Forecasting the right time to reopen a pub

By Dave Gosling, partner and UK hospitality and leisure sector specialist, Menzies LLP

- Last updated on GMT

Weigh up costs: 'by taking advantage of three-way forecasting and considering their options carefully, restaurants and bars can determine when the time is right to reopen'
Weigh up costs: 'by taking advantage of three-way forecasting and considering their options carefully, restaurants and bars can determine when the time is right to reopen'

Related tags: Finance, Public house

While pubs, restaurants and cafés are permitted to reopen from 4 July, some may be forced to stay closed rather than resume trading straight away for financial reasons.

The hospitality sector has become used to real-time contingency planning and agile decision making.                                                           

As one of the sectors hit hardest by the Covid-19 pandemic, knowing which key areas to consider, and conducting effective financial forecasting, is essential. This can help operators to weigh up the costs involved in both scenarios and make the right choice for their business.

In order to welcome customers back through their doors, hospitality and leisure businesses must ensure that they are “Covid-secure”​ by complying with new Government guidance.  

As well as developing effective hygiene procedures, guidance states operators should take steps such as introducing systems that enable customers to socially distance, and only provide table service, as well as using online menus where possible.

When deciding whether reopening makes sense from a financial perspective, operators should weigh up additional costs around implementing coronavirus safety measures, against predicted revenues.

Restaurants, cafés and bars belonging to a chain have a decision-making advantage: the ability to conduct a reopening ‘trial run’. For example, opening one or two venues at a time could allow them to identify any potential problems, such as excess or insufficient staff, and make the required changes before more locations are opened across the country.

 The size of the restaurant or bar should also be taken into account as this will determine whether social distancing measures will be possible.

Three-way forecasting 

Operators should also consider making use of the Government’s new ‘flexible furlough’ scheme, which provides businesses with the opportunity to bring staff back to work part time.

However, it is important to bear in mind that as the months progress, the scheme reduces in benefit. 

In order to make the most of it, operators should put staff plans and return to work plans in place through to October.

Three-way forecasting can help businesses weigh up the risks and rewards involved in reopening, providing a valuable decision-making tool. 

By integrating a company’s forecast profit and loss, balance sheet, and cash-flow, this technique allows businesses to understand the full impact that certain decisions may have on their business, rather than purely focusing on the cash-flow aspect.

Where it doesn’t make financial sense to reopen immediately and/or to maximise profits, restaurants and bars should consider alternative activities that could help them to prop up revenue, such as sales from takeaways, home delivery services or food boxes. 

Seeking specialist advice may be wise, for example, in building robust financial forecasts to enable businesses to make informed decisions, and from HR specialists when it comes to staffing levels.

Over the past few years, the hospitality sector has been forced to rapidly react to changes in consumer behaviour and it’s likely that the coronavirus pandemic will further accelerate this transformation. 

By taking advantage of three-way forecasting and considering their options carefully, restaurants and bars can determine when the time is right to reopen and make the most of the summer trade, protecting their financial position.

Related topics: Rebuilding the Pub Sector

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