Our restaurant business had a big moment this year – we finally paid off our covid debt. We borrowed £300,000 for our business during covid, which, for a business doing a little under £3m in turnover, is 10%. Not huge, but if you look at it against annual profits, it was a lot larger. In any event, it has taken us nigh on five years to pay it off.
As you might expect, this has been the real challenge for us – and I think for many others in the industry. The length of the debt overhang has been significant, and of course, it isn’t just the debt. When we took on our covid loans, the base interest was 0.1%, life didn’t seem too bad. But as soon as base rates raced up to 5%, life looked very different. So, not only have we paid our £300,000 back, but also another £50,000 in interest.
Unsurprisingly, we haven’t been as profitable in the post-covid years – and honestly, I don’t think we’ve been quite as good either. As a management team, we were recently reflecting on some of the team dynamics and realised that a few individuals wouldn’t have met our pre-covid standards. It’s only now that we feel ready and able to raise our expectations back to where they were before. That said, it’s not easy; we’ve all become a bit too used to a slower pace and a culture where hard work hasn’t always been the norm.
On top of that, we haven’t had the cash to invest in our refurbishment programme, which means some areas we would have upgraded earlier have had to wait. I’m only just now getting around to refurbishing a meeting room that hasn’t been touched in 12 years! It can be frustrating, but this is the reality.
I sometimes wonder whether we should have gone down the company voluntary arrangement route and ditched a load of debt to enable us to start afresh. In truth, I have no idea how common this has been over the last five years, but my suspicion is a lot of people have done it, maybe quietly, and it has helped them get restarted much faster than us. It is one on my list of many regrets.
Nevertheless, the good thing is that, after too long a time, I now feel we are back and able to run the business without any covid overhang – whether in terms of staff or finances. I even took a 16-year-old to work recently because her father was ill and couldn’t drive, and was so impressed by her level of commitment and determination – this really gives me hope.
Service levels are on the rise, we are doing the final bits of refurbishment that have been a little long in the making, and we are feeling positive about what we can achieve. Of course, there are still a few things we need to work on – staff that need to be lifted up to the standards we want, for example. That said, the positives are still there, and it feels like we are moving in the right direction.
There is, of course, the fact that, as an industry, we are still really struggling with a price point that has grown significantly over the years, with the result that volume is, at best, flat. This has meant that our customers will stay home a little more, just come out for a drink or spend a little less when they are here. As operators, we have to find ways to make the value equation work harder for us and deliver experiences that our guests want to come back for. The outcome is that we need, as always, to be holding ourselves to account – constantly questioning how we can improve and where we can do better.
We want to keep raising standards of amenity, service and food quality to make the value equation worth it for our customers. Perhaps now, the business can pay me some of the loans I have put in!
Alastair Scott is chief executive of S4labour and owner of Malvern Inns.
