Plastic screens and makeshift grocery stores: How one restaurant chain is surviving the coronavirus crisis

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Plastic screens at the tills. Staff decked out in visors and gloves. Contactless payments only.

Welcome to the new normal of ordering food on Britain’s high street.

As the nation slowly starts to emerge from its eighth week of lockdown, the country’s fast-casual sector — a staple of the restaurant scene — is grappling to adapt to the new coronavirus economy, by pivoting into makeshift grocery stores, launching curbside pickups and delivery services, and selling food-at-home boxes.

For many restaurant chains, restarting shuttered operations only halfway makes little sense. Both the financial costs and the health risks are too high and outweigh any potential revenues they may gain as they scramble to survive the historic disruption to the sector caused by the pandemic.

But in the last couple of weeks, some of the nation’s best-loved brands, including British baker Greggs GRG, -3.07%, sandwich and coffee chain Pret A Manger and Californian burrito and taco restaurant Tortilla, are among those tentatively testing the new environment as they start opening their doors to customers for takeout and deliveries.

On Monday, Pret even announced that its first ever retail coffee range will be available to order on Amazon, in an effort to refresh its dwindling revenue stream. The news came as Pret, which is owned by JAB Holding, said it was reopening a further 70 branches across the U.K., adding to the 30 already open.

Leon is another high-street chain that has come up with innovative ways to navigate the myriad challenges of operating in the current climate, including ensuring the health of its employees and customers while navigating cash flow uncertainty amid a nervous marketplace.

Unlike many of its peers, Leon never closed all of its restaurants. “From the beginning, we decided to remain open for takeaway, delivery and as shops because we have a vital role to play in helping to feed Britain,” a spokesperson for Leon told MarketWatch.

At present, Leon has 16 out of a total of 64 of its restaurants open in locations including Brighton, London’s Notting Hill, and also Cheapside in the financial district. 12 of these are open for the public, with another four dedicated to feeding critical care teams through Leon’s not-for-profit FeedNHS program for the National Health Service.

The company has adopted several strategies to keep its business ticking over. It has turned some of its restaurants into ‘mini-supermarkets’ selling products including essentials such as organic milk, eggs, teas, market fruit and vegetables, juices, sauces (mayonnaise, ketchup), ready meals (vegan and non-vegan), as well as household items including toilet rolls and cleaning cloths.

It is also placing meals in plastic pouches that customers can refrigerate, freeze and heat up at home.

Another income stream is offering dishes via food delivery apps Deliveroo and UberEats, which have both seen a spike in near-term growth, as more restaurants and customers sign up to their platforms.

Leon has also mobilized its kitchens to create an online platform called Feed Britain, which provides a route to market for suppliers whose revenues have been severely affected by the pandemic.

The produce available through Feed Britain was previously destined for restaurants, hotels and first-class airport lounges, but now customers can enjoy restaurant-quality food in their own homes from £2.70 per meal. All profits are donated to FeedNHS.

The pandemic has been particularly brutal on the fast-casual sector, which had been going through a challenging period long before the crisis, with rising margin pressures as a result of higher labor costs, higher business rates and increased food costs.

Now, those issues have been significantly exacerbated.

“As with all organizations faced with the extraordinary level of current uncertainty and huge hits to profits and cash flow, we are regularly discussing scenarios and time lines at senior team and board level, and we keep running and rerunning prudent/pessimistic scenarios to evaluate the impacts to cash flow, balance sheets and our overall financial health,” Leon said.

Despite Leon’s herculean efforts to keep its business going, all fast-casual chains anticipate a significant fall in footfall, even as the economy starts to splutter back to life.

“Our decision to keep our restaurants open after the government announcement of a nationwide lockdown continues to be with a view to supporting essential and key workers, the vulnerable and the NHS. There is only a fraction of the usual footfall and demand for our food, and our numbers reflect this,” Leon said.

The safety and well-being of workers and customers is still the highest priority so Leon has put in place stringent cleaning measures in its kitchens and workers have been given social distancing training. It has installed Perspex glass at the counters, only takes contactless payments, and has safe collection areas for orders.

The company is also in constant contact with its teams to understand whether they are comfortable to work or not and has been contacting individuals about what is available in terms of financial support. “We’ve not required anyone to work in our sites if they are not comfortable doing so,” the company said.

Leon has accessed the government’s coronavirus job retention program, which has been critical to the survival of the hospitality industry.

The program has also been tapped by Greggs, the U.K.’s largest bakery chain, which is also looking at how it can reopen its more than 2,050 shops.

“Our operational shop trials have initially taken place behind closed doors in order to test the effectiveness of our new operational safety measures. As these trials progress we are gradually beginning to reopen these shops on an ad hoc basis to walk-in customers,” Roger Whiteside, Greggs Chief Executive, said.

The FTSE-250 listed company has been carrying out a private controlled trial across a small number of shops in the northern city of Newcastle. These include through food delivery app Just Eat, Click + Collect, as well as a small number of walk-in customers.

Greggs will only move to open a wider number of shops if the feedback from this initial phase is positive and it supports extending the reopening plans, according to a spokesperson.

There was some relief on Tuesday for the fast casual sector when the Chancellor Rishi Sunak said the furlough program — which pays 80 percent of employees wages up to the value of £2,500 a month — has been extended from the end of June until October.

Restaurants will have to strike a delicate balance, otherwise they risk facing continued losses, according to Reece Tomlinson, chief executive of RWT Growth, which advises small and medium-size businesses on their finances. If they have too many staff or too much food on the shelves they can suffer due to cash flow losses. But if they don’t have enough of either they will have unsatisfied customers.

“As a whole, it is likely that fast-casuals will face continued cash flow challenges during this period of a gradual reopening of the economy,” he said.

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