Tips from the top

CGA Peach's 2020 Conference’s ‘Leaders Panel’ of bosses from PizzaExpress, Fuller’s and Loungers flagged up some important trends and pressing concerns. Here are ten messages from the big-hitters

CGA Peach’s 2020 Conference’s ‘Leaders Panel’ of bosses from PizzaExpress, Fuller’s and Loungers flagged up some important trends and pressing concerns. Here are ten messages from the big-hitters

1 Pubs are taking restaurants’ territory
Fuller’s chief executive Simon Emeny said his company was up to around 400 sites now—but after 170 years in business it finds itself in the unfamiliar position of competing with restaurants as much as other pub operators. “The smoking ban has created a lot of opportunities for pubs like ours… Premium pubs serving fresh food… do compete very well with restaurants now.”

This trend has been the catalyst for Fuller’s acquisition of cider-and-pizza operator The Stable, which is bedding in well at the company, he said. “We’re really enjoying it—it’s exposing us to something that’s slightly outside our skillset and comfort zone, which is good for the organisation.It’s helping us learn an enormous amount and ultimately it’s going to help many of my colleagues develop their career in other parts of the country and other parts of the industry.” Will Fuller’s be making more acquisitions? “Wait and see,” answered Emeny.

2 PizzaExpress is diversifying
PizzaExpress chief executive Richard Hodgson said the company had plans to add 30 to 35 new restaurants a year to its current estate of 540 worldwide, and argued that with like for likes running 6% up and margins widening it is in good shape. But in its 50th year it is now seeking to diversify—into international markets, especially China; into delivery via a pilot in London; and into new concepts via a chicken-based brand called Reyes, now being tested out in Cambridge. Broadening out is important, said Hodgson. “Ultimately there will come a time when there is no more space for PizzaExpress in the UK, so we’re thinking long-term—about how we can carrying on growing.” 

3 Loungers has grown on instinct… 
Founded in 2002, Loungers is a whippersnapper compared to the venerable Fuller’s and PizzaExpress, but its growth is no less impressive. Executive vice chairman Alex Reilley reckoned the group would be up to 100 sites by the end of next year, and said the expansion so far had been based on gut feel as much as strategic planning. “You go through a period when everything has to be pretty instinctive. When you’re rolling out so fast there’s never a point when you can take a bit of stock.” 

It can lead to some unusual situations, and Reilley revealed that despite reaching 70 sites Loungers doesn’t yet have a single person in a central HR function. “That isn’t necessarily the way everyone should do it, but you understand your business better than anyone else,” he said. “Listening to the heartbeat of a business tells you instinctively what you should be doing.” 

4 … And is hungry for more
Speculation about future ownership has followed a huge number of sector brands this year, and Loungers is no exception. Private equity backer Piper invested in the business in 2012, and on the rule of thumb of five-year involvement the time will soon come when it considers an exit. Reilley said his team was keen to stay in charge at that point. “Selling to a trade buyer is quite unlikely, to be honest—mainly because there’s an appetite from the management team to continue to the journey… to see how far we can drive the bus.” 

A float or further private equity options are therefore more likely—but whatever the outcome Loungers wants to preserve its approach to business. “Culturally what we do is very unique and special, and it’s about protecting that.”

5 Brands must keep raising the bar…
Intense competition and a constant flow of new arrivals means no concept can afford to sit still, Reilley said. “Our view has always been that the second you stop innovating and evolving what you do you’re dead… there are so many great brands and entrepreneurial ideas emerging that if you sit on your laurels for a second and think you’ve done it then the competition will shoot straight past you.” That applies to every aspect of a business, but especially design and food development. “You don’t want to be responding to trends—you want to be setting them or at least be ahead of the curve.”

6 … But respect the fundamentals too
While PizzaExpress is determined to keep evolving too, Hodgson argued that fundamentals still trump new fads. “Innovation is important, but… If you go back to 1965, what was important then is important now—great product, great environment, great service and great value for money.” There is a danger of tinkering too much with a menu, he suggested. “Keeping the offer fresh is important, but the vast majority of our customers have their favourites.”

It follows that while new start-ups should never be underestimated, the proof of a concept is in its longevity. How many of the new wave of brands will follow PizzaExpress in lasting for half a century? “There’s plenty of space for good operators… but whether they are still here in 50 years time will be the real test,” Hodgson said.

7 Trust and consistency are vital
Longevity breeds trust, and that is important at a time when cash is still tight for a lot of consumers. Consistency of delivery counts for a lot, Hodgson argued. “People are being more adventurous with their food, but they’re still keen to make sure they don’t get it wrong. A lot of people are relatively risk-averse, and the great thing about our brand is that they know what they’re going to get. When you’re investing 15 or 20 pounds a head or taking a family out you can’t afford to get it wrong.” 

8 Good operators need to pay well
The National Living Wage will add to operators’ bills from next April, but Fuller’s jumped the gun by raising its hourly pay to the new floor of £7.20 in the Autumn. Emeny reasoned that doing so would give it a head start on recruitment and help it stand apart from the crowd on service. “It’s going to be a cost to the business but it’s absolutely critical that we make it work for us.” HR is a big issue for brands at the moment, the panel agreed. “[People are] more important than just about anything else we’re doing in the business at the moment,” said Emeny.

Hodgson there was an “inevitability” about the new pay levels. “People who work in our sector deserve to earn a living wage… We should all welcome it and think long and hard about how we afford it.” For PizzaExpress, that will be by “trimming the fat” off the business, and perhaps trying to reduce the margins lost to discount deals. “The challenge is to do that [absorb extra wage costs] without compromising the proposition. Some of the weaker players will be tempted to cut corners, but customers will notice.”

9 Supply v demand is the big equation
Reilley returned to one of the big themes of the Conference—the danger of saturation in pubs and restaurants when so many brands are expanding so fast. “There will be towns where there will be too much supply for customers. It’s a positive story because we’re all growing… but it is the kind of thing that should be keeping us all awake at night.”

But the supply and demand equation is flipped on another big issue: managerial staff. Here it is fast becoming apparent that there is a shortage of talent to lead and manage all the restaurants that are opening. “There’s no doubt about it—demand for people and supply will not be aligned,” warned Reilley. Robin Rowland, executive chairman of YO! Sushi and chair of the panel, agreed. “Management turnover is starting to raise its ugly head in a major way… it’s the biggest battleground right now.”

10 Technology will transform payment
Technology is changing the sector in all sorts of ways, but it is in payment that the biggest shift will be seen, Emeny suggested. He thinks it won’t be long before we look back in amazement on the days of queuing at the bar or hanging around for a bill, and Fuller’s is now working on various high-tech updates to its payment systems. “The consumer wants a smarter, swifter transaction at various stages of the experience… That’s the biggest area that needs to change.”

At PizzaExpress meanwhile, technology is being deployed in back-office processes and workflows. The business will be taking learnings from its growing business in China and Hong Kong, where visual social media technology is much further advanced than here, Hodgson said. “I’ve yet to see anyone eating a pizza in one of our Chinese restaurants without taking a photo of it.”

 

Recent posts:

Share post

Archive

Subscribe to our newsletter

Access the latest On Premise news and reports by signing up below. 

CGA