental and physical well-being for hospitality employees. It can also drive an increase in productivity, work satisfaction and enjoyment, and ultimately increase employee loyalty and retention rates. Part of a healthy life/work balance surely must include the financial renumeration and support that allows for our employees to enjoy that “life” part!

 

I’m going to end on a high note. We’ve been running the UK’s biggest hospitality salary survey for several years now, and the number of hospitality workers who say they have a good life/work balance has increased dramatically, from 27% in 2020 (before the pandemic) to 51% in 2023 to – hot off the press – 59% in 2024. 

 

So, we’re getting there. The movement is positive, but we really do need not to under-estimate how important long-term financial well-being is for all employees, especially in the current climate. Ask yourself, am I providing enough financial support (not just salary etc) for my team members in the “work” bit for them to enjoy the “life” bit? Let’s start asking the hard questions and stem the team churn in this fantastic industry.

What with Wagamama and Mowgli recently launching loyalty schemes, Deliveroo investing in an advertising campaign to promote its Deliveroo Plus scheme this autumn and the news earlier this year that Pret A Manger was to ditch its much-feted subscription model, customer loyalty is a hot topic in hospitality right now.

 

But I don’t believe customer loyalty exists. Recently, I was approached by hospitality tech firm Zonal to see if I’d like to work with it on a project around this very subject. I started by telling a story about my love for Honest Burgers. We have an Honest Burgers right opposite our office. In fact, if the fire alarm goes off, it’s our designated meeting point. We have a lot of fire drills.

 

I loved going in there. The staff were friendly, the music was perfect, and it had plants everywhere that gave a really nice feel to the place. And I had a rather specific, rather odd order. I liked to have the plant burger, but I really like bacon, so I’d always add some of that on top, too. The vegan plus meat combination could have easily been a cause for confusion, but rather than causing issues, it simply became: “Would you like the usual, sir?”

 

Then, near Christmas, the manager of that restaurant left to go elsewhere. And when I next went in, everything had changed. The staff were still lovely, but the music had changed. She chose the playlists, apparently. The plants were all gone – also hers, brought in from home. And, when I put in my usual order, the waiter reappeared ten minutes later with a question from the chef: “Sir, just to check, did you really mean real bacon with that?”

 

Loyalty is an overused term in organisations and hospitality, and it’s a dangerous one. Because if leaders believe their customers are loyal they stop trying to impress them, focusing on winning them in the first place, then gradually taking their custom for granted.

 

Quite simply, if you stay more useful to your customers than the competitors and alternatives, your customers will stay with you. But if someone else becomes more useful – a better product, better price, better experience, more socially desirable brand – then they’ll go elsewhere. But where you can build some sense of loyalty is through your people – as Octopus, AO and First Direct show. 

 

Octopus Energy is taking the highly regulated energy industry by storm by empowering its team to come up with creative ways to solve its customers’ problems. Customers hated the hold music, and so now, should you be put on hold by Octopus, you’ll hear a song from the year you turned 14 – the age that, on average, a person first engages with music. Another example is the Octopus Wheel of Fortune. Every time an Octopus customer enters a meter reading, they can spin the “wheel of fortune” to win anything from 1p to £512 credit on their account, and more than 100,000 of them a month do so. This shows an understanding of the inconvenience of submitting meter readings for customers and actively recognising and rewarding them for doing so.

 

Another industry you may not think to look at for loyal customers is white goods, but online retailer AO is one of the highest rated UK retailers of any kind on Trustpilot. That’s in no small part down to the fact that one of its core values is: “Treat every customer like your own gran.” But, more than this, staff are supported to deliver on this promise. Stories are manifold, from delivery drivers paying for pizzas when a new oven can’t be fitted in time for dinner to local teams arranging for an AO branded van to visit a six-year-old van fan on his birthday.

 

Likewise, banks are about as well known for building loyalty among customers as utility firms and white goods retailers, but talk to any customer of First Direct and most will extoll its virtues. Again, this is down to first-class customer service delivered by teams supported to do so. First Direct famously “hires for the smile, trains for skill”, and then enables its teams to listen to customers and act with empathy – no scripts, no call handling time targets and calls answered by real people.

 

The hospitality industry has a huge advantage over others in this, as a people-focused sector with colleagues who know that customer experience is crucial to delivering a great experience. There are other complexities to this, of course (the ambition of the leadership to provide excellent customer experiences, great training, a fundamental understanding of what drives your customers’ decision making, a recognition that not everything in good business must deliver an immediate return on investment).

 

However, while I maintain that customers are not loyal to businesses, I do believe they are loyal to other people – and these can be your people, assuming you give them the correct support and tools.

As of 1 October, it’s official: The Employment (Allocation of Tips) Act is now live! The changes in the new legislation are significant, aiming to bring much-needed transparency and fairness to how tips are distributed across the hospitality sector and other tipped industries.

Throughout the development of this act, Tipjar has been collaborating closely with the Department for Business and Trade, lending our expertise to help shape a framework that meets the needs of both workers and businesses.

For those looking for a deeper dive into the specifics, we've created a range of resources you can access here. But now that the Fair Tips Act is in effect, it’s not just about compliance, it’s about embracing this change and understanding the broader benefits it brings.

The new tipping legislation is not just a legal obligation but a powerful opportunity for operators to build stronger, more motivated teams. Yes, there are potential penalties for non-compliance, but let’s focus on the opportunities.

Guidance: For far too long, there hasn’t been a level playing field regarding how operators manage tips or tronc, which has meant those that are doing the right thing haven’t always reaped the rewards in the same way as operators that may have mismanaged these funds. Undoubtedly, there are contentious issues with the legislation, but at least everyone now must follow the same rules, and those that look after their teams fairly will inevitably come out on top.

Better attraction and retention: Fair and transparent tipping practices are not just the law now, they can also be a powerful tool to attract, engage and retain top talent.

Cost savings: With a legitimate tronc policy in place, employers don’t pay national insurance on tips, which could save your business thousands.

A more motivated team: By utilising technology, we have a much better opportunity to enhance our tronc policies to reward better performance. With service charge now being so widely used, it has unfortunately bred complacency in pockets of our sector, which has led to diminishing service levels. By rewarding team members appropriately for working busier shifts, providing better service and selling more, this is a great opportunity to stand out from your competition. 

This is just the beginning. The Fair Tips Act marks a significant shift, but there are still plenty of opportunities on the horizon. At Tipjar, we’re excited to explore new ways to enhance the benefits of tipping for both employees and employers:

A “bank-like” savings pot: Imagine a separate pot where employees can save their tips with interest – like a digital piggy bank.

A digital card: Making tips go further than ever before. A dedicated card for employees to spend their tips directly, with access to hundreds of high street discounts and cashback.

Financial education: We believe in empowering employees with financial knowledge, helping them gain greater financial freedom and security.

We’re fortunate to work in a brilliant industry where we hear heartwarming stories of the impact that tips can have on people’s lives. Life beyond the legislation is an exciting place for both employers and employees, and Tipjar will be there every step of the way to support.

So, embrace the change, explore the opportunities, and let’s work together to create a fairer, more transparent future for everyone in hospitality. Exciting times are ahead!