CGA’s Big Peach 2020 Digital Experience featured a session dedicated to big issues in finance and investment. Chaired by CGA’s business unit director for food and retail Karl Chessell, here’s what the experts had to say on seven of the hot topics.
On… access to funding
Paul Newman, head of hospitality and leisure at RSM, said businesses with close banking relationships have found it relatively easy to get emergency funding, while those without good links have had it harder. Financial reviews during the first lockdown had been effective, he added: “Many businesses are now better capitalised to deal with the restrictions going forwards.”
On… CVAs
Like several other leading operators, Italian restaurant group Gusto has undertaken a CVA this year, and chief financial officer Frank Bandura said that with support from landlords and supplies, restructuring had paid off. “We realised we had to restructure the business to make sure the brand could survive… It means we have a great business that can look forward to the future with a degree of confidence, and know that we can withstand future lockdowns we might get.”
On… landlord relationships
The support of landlords for businesses that are closed or struggling for sales has come under scrutiny this year, and responses have been mixed. “Some have been very innovative in coming up with ways to support operators… and some haven’t,” said Trevor Watson, executive director of Davis Coffer Lyons. Independents had tended to be more constructive than institutional landlords, said Matthew Peck, finance director at Mowgli Street Food.
On… rent reforms
The challenges of post-lockdown trading have prompted calls for reform of the rent system, including turnover-based rents and shorter-term leases—but while landlords have offered discounts, holidays and other concessions, permanent change is unlikely, said Trevor Watson. “As things have progressed, that [campaign for reform] has proved to be slightly optimistic… Most people recognise we’ll probably revert to type [after the pandemic].”
UKHospitality has been lobbying for a rethink of the upward-only rent review model, and Matthew Peck said it was high time for change. “It’s fundamentally inequitable that all the upside sits with the landlord, and that you either pay market rents or over-the-market rents… it’s still a feudal relationship on many levels, and it feels like something has to shift.”
On… the end of the rent moratorium
With the end of a moratorium on forfeiture rights for non-payment of rent running out at the end of the year, Paul Newman said some businesses would suffer. “I do fear that we’re if the moratorium isn’t extended then good sites are going to be handed back to landlords, and that’s going to create further over-supply of property and drive rents down.”
On… future deals
Hospitality is still a very attractive sector to investors, said Paul Newman. “They’re keeping their powder dry for the moment, but there’s no end of opportunities out there for well capitalised businesses.” The recent success of Various Eateries’ flotation on the Alternative Investment Market was an important vote of confidence in the sector. “It shows there is still appetite for the right sort of investment.”
On… property opportunities
Matthew Peck said Mowgli remained bullish about opening new sites. “We feel that the fundamentals of hospitality will still be in place once we’re through this crisis… People still want to eat out.” But caution is needed. “We’re nudging it forward slowly and only committing when we’ve got a bit of clarity for the next period of time, and making sure we’re not taking on too much.”
The wave of restaurant and pub closures this year will bring potential for expanding brands in 2021, Trevor Watson suggested. “We’re going into a massive land of opportunity in terms of opportunities for new sites.” Frank Bandura added: “With the restructuring behind us and the group put on a solid financial footing, we are in a great position to take advantage of any site opportunities that may come along.”
To watch the Big Peach 2020 Digital Experience’s financial session in full, watch below or click here.
