Fridays joins the signing-on spree as bar group expands
IT is a practice commonplace in the football world. Now, talent is in such short supply in the hospitality industry that companies are having to offer “signing-on fees” to secure the managers they need.
The phenomenon, sparked in part by labour shortages arising from Brexit, is among several seismic changes that Robert Cook, chief executive of Hostmore, has seen sweep through the sector since the coronavirus pandemic took hold more than two years ago.
Mr Cook, whose firm owns the Us-themed Fridays cocktail bar chain, said while the quality of applications the business was now receiving is improving, “there is a high level of poaching going on”.
He told The Herald: “You just have to be on your toes and step in and enhance salary if you want to keep your best talent, and also if you want to attract the best talent, signing-on fees for general management is pretty much in play at the moment in store. Attractive signing-on fees that materialise after a length of stay is quite at the fore at the moment.”
He added: “I have never heard of that before. I had only ever heard of signing-on fees in the football world.”
As well as signing-on fees, Hostmore now offers the chance for senior personnel to become shareholders. Around 140 general managers and senior team members now hold stakes in the company under a move made possible by its recent stock market flotation. With such figures also eligible for bonuses, Mr Cook said it is proving to be a useful tool in retaining and attracting key staff.
“Our big attraction for senior people is that we now have got a share scheme in place for our teams,” he said.
“We have always had an annual bonus. But even [the pay of] hourly paid staff we have had to adjust. We are offering 16-year-olds the same minimum wage as a 25-year-old to attract [people] to our back-of-house area.”
Mr Cook joined Hostmore from Virgin Active, where he was chief executive, in December 2019. He was part of a new management team drafted in by Electra Private Equity as it prepared to float the Fridays business last November. Since then it has been known as Hostmore, and owns the 63rd + 1st and Fridays and Go brands, as well as Fridays.
Having held senior roles in the hospitality career since the 1990s, and operated at chief executive-level since 2004, Mr Cook had worked through his share of seminal events, from the September 2001 terror attacks to the financial crash of 2008/2009 , before Covid came along. But he admits he has never before faced so many big challenges all at once.
As well as challenges at macro level, namely continuing supply-chain upheaval, surging inflation and the fall-out from the Russian invasion of Ukraine that have followed the coronavirus pandemic, the hospitality sector is dealing with the resumption of business rates, the end to the moratorium on rents, and value-added tax being returned to 20 per cent after emergency Covid support measures ended.
Mr Cook, a former chief executive of Hotel Du Vin and Malmaison, said:
“It is one after the other of bad news… I don’t think I have seen all of the difficult London buses coming round the corner at once, as we have seen in the last few weeks and months. Saying that, we are in a pretty strong position in terms of our balance sheet.
“Having been round the block a few times both myself and the team, particularly my CFO [chief financial officer] Alan [Clark] who is similar to myself in terms of experience, we know the levers to pull and to push to make sure that we do the best that we can in the difficult circumstances. But I have got to say I don’t think I recall so much negativity coming all at once.”
Mr Cook added: “This is an awful lot for the industry to take. Really, it is going to be a tough time for many [operators]. Unless you are in a position where you have a pretty strong balance sheet, a high level of cash in bank, a good covenant and a great relationship with the landlord, it is going to get tricky out there, which Hostmore sees as a difficult time, and an opportunity.”
Mr Cook is well aware of the pressure inflation is exerting on consumers, and notes that people may now feel they can eat out only twice a month, whereas before the current cost-of-living crisis they may have done that four times. He is also conscious that people may be saving their disposable income to go on holiday, having been denied the opportunity to do so because of the pandemic in the last two years.
Despite those challenges, the firm is keen to expand. Hostmore currently has 85 Fridays outlets around the UK. Supported by a £25 million revolving credit facility, agreed before it joined the stock market, it plans to add to that tally with new units in Chelmsford, Durham, Barnsley and Ashford in Kent this year.
The company is beginning to extend 63rd + 1st, a New York-inspired cocktail bar concept, with an outlet in Edinburgh to follow the inaugural opening in Glasgow soon. And it hopes to take Fridays and Go, the company’s “fast cast restaurant” brand, to towns and cities around Scotland, after a successful pilot launch in Dundee.
Mr Cook said: “We jumped on the first distressed asset wave that came through at the beginning of Covid. But we believe there will be a bigger wave of distressed assets coming to the market [given the challenges]. Really, we just have to sit patient and see what that unravels.
“But equally we have got to be protective of the business and be prudent in how we deploy our capital, given the uncertainty that the Ukraine war and the headwinds of inflation are presenting to us.”