City A.M. knows the hospitality industry is in trouble – and that London without its bars, restaurants and late-night dens wouldn’t be half the city it is. Hospitality entrepreneur Chris Miller writes today to say that the capital will change – but there are opportunities too.
As the saying goes those who are tired of London are tired of life. One can see why. Our capital is the pulsating heart of Europe, a place of untrammelled learning, experience, and opportunity; a centre from which culture grows.
It is London’s culinary aptitude that punctuates every night out, gallery visit, theatre trip, or concert – and where my obsession lies. In the last four years, White Rabbit Fund has helped to incubate and grow 15 restaurants across the city.
Our 2020 pipeline was extensive including multiple international openings. This was to be an incredibly exciting year.But then the blood running through London’s veins dried up.
The overnight transition from a very profitable business to one with zero income has been devastating but not insurmountable. We are one of the lucky few: small and agile enough to pivot into new revenue streams, while being, like many, propped up by support loans and furlough grants to keep our staff employed.
Tough? Absolutely. But facing head-on the perils of this pandemic in the last few months will have been the easy part. We are about to see that the damage Covid has done to the culinary world will for many establishments be terminal.
In a matter of weeks the industry will lose its furlough money and protection from landlords demanding full rents. Combined with the limitations of social distancing and cautious diners dampening demand, and it’s clear – to put it lightly – that there will be mass casualties.
Realistically, a vast culling of our industry will occur over the next 18 months. Jobs will be lost, institutions will crumble. But bemoaning circumstances beyond our control achieves little for our staff or punters. What we have here is an opportunity; carte blanche.
The restaurant model was broken before Covid. Property costs were too high due to excessive rents and business rates. There were staff shortages, a mass of competition, rapidly-changing market dynamics, and delivery platforms chewing our margins.
When one expands aggressively with little concern for quality, modern trends, design or technology, one cannot cry ‘Covid’. The virus has accelerated the demise of many already broken businesses. It has also left many great businesses on their knees.
But hospitality will not disappear. Far from it. The market will return with the fundamental need for people to eat, drink, and socialise in real life. From the ashes of Covid will come green shoots; a new dawn of hospitality resplendent with opportunity to create and back early stage businesses ready for explosive growth in this new world.
Downturns are where most successful hospitality businesses are made. What Silicon Valley calls ‘creative destruction’. The conditions are ripe, and I’ll explain why.
First, rents are likely to adjust down and landlords will provide more favourable terms to attract the few surviving active players in the market. Expect to see capital contributions and turnover rents to attract best in class operators.
Second, will be the abundance of great quality staff at all levels. Amid the inevitable approaching recession, mass unemployment will sadly occur. This crisis will see top talent looking for work alongside a plethora of readily-available junior staff we can tap into.
Third, with less competition, lower rents, and eager staff, creative concepts will manifest. Multiple entrepreneurs will appear – but they will need support and backing to launch and grow.
This leads to the fourth: the ability to structure favourable deals at sensible valuations. Great businesses will come to the market with stretched balance sheets but very few funds will be investing in early stage hospitality and leisure in the next few years. Generalist investors will avoid this sector until a brand is fully-proven. This will result in a shift in view on valuations to more sensible levels.
Businesses will not be looking for peak market valuations, rather strong support networks with proven track records for growth. This is the name of our game at White Rabbit. The above may sound like a panacea, but we intend to make it happen, helping to regenerate high streets, creating real jobs, and income for all stakeholders.
We are all now tired of lockdown life and in need of London. The London that emerges will be different, but that’s exciting, isn’t it?
Chris Miller is Founder and CEO of White Rabbit, a hospitality development platform that provides capital and support to chefs. Since its creation in 2016, White Rabbit has opened 15 restaurants backing four different brands – Kricket, Lina Stores, Island Poke and Kym’s