Beyond Eat Out to Help Out – what next for restaurants?

By James McAllister and Stefan Chomka

- Last updated on GMT

Beyond Eat Out to Help Out – what next for restaurants hospitality food discounts

Related tags: Eatouttohelpout, Restaurant, Public house, Gastropub, Casual dining, Azzurri, Hawksmoor, JKS Restaurants

The Government scheme undoubtedly put bums on seats in August, but it has also encouraged an unwelcome return to discounting. So where does this leave the sector now?

For an insight into just how effective the Government’s Eat Out to Help Out (EOHO) scheme has been for struggling restaurateurs, look no further than a tweet on 18 August from restaurant director at Rockfish David Strauss.

“EOTHO. Even busier again this week with worse weather. A staggering success really. Building up to a massive last day, bank holiday Monday (31 August). One site has 241 booked on Monday and 5 booked on Tuesday,” he posted.

The site Strauss was referring to was Rockfish in Exeter. While he says it is not unusual for the restaurant to be fully booked on that particular bank holiday, the end of August typically marking the end of the busy holiday season for many West Country hospitality businesses, what was unusual was how far in advance it had been filled. Just as striking was the lack of covers booked for the following day.

Rockfish is by no means alone in this situation. Restaurants the length and breadth of the country have reported a huge spike in sales on Mondays to Wednesdays (the three days the scheme ran each week) and are now nervously eyeing their booking data for September when, for many, reservations will not so much take a tumble as fall down dead.

After the success of EOHO in August, where does this leave the restaurant industry in September and indeed the rest of the year?

 

Hawksmoor-to-launch-Hawksmoor-at-Home-as-its-thoughts-turn-to-reopening_wrbm_large
Hawksmoor has benefited from the EOHO scheme

A runaway success

While the industry may be divided on what steps to take next, one thing on which they can all agree is the unprecedented impact of EOHO. The scheme, which offered eat-in customers at participating hospitality venues a 50% discount up to £10 per person on all food and non-alcoholic drinks between Mondays and Wednesdays throughout August, was used to claim on more than 64 million meals in its first three weeks, with some 84,000 individual restaurants registered to take part in the scheme. Moreover, final figures are almost guaranteed to exceed the 100 million meal mark.

Designed to get people back into restaurants and feeling confident about eating out, EOHO has more than met its brief. Despite the lingering threat of the Coronavirus, the number of customers at UK restaurants were consistently higher between Mondays and Wednesdays this August compared to last, according to data provided by OpenTable. In the third week of the scheme (17-19 August), restaurant covers were up 61% on last year; in the second week (10-12 August) they were up 41%; and during the first week (3-5 August), they rose by 12%.

Data from CGA Peach supports this, with around 40% of adults using EOHO to make their first return to restaurants since lockdown. “It’s pretty clear it’s been successful,” says CGA Peach’s Peter Martin. “Hard sales EPoS data shows clearly it has been successful,” he says. “It’s got people out of their houses and it’s reassured them.”

Restaurateurs are equally fulsome in their praise of the scheme. “Eat Out to Help Out has been absolutely huge for us,” says Will Beckett, co-founder of steakhouse group Hawksmoor, which operates eight UK restaurants, many of them in London. “It’s been crazy, and we couldn’t have been any busier.”

In conjunction with the scheme, Hawksmoor put on its own offer between Mondays and Wednesdays that allowed diners to get a 300g rump steak with chips and a sauce for £20, which was subsequently reduced to £10 with the discount. Across the six restaurants it had reopened, the group received more than 15,000 bookings as a result of the scheme.

“We booked out everything we could across every restaurant on those days,” continues Beckett. “We even opted to open for lunch on the bank holiday because of the demand, and even the response there was massive, with bookings selling out within in a few hours.”

Gemma Simmonite, owner of Gastrono-me restaurant in Bury St Edmunds, reports a similar experience, describing EOHO as having had a “profound” effect on her business. “On most Mondays to Wednesdays through August we’ve seen a 350% increase year on year,” she says.

“I don’t think any of us imagined how successful the scheme would be,” says Karan Gokani, director of Sri Lankan and South Indian restaurant group Hoppers. “It’s reinforced to people that they can go out and feel safe; and it’s been a great moral booster for operators.”

Impact beyond August

Yet despite its success in putting bums on seats in August, the wider impact of the Government scheme is moot. The industry has largely fallen into two camps: those that believe it has done its job in encouraging people out into restaurants, kickstarting an eating out revival (albeit a tentative one); and those that believe that once the discount stops dining rooms up and down the country will once again fall silent.

Martin is very much in the former camp, citing CGA Peach research that found that people intend to continue to eat out beyond August. “[The industry] has a successful base on which to build. If it’s got them out, then they are reassured,” he says.

Jackson Boxer, chef-patron at London restaurants Brunswick House and Orasay, also believes this to be true. In a post on Brunswick House’s Instagram feed he wrote: “Nearly everyone in this room was visiting for the first time. Many of them were young, and mostly not experienced restaurant goers. All of them so full of warmth and joy. The greatest thing about the discount was the way it opened up our house to people who hadn’t previously, for whatever reason, felt it was for them. They have now discovered that it is. All of them have promised to return.”

Martin is aware of the disconnect between people’s intentions and actions and says this is when the industry needs to build on the momentum the scheme has created. “The big challenge for the industry now is to get their marketing in gear,” he says. “It’s no longer about discounting, it needs to be a bit more creative. We should be seeing marketing departments for both independent restaurants and across the chains seeing how they can be creative and continue to reassure people and tempt them out, and not just on price.”

Rockfish’s Strauss shares this sentiment. “The great thing about EOHO was that it was such an imaginative idea. It really is only a tenner off, so to carry on doing it seems like such a lack of imagination. It’s been great, but let’s see what the next thing is and then react to that.”

 

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The Coconut Tree was one of the first companies to announce an extension to the discount

Carrying on a discount

The results of a recent poll conducted by Lumina Intelligence suggest that the industry does not want to return to the days of discounts. Of the 234 business leaders of independent restaurants, pubs and quick-serve operations questioned by the weekly poll, just 26% say they intend to offer some sort of early week discount into September and beyond.

That said, the chorus of independent restaurants and groups that have announced in recent days that they will continue in a similar vein as EOHO into September and in some cases even beyond, but this time footing the discount themselves, is getting louder.

One of the first to make the move was Sri Lankan restaurant group The Coconut Tree, which throughout September is offering a 50% discount on all food and non-alcoholic drinks from Monday to Wednesday. The offer will then continue into October with the discount applying on food and soft drinks at lunchtimes only, although brand director Anna Garrod has not ruled out carrying it on further.

According to Garrod, EOHO was the catalyst for the group to reopen its restaurants, with it offering the discount even on alcohol during August. “It was about making people aware of Sri Lankan food. It really worked for us and that is behind the thinking of us bringing it forward for another month.”

"Economically it’s better without it. But if you asked me
whether it’s better to keep your doors shut or
to offer something as an incentive,
it obvious to do this for sure”

Although Garrod admits the approach won’t suit all businesses, she says that a continued discounted offer will build on the momentum of getting more people to try The Coconut Tree for the first time.

“For us it’s a realisation thing. Our menu is affordable. People can’t really eat more than £20 a head, so it works. We will continue to do this as an education piece. I don’t like discounting wars, it’s a war that can’t be won, but for this point in time and maybe across our new sites it’s an opportunity to get people to notice a new cuisine that they wouldn’t notice normally.

“I don’t think people are coming because of discount - it won’t damage us over time.”

In terms of extending the offer beyond October, Garrod is also open minded. “Never say never. The lunch thing might continue if it was bringing us an enormous amount of new business. In this particular place we’re in it’s very difficult to plan, forecasting is near on impossible. You have to live in the moment. It could serve you very well if you think positively about an outcome and give yourself enough time to talk with your customers. That for us is the key to moving forward.”

David Carter, founder of London barbecue restaurant Smokestak, shares a similar view to Garrod’s. Smokestak is offering a discounted offer during September, which Carter also hopes will retain the momentum of EOHO.

“We’re giving it a shot. No one knows for sure how to run a business well in the middle of a pandemic,” he says. “We’ve been so oversubscribed as a result of the scheme that it just made sense to run with the momentum into the next month. It felt obvious, really.”

Smokestak isn’t mirroring EOHO but rather Carter has made changes to offer to ensure it incentives price-sensitive customers. “We looked at the offer and worked out how to modify it in order to make it work in September. Had we not we may have had to consider closing for lunchtimes between Mondays and Wednesdays. Obviously, economically it’s better without it. But if you asked me whether it’s better to keep your doors shut or to offer something as an incentive, it obvious to do this for sure.”

Spanish restaurant group Brindisa also believes continuing the discount to be the right approach and is again open for it to continue beyond September if it is a success. “Like any promotional offer we shall assess it on week to week basis and evaluate the viability of it throughout the month of September and decide if we want to continue into October,” says Vishal Vakani, Brindisa’s operations director.

“If the promotion has been fruitful there is every chance we may extend it into October and perhaps beyond. Ultimately, it’s about getting people back out and about and feeling confident, whatever day of the week it is and keeping our staff on their toes and avoiding dull services. It’s good for the customers, the staff and our business.”

Martin Williams, CEO of the group behind steak restaurants M and Gaucho, is another advocate of continuing the discount beyond August having reported that around 40,000 diners will have enjoyed the discount across its portfolio. Moreover, Williams is actively encouraging other restaurants to follow suit.

“We are equally part of the solution and now it’s our turn to give back, both by rewarding previous guests’ loyalty and thanking new diners. We encourage those restaurants that are able to do the same. Let’s all play our part in getting the hospitality industry back on track and being part of the solution.”

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Azzurri has warned against continuing to offer discounts beyond EOHO

The perils of discounting

Other restaurateurs, however, are unconvinced, with some fearing the industry could be sleepwalking back into a period of deep discounting, a tactic that previously undermined the sector and led to a perilous squeezing of restaurant margins.

When questioned by Lumina Intelligence as to whether offering discounts could be damaging for their business going forward, operators are split, with 48% fearing it might and 52% believing it would not.

“The way we’re thinking is if you look back to the 2008 crisis, a lot of restaurants got themselves hooked on vouchers, and the casual dining industry certainly spent years trying to work out how to wean themselves off of vouchers,” says Beckett, who insists Hawksmoor will not be self funding any form of discount in September.

“Business should be careful when they consider extending the discount. We try to be good value, anyway, and we’re passing on the VAT cut on our express menu, which will offer an incentive to some. But there’s something I don’t really like about discounting as a matter of course, as I wonder what it says about the value of the food you offer.”

Stosie Madi, chef-patron at award winning gastropub Parkers Arms, also doesn’t believe in extending the scheme, despite it helping bring it valuable custom to her rural venue. “When this came on, we all thought this was mainly to get more traffic into the city centres, but what it’s done is been hugely successful in rural, coastal and smaller suburban areas,” she says.

“Taking £10 off a bill is one thing; taking £40 off a party of four is a different ballgame, and I don’t know if people have considered this. For me, to shave off £40 from a four-cover meal is a harsh cut, and were it not subsidised it wouldn’t be worth it. At high volume it could be lucrative, but I don’t know how it would work in any other place.”

CGA’s Martin is another who doesn’t believe there is much to gain for returning to a discount model, pointing out that many casual dining groups still bear the scars from over a decade ago when the practice was rife.

“Discounts are an easy thing to start but a very difficult thing to stop,” he warns. “These are tough times to run a business, there are still people who are yet to come out and those who haven’t got the money, and parts of the country are not open because offices aren’t open, but this is where the creativity and the resolve comes in. Tenacity is the thing that the industry has to show.”

He adds he isn’t surprised at the discounting route some are taking. “People have got to take their own view on this. They understand their margins and it could work for them. But people are going to want an experience and quality food, the fundamentals of hospitality haven’t changed. You’ve got to give them something special, not just cheap food, or you’re just competing with the supermarkets.”

Gastrono-me’s Simmonite believes that one potentially damaging outcome of EOHO is that is has undermined the true cost of food for customers, which could be difficult to readdress at a time when money is tight for many.

“Restaurants have to have a chance to find their equilibrium; to stand on their own two feet,” she says. “Discounting is a hard habit to break customers from, we have to help them appreciate the real price of a meal out, and to not only be turned on by cheap fixes. Customers don’t get to see how much restaurants are claiming back, they are unconcerned and understandably unaware. But those costs are very high and equally unsustainable as is EOTHO for the government.”

“Discounts are an easy thing to start
but a very difficult thing to stop”

For Azzurri CEO Steve Holmes, the figures simply just don’t add up for a business to start funding any type of discount, which is why the brands in his group, including ASK Italian and Zizzi, are not offering an EOHO-type discount beyond August. Holmes believes the scheme fulfilled its brief of regaining diner confidence, and says Azzurri has experienced good trading on Thursdays through to Saturdays at its restaurants as a result.

“I’m thinking of it less of a 50% discount offered by the Government and more of a one-off incentive, with the deeper message that it’s safe to go out into the wider society and engage in social activities in a distant and safe way. I don’t think it’s driven out price sensitive discount hunters like transitionally discounts have done.”

“With that logic, it doesn’t stack up to continue to offer the discount through September, October and November.”

Holmes is all too aware of the problems caused by deep discounting in the sector in the past. “It’s very dangerous if people start to offer 50%-off because the margins don’t work. If you reach September and people are at work and the discount doesn’t trigger the same volumes as August and you offer 50% off you’ve got an unprofitable business. No restaurant can make it work with 50% off every single cover if it’s funded by themselves.”

Just as Gaucho’s Williams has called on other businesses to extend the discount, others have publicly requested they don’t. Posting on Twitter, Gary Usher, founder of restaurant Group Elite Bistros wrote: “Don’t extend #EatOutToHelpOut. It has helped hospitality massively but the longer it goes on the longer people lose sight of what food really costs.”

 

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Hopper is taking a cautious approach to discounting

An uncertain future

So where does this leave the sector? While it might be going too far to say that battle lines are being drawn, there are clear opposing opinions about what businesses should do next, with fears that the actions of some of the bigger brands in continuing discounts could drag smaller businesses into a price war that many couldn’t have afforded to fight even in the pre-Covid days.

Carter, for one, believes that, when the time is right, he will be able to wean his customers off discounts without much issue.

“We still have people coming to eat from the a la carte; we’re still doing a steady trade on the other days, particularly on Saturdays. I think it’ll encourage people to carry on taking advantage of it while it’s available, but that they’ll still come back afterwards. Maybe not at the same volume but still steadily.

“It’s just something to bring us one step closer to moving into the new normality. I don’t think it’ll stop people wanting to eat out. It’s helping get people out. The £10 is of course a huge plus, but it is not a deciding factor.”

"We should be leveraging the fact that customers
have missed restaurants and want to come
out and visit them more"

Beckett, on the other hand, says he is using August as the foundation to build on Hawksmoor’s offer beyond price. “We’re going to double-down on service and quality, what we do best,” he says. “We think we can make it work anyway, and we have a platform we can work from.”

While he admits that in comparison with 13 days of EOHO, the subsequent Monday to Wednesdays in September are certainly quieter, they remain in line with bookings for September the previous year.

Others believe a more targeted type of discount would be a good compromise, with Strauss suggesting operators look to do it on just one day a week.

Gokani, meanwhile, says that Hoppers will be bringing in discounted menu offers to help drive sales during the quieter periods in the autumn and winter months, but he rules out extending the scheme in its current form.

“There’s an element of making sure you don’t over-react,” he says. “We don’t want to do something just because we see others doing it, we’d rather wait to have more of a handle on what the landscape is like as we move into September. And I’m unconvinced we’d be able to, as an individual restaurant, come close to achieving the same number of covers as we did under the nationwide scheme.”

For Holmes and Martin, opportunities that have arisen since the lifting of lockdown might present the best solution for moving forward. According to Martin, the way the majority of customers have had to make bookings during lockdown, either online or through apps, can be capitalised on.

“Businesses have probably got more information on their customers than ever before to be able to tailor promotions more specifically to them. That’s how we are thinking about it. How do people use that data to communicate better and build more loyalty with their customer base?”

Holmes shares this mindset and describes the lifting of lockdown as an opportunity to start over. In January, the business moved away from the Meerkat Meals two-for-one offer and Holmes says this will not change because of Coronavirus.

“There’s still going to be a market for promotions, either through value-add offers, menu innovations, set menus - but that’s different to a deep discount. Sophisticated promotions are what we should be thinking about and they are the direction we are likely to take. We should be leveraging the fact that customers have missed restaurants and want to come out and visit them more rather than looking at it from a price perspective.”

“There’s an opportunity, because more people have been booking online rather than walk ins, and restaurants have probably got a closer relationship with their customers than they have ever had. Don’t waste it. Understand what they want. Communicate with them. That is going to be really important.”

 

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