I normally analyse the key factors, macro trends and drivers of change for the long-term future of our industry, forecasting through to 2030; this is of course irrelevant at this point when it is difficult to see what the next few weeks and months will bring.
When forecasting ahead during the Brexit situation of 2018/2019, it was easy to say that Brexit was merely a bump in the road in the long-term growth of the industry, as all the trends in eating out and drivers of change meant that the industry was certain to continue on an upwards trajectory.
Now, it is far harder to state for certain what the longer term future is, as the implications of the Lockdown, the financial situation of many operators and suppliers, the health fears of consumers, and the emerging new trends and changes in consumer behaviours mean that we are entering a new period for our world, our economy, and our industry.
As I analyse and forecast, I’m reminded of the words of Donald Rumsden ‘there are known knowns….known unknowns….and unknown unknowns…..’
In scenario planning that I have been doing for various clients, there are key scenarios that require analysing for the immediate future, but some, such as demographic changes and behaviours, and consumer trend changes, are too early to accurately forecast; the most important scenario to map out at this time, is the re-starting of our industry and what that involves and looks like, and that is my focus for now – the known knowns and the known unknowns.
Whilst the industry is in Lockdown, we would imagine that there are no foodservice / hospitality operators in business, and yet a quick check on Deliveroo in central London shows that there are 400 operators delivering at lunchtime today. Supper London, the delivery service for fine dining, is also delivering meals from Hakkasan, Roka, SushiSamba and Hide, amongst others.
These operators have pivoted swiftly, reacting to the challenge of the new normal, which is great to see, but we hope and assume that they are doing the right thing for their staff. KFC and Burger King are re-opening a handful of their sites, on the proviso that staff are opting in to working, are given the ability to work safely, and not travelling in via public transport. Reports from France are that McDonald’s are about to re-open some stores there for takeaway and delivery only, and this is something that we can expect to see as the first steps in the UK for our industry to re-emerge.
It has been stirring to see the commitment and hard work of many operators and their teams as they work diligently to support key workers and charities, and there are many heroes from our industry, going above and beyond to help others, as well as trying to save their businesses. By opening to serve key workers, operators will not only gain kudos, but also lead the way in slowly getting their businesses and supply chains back into operation, as the likes of Leon and Pret have recently demonstrated.
I am forecasting that c.15% of the fast food and takeaway market will be operating by the start of May, meaning c.6,000 outlets out of the approx. 41.5k fast food outlets will be open. We will then see further openings as the Lockdown is slowly released. Consumers have obviously increased their usage of delivery services, as their only way of getting a taste of their eating out fix, and I expect that this usage will continue, even when Lockdown is relaxed, as social distancing and health fears will remain front of mind.
We are seeing not just the Fast Food market continue to operate as pubs are also recognising their role at the heart of their neighbourhoods, and the strength of the tenanted model means that husband and wife teams are able to provide meals for takeaway along with other services, helping to keep their businesses going whilst supporting their communities. I’ve seen a local pub place a shipping container in their carpark and open up a village store from it! I estimate that c.15% of the Pub market is still providing some services, (albeit nothing like normal trade) and that this will increase to >20% by the start of May.
The greatest challenge for the industry is going to be the way in which pubs and restaurants can fully re-open, rather than simply provide takeaway; given health fears and social distancing concerns, and the financial reality of possibly only starting with c.20% of normal trading levels, this is going to be a slow and steady process. In Simon Emeny’s (CEO Fullers) words ‘we don’t want customers being served by colleagues in face masks or behind perspex screens’, and quite rightly safety measures for staff and guests is going to be paramount until a vaccine is distributed.
Without doubt, technology is going to play a strong part in the re-emergence of our industry, speeding up our move from analogue to digital world. The use of services such as www.Checkfer.com which uses beacon technology for consumers to order and pay at their table and was used in the Pret A Manger app, their development of a new industry-wide consumer app, OrderPay, which has gathered an industry cooperative coalition behind its rollout, is only going to gain significant traction. Consumers ordering and paying without any contact with staff, negating even the need for card payments, and served safely at their tables, is a winner for operators and guests alike.
These technological solutions are also going to help from a business model perspective, reducing the labour cost for operators who provide a simplistic service model; this will then lead to greater polarisation in the longer term, between restaurants that provide a superb, expert, crafted level of service and experience, and those that use tech to enable refuelling/casual dining.
We can recognise that coffee shops, fast food, sandwich shops and bakeries will be at the forefront of re-opening for takeaway only, with Pubs and Restaurants following some point after. TRG’s announcement of their plans to have c.400 out of 600 sites open by December possibly reflects the whole industry. But none of these operations will resume on 100% of previous revenues; if restaurants are allowed to re-open by putting social distancing measures in place, tables will need to be well spaced out, enabling c.50% of previous capacity to be achieved. However this still requires consumer demand which isn’t going to be immediate; I am forecasting a steady build-up of 20% pre-CV revenues, rising to 30%, to 50% and then to 70% over time, but 100% not being achieved until a vaccine can ensure staff and guests safety – possibly not ‘til the end of 2021.
Of course, much of this depends on some financial stability as the economy starts to re-build, and we will be in recession, with the knock-on effects that this undoubtedly creates, with higher unemployment, greater levels of personal and business debt, higher taxation and more caution from a consumer lacking in confidence. If 2020 is badly wounded, 2021 will also show significant scars.
The industry does have to recognise that there may well be rolling Lockdowns, as measures are switched on and off, dependent on the level and spikes in infections, and so a flexibility in staffing, supply base and operating models are required. The support of the supply base is going to be critical in this, and I imagine that procurement/supply chain managers, consultants and purchasing support businesses are going to play a more significant role.
Regretfully, there will be corporate casualties, with administrations, winding-up orders and breakdowns between landlords and tenants. We will see a number of operators fall by the wayside, and yet there will be opportunistic businesses and entrepreneurial start-ups looking to take their chances in this new world, albeit working to a new business model. Already some of the Carluccio’s sites in administration are being bid for!
There is positivity for our industry, and the work that various operators have done to support their communities, key workers and the NHS has been magnificent, and will be recognised by consumers as we come out of this; the sense of hospitality being at the heart of our communities will help those businesses to grow stronger. Operators forced into reactionary pivoting into delivery and takeaway services will recognise that these can provide a supporting source of income which will fit into consumers’ growing use of food and drink ordered online, either from grocery channels or foodservice – the blurring of channels is certainly going to continue. The hospitality of our industry, its resilience and entrepreneurial skills, will pull through.
There is also one certainty, a known known that will be evident at the start of 2021, something that will be welcomed by hospitality operators that generate business from parents and look after children well – there will be a baby boom!
Simon Stenning of Future Foodservice