Starbucks, JD Wetherspoon and McDonald’s have all said they will pass some or all of the cut in VAT for hospitality businesses – which has been reduced from 20% to 5% - onto their customers in a bid to encourage people back through their doors.
McDonald’s has recommended that franchisees cut prices on Big Macs, Quarter Pounders and Chicken McNuggets, reducing the price of combo meal deals by 40p and Happy Meals by 30p.
It has also suggested a 50p reduction on breakfast meal deals and 30p off McMuffins.
McDonald’s UK CEO Paul Pomroy has also said the business is keen to participate in the Eat Out to Help Out scheme as soon as it reopens for dine-in. At present, only four of the fast food giant’s 1,350 restaurants have reopened fully.
Starbucks, meanwhile, says it will pass on the full 15% discount on coffee served in stores that are operated by the company, although those under franchise have been left to make their own decisions over pricing.
Wetherspoons has also announced price cuts on food and drink, including alcoholic drinks, even though they are not eligible for the VAT reduction.
The reduction in prices from large restaurant groups has led to concerns of an unfair playing field being created between large companies that can afford to cut prices and independent restaurants that will not be able to.
“It’s clear where all of the Chancellor’s new support measures are working best, and it’s not for SMEs and the independent sector which is so badly represented within our industry,” says Hospitality’s Union’s Jonathan Downey.
“Wetherspoons, McDonald’s, Starbucks and Pret have all announced that they are passing on the VAT savings, whilst smaller businesses are looking at holding on to the benefit in a desperate effort to keep going. This, along with all the other new measures, has completely divided our industry.”
Downey also questions the support to the independent sector that the Government’s Eat Out to Help Out discount scheme will provide, and its Job Retention Bonus designed to encourage companies to keep on furloughed workers.
“Any company that can afford to pass on the full 15% VAT reduction to the customer doesn’t need help with a £10 Mon-Wed voucher scheme and certainly shouldn’t be benefiting from a £9.4bn job retention bonus scheme for jobs that aren’t at risk. This, in particular, is an astonishing waste of taxpayer cash that is being lapped up by the large corporates and who can blame them?”
D&D London chairman Des Gunewardena says his restaurant group would be making price cuts, but that it would not be passing on the whole of the VAT reduction. He says menu prices will be reduced by 7.5% with the other 7.5% taken as an increase in margin.
“Overwhelmingly, the VAT reduction needs to be used by restaurants as we are doing, mainly to help our profitability, because we are all losing money,” says Gunewardena.