Restaurants and cafes signal a hospitality SOS
The food service arm of the hospitality industry is the third largest private sector employer in the UK.
Accounting for 3.2 million direct jobs and 2.8 million indirect positions, the sector was estimated to contribute £72 billion to the UK economy through its activities and it’s harder to imagine a sector that has been as badly affected by the Covid-19 pandemic and subsequent lockdown.
Hundreds of positions have already been made redundant through closures while the immediate future continues to look tough for the country’s remaining restaurants, cafes and other food service businesses.
Following the imposition of the multi-leveled lockdown system and the 10pm curfew on 24th September for restaurants, the immediate impact has been stark.
Comparing the week before the curfew and the week after, like-for-like sales fell by 21.2% (according to S4labour, an online labour-scheduling management system) while food sales fell 19.1% and drink by 23.2% on the fortnight before.
London suffered the biggest fall with a 38.4% sales decreases compared to a year ago whereas the rest of the UK combined only suffered a 5.2% decrease, although this is still the equivalent of millions of pounds lost from the economy.
S4Labour also noted that 10% of food hospitality sites had yet to reopen at all after lock-down measures were first introduced in March.
Richard Hartley, Chief product officer of S4Labour, commented on the figures by saying: “This level of decline is unprecedented and worrying for the industry.
“Our data shows that food and drink sales are 18.27% below where they were when the curfew was introduced in September with the 9pm to 10pm hour specifically suffering with a 40% reduction in sales as restaurants have to be clear of customers by closure.”
Restaurants and other food service establishments are facing a perfect storm of problems converging on them of which the Covid-19 pandemic and response is just the epicenter.
Business rates, rents and VAT have all increased for most of the sector over the previous months and job losses, business closures and regional lockdowns of varying length and severity has led to lower disposable incomes among a lot of their customers as a result.
According to data from The Insolvency Service, restaurants have seen 25% more insolvencies than the previous 12 months up to and including the end of June 2020.
This trend has continued with food and beverage service activities seeing 195 insolvencies in July and August 2020 combined – more than any other sector for this period.
What can be done?
It might seem like an uphill struggle at the moment but food service businesses are rightly renowned for their tenacity and ingenuity and there are several options and ways they can evolve to meet and mitigate the ongoing health and economic emergency.
Socially Distanced Service
The show must go on for some restaurants that are seeking to adapt to the new guidelines and try to present customers with a functioning service while complying with the law.
This can involve PPE for staff along with temperature and other symptom checks to make sure they are viable to work; well marked and spaced tables and service areas for customers and staff to move among them; Single use menus for each table or in-app ordering; more visible hand sanitisers and air purifiers and the removal of pre-laid cutlery and condiments to minimise transmission.
Hours and number of customers will be reduced but this is an attempt to bring cash into the business and also maintain an element of normalcy in the lives of customers and staff alike.
Takeaway Only Model
If an in-house service is impossible then some have switched to a takeaway only model which involves a pre ordering system either through telephone or app service.
This will also include staff roles potentially being repurposed to help with order taking, food preparation or even doing deliveries. It’s a concrete way of keeping staff employed with the business rather than making them redundant or losing them to other businesses in the sector that do decide to keep operating.
Some businesses could use this new method to permanently offer takeaway services if they reopen and also other potentially lucrative avenues including external catering or pop-up facilities when crowds are allowed to gather and mix again.
While the Eat Out to Help Out scheme provided some respite in August before it was withdrawn, there are other avenues of government support available some of which are universal such as the newly improved Job Support Scheme and others which vary in availability depending on what alert level the local council area has been classified as.
There are temporary VAT rates cuts and deferrals and business rates relief for hospitality businesses along with business cash grants of between £2,100 and £3,000 per month which can be backdated to August for businesses that had to close but previously didn’t receive any financial support.
The end of the Coronavirus Job Retention Scheme is imminent and while the Job Support Scheme will provide some measure of support and income, it won’t be able to cover every single position lost or keep every business from having to ask some hard questions about its future.
Time for realism
Despite all of these measures, with an uncertain future depending on current forecasts and data, you might decide that it’s just not viable to continue going forward with the business under current conditions.
There are several options available here including an insolvency moratorium – to give your business 20 working days breathing space from creditors and other demands.
You can decide what you want to do with your company without undue pressure being applied.
If you do decide that closing the business would be for the best then we can also help you examine the most appropriate liquidation options to end the business as efficiently and stress free as possible.
Despite the economic headwinds battering the food service arm of the hospitality industry is taking, thousands of businesses are still standing – just.
If you’re one of them then we can do more than wish you good luck. Get in touch with one of our expert advisors today and we can arrange a convenient and free initial consultation.
They can talk you through a menu of options that can help keep your business open or if that’s not possible or desired, efficiently and effectively closed to let everybody move on with their lives and careers quickly.