Sunday Briefing: 16 August
Neil tells us a story about the time he was just 15 and, being a fully grown man, felt himself way too old to go on holiday with his family. To cajole him into cooperation his parents handed him a brochure, saying he could choose any destination for the annual jaunt. They hadn't properly done their homework as, for the first time a place called 'Florida' appeared on the final few pages under a main heading, 'New World'.
"I want to go there," Neil said. His Dad took one look at the prices, as part of the small print below photos of over-happy people eating pizza and navigating flumes.
"We're not going there. Anywhere else?" His Dad thought he was being reasonable, but Neil admitted to feeling crushed, his opinion and choice not being recognised. We choose who to listen to and who to find annoying, but some surely have more reason to be heard than others. Luke Johnson is one of those people. He's been round a number of blocks, sporting a CV bulging with interest and experience. He has part-owned restaurants like Giraffe and pubs, like Draft House. He has done deals that have made him a lot of money, such as selling the Elegant Hotels Group to Marriot for $200m in late 2019 and Cruise.co.uk, the UK’s largest online cruise holiday website, to Bridgepoint Development Capital for £52m. He has been the principal owner of Mayfair Gaming, the founder of Integrated Dental Holdings, started Signature Restaurants, which owned The Ivy, J.Sheekey and Le Caprice, as well as the Belgo chain, took control of the Pizza Express restaurant chain, was chair of Channel Four between 2004 and 2010, is currently the chair of private equity house Risk Capital Partners and chairman and part-owner of Bread Ltd (the firm behind the Gail’s Artisan Bakery chain.) In a spare ten minutes he serves on the board of Brompton Bicycles and is chair of the publicly listed Brighton Pier Group and contract catering firm Genuine Dining. Oh, Luke is also the chair and majority shareholder in Xstrahl, a medical devices specialist and owns All Star Lanes, London’s leading tenpin bowling business. As I said, a number of blocks.
He writes a piece in The Sunday Times today (Sunday 16 August), saying it is his 40th year in the food and drink trade, and it’s easily the worst. The industry has recently been crippled, as we all know, and Luke picks out one restaurant company which, despite his prodigious backing, threw in the towel last week. He says, "An insolvency practitioner sent me a letter saying that the business had gone into Administration. Investors such as myself will lose all our capital, I expect creditors will, too. Most of the handful of restaurants it owned will shut, although the owner might buy one back (without his external shareholders).
"Too many operators have forgotten that their priority is to provide customers with decent food, drink and warm service in friendly surroundings. Endless rules, reminders of a pandemic, queues and short-staffing are very off-putting, especially for a public that has survived without eating and drinking out for many months.
"People might decide that this discretionary habit is one they can give up. Many owners are struggling for survival, so cutting wage bills, portion sizes and even putting up prices should be no surprise. But these measures are likely to be counter-productive. As ever, the weak are going to the wall and the strong will prosper."
A man whose opinion is very hard to ignore also says, "I predict that between 10%-20% (of restaurants) will shut their doors permanently during the course of this year and the next. Of the 2.5 million people employed directly and indirectly in the industry, perhaps 500,000 will lose their jobs. Related sectors such as hotels, travel and leisure are being similarly battered. This is a tragic, self-inflicted disaster that could have been largely avoided by adopting different public health policies."
Those are horrifying numbers, even for those in our glorious profession who might benefit from a closed establishment or two, but one man whose shimmering halo is starting to fade and fall is the NTI newsroom's shout to play the next James Bond, who has almost single-handedly brought us 'Rishi's Dinners', the nation's new sweetheart and most popular politician (which is a little like holding the award for least-hated paedophile). No 11's package of subsidies and loans has cost us all around £30 billionn to furlough 9.3 million workers, of which some seven million were still at home last week. Business loans have cost the Government upwards of £50 billion.
00 Sunak's scheme (for such it surely is) of 'Eat-Out-To-Save-Lives-Be-Aware-And Beat-The Pesky-Virus' is £500 million of providing discounted meals between Monday and Wednesday has taken the headlines, previously packed with death and gloom. Regrettably, there is only so much scampi-in-a-basket a person can take before they remember they don't have a job and the words 'recession' and 'pandemic' boot a smiling chancellor from the front pages. People are starting to listen to James Smith, the research director of the Resolution Foundation thinktank, who thinks that with the end of the furlough scheme in sight at the end of October the Government should be doing more. Like what, Mr Smith (his real name?)? Maybe negotiating a sell-and-lease-back of Britain to the Chinese? Pimping the Queen out on one final world tour? Forcing the one remaining remember of Take That to go on tour again?
In response to the more than alarming GDP figures this week, Rishi started to bite back, “We shouldn’t pretend that it will always be possible for people to go back to the job they had, and in those situations it’s more important that we focus on providing people with fresh opportunity and have them look forward.” In other words, many people will inevitably lose their jobs and will have to fight others for new ones. That process has to start sometime. It may as well be October.
One business which is starting to recognise the (almost) inevitable is the much-maligned Debenhams (who sells scarves, make-up and toasting forks). The NTI newsroom reported this week that the chain had made a further 2,500 of its staff redundant this week and have now lined up Hilco Capital, the press reporting this is a "firm specialising in winding-up struggling retailers". It's like that 'You've Been Framed' sequence when a fully-cut bride gets up on a wobbly chair to show off her tango and you absolutely know what is going to happen next. Debenhams said it was "trading strongly" and Hilco's appointment did not mean a Liquidation was likely. The bride said, as she balanced on the chair on one stiletto, that she was confident of completing the dance moves and her teetering violently did not mean falling off was likely ...
If the Administrators, FRP Advisory, fail to find a buyer or new investment, Debenhams faces Liquidation, putting 14,000 jobs at risk. Catch up on this with the NTI newsroom in the next few weeks.
Meanwhile the new Spitting Image puppet of Mike Ashley (or it may have been Mr Ashley himself, it is impossible to know) was spotted smugly walking from a cluster of meetings during which his Frasers Group made an aggressive bid for the collapsed sports retail empire of his old rival Dave Whelan, the former Wigan Athletic owner. (Dave was quoted as saying how "delighted he was to have his old mate Mike in on the bid ...") Frasers, formerly Sports Direct, is understood to have offered Administrators more than £30 million for DW Sports, which comprises 73 gyms and 75 stores. It is the latest opportunistic swoop by Newcastle United owner Ashley, who has used the high street crisis to strike cut-price deals for retailers including Jack Wills, Evans Cycles and House of Fraser. Administrators at BDO are said to have been asking for about £20 million, but Mike was heard to say,
"£20 mill ... are you having a laugh? £100 tops." Negotiations are ongoing. Taking over Whelan’s empire would add to Ashley’s 880 stores at Frasers. A source said it would be a “perfect strategic acquisition”. Frasers reported a 14 per cent rise in half-year sales to £2 billion last October, but last week it delayed its annual results, saying its auditors needed more time. The shares closed at 283.4p, down by 38 per cent since the start of the year, valuing it at £1.5 billion. Mike was spotted emerging from a Travelodge before the latest of the negotiations this week, leaving behind him a heated conversation between furious landlords, who want to defect to rival hotel groups after slashing rents, and the group's owners. The budget chain has sent a presentation to hotel owners to try to dissuade them. The NTI newsroom recently reported that a group of landlords are looking to set up a rival chain 'Goodnight Hotels'. The latest move comes as property tycoon Nick Leslau, who owns more than 120 of Travelodge’s hotels, is understood to have hired advisers to find buyers.
The latest airline to feel the pinch of the pandemic is Jet2, where more than 100 pilots are to lose their jobs after the airline rejected alternative proposals, according to the pilots union. In June, the British Airline Pilots’ Association union (Balpa) said the Leeds-based carrier had proposed cutting 102 pilot jobs after flights were grounded. On Saturday, Balpa confirmed that Jet2 was pressing ahead with the cuts even though the union had put forward a range of alternative options.
For many, a not so happy Sunday.