The 2023 spring budget has been announced, bringing some good news for the Hospitality industry, with the value of Draught Relief increasing from 5% to 9.2% (relating to qualifying beer and cider) as well as continuation of support for energy bills and incentives to bring more people back to work. This positive news comes at a time when the traditional pub that we all know (and love) is slowly disappearing before our very eyes.
In October 2022, BigHospitality stated that 50 pubs are closing every month as overall numbers hit a record low. The question remains, why is this happening and what steps can we take to minimise this becoming your future?
The struggles surrounding the Hospitality and Leisure industry are being amplified by the current cost of living crisis as well as the seemingly everlasting effects of the Coronavirus pandemic. From streamlining your recruitment process, to finding your niche, in this article we explore the steps you can take to remain relevant and give yourself the best chance to succeed.
Know Your Niche
Boosting sales is difficult at the best of times, but it is essential in order to achieve success. Do you know your market and niche? The traditional pub aims to please regular punters out for drinks and perhaps a snack/simple meal from the bar. A gastropub emphasizes the quality food aspect, this would appeal more to families and corporate events, due to the increased pricing and quality. Your target audience is dictated by your location, themes and services. Is this something that you need to analyse more intently than before, allowing you to hone things further?
Know your cost structure
In simple terms, a fixed cost is a cost your business will incur no matter your sales/service– and knowing how these are changing over time is key. These are expenses such as rent, utility bills, advertising and licenses. At Menzies LLP, we advise our clients on what these fixed costs are and also alert you should any be increasing beyond your means. It is important to challenge suppliers in order to ensure the business is getting the best value for money on these fixed costs. Further, being aware of your break-even point – what value of sales you must complete in order to equal your costs – is important.
Having sight of reports such as management accounts and key performance indicators (KPIs), in terms of which products sell well, and more importantly which are the most profitable – can be really valuable. Analysing these KPIs will help you make better informed decisions regarding your business, and allow industry bench-marking to see how you measure against the competition.
Not all KPIs need to revolve around finance, you should also be monitoring the non-financial information such as numbers of covers, spend per cover, staff satisfaction, complaints levels, and whatever else is felt as relevant.
Polish your Recruitment process
Developing further on the sector’s recruitment struggles; UKH CEO Katie Nicholls has said “Vacancies in the sector remain high, double pre-pandemic levels”. It would be wishful thinking to assume this is because of a booming, growing industry, but unfortunately it is due to the challenges around finding and keeping talent in a highly competitive recruitment market. Our People Solutions team are helping our clients with this challenge, starting by looking at the recruitment process. They will ask questions around the speed and efficiency of the process, how professionally you engage with potential hires, the on-line platforms and technology you use and, importantly, the company profile and benefits you have to offer.
All of this needs to be right to attract the right people. Retention is then key and this will come with other questions to ask about induction, training, competent management, flexible working, competitive wage rates and benefits. As of August 2022, Ciphr published a survey asking over 1,000 Brits why their employer is a joy to work for. 24% of Brits said that the most important quality their employer had is a good employee benefits programme – is this something you need advising on?
Take advantage of available Tax Reliefs
As an employer and tax payer, are you aware of all relevant tax breaks you could be entitled to? UK tax obligations are high, particularly due to the UK being only one of three countries in Europe that does not have a reduced rate of VAT for the hospitality sector. Therefore, it is important to take advantage of any tax efficiencies available to you.
The most obvious one to consider would be Capital Allowances claims on any expenditure of a capital nature – namely refurbishment or fit-outs of your kitchens, bars or dining areas. Under this mechanism your tax relief is accelerated, and there is currently a temporary special scheme of super-deductions – We can help you identify qualifying items and ensure claims are submitted to HMRC to maximise the benefits from this temporary regime.
In summary, yes – hospitality is facing another difficult year, but with passion, adaptation and resilience focussed on key parts of your business; we believe hospitality can return to feeling like the booming, loveable industry that we all know it is.