Joris Lochy | August 18, 2021
The term "Horeca" is an abbreviation of "Hotel", "Restaurant" and "Café". It represents a very diverse sector, i.e. from star-restaurants to catering and canteens to brasseries up to small, local cafes. A small country like Belgium counted end 2017 almost 60.000 horeca-enterprises (7% of all Belgian enterprises), thus showing the importance of this sector. Furthermore with a total revenue (also end 2017) of over 15 billion EUR and more than 75.000 people employed in this sector, it remains an important economical actor for the Belgian economy.
It is undisputable that the Covid crisis has been a disaster for this sector. However, now that life gradually returns back to normal, it is likely that the trends which were already launched in the horeca sector before the crisis will be even enforced and accelerated.
With new habits come new customer needs related to the horeca. Think about the company canteens. With more people working from home, this sector will have to reinvent itself. Most likely they will start offering also prepared meals directly to consumers via supermarkets and other distribution channels. Obviously, this will force other actors in this market to reinvent themselves, thus launching a chain reaction.
Even more pronounced is the impact of take-away and delivery. While a large group of the population was still a bit hesitant to consume take-away, the Covid-confinements also forced this group to start exploring these new services. At the same time, restaurants which were not offering take-away services before were also forced to adapt. As a result, take-away and meal delivery services have known an exponential boost and this trend, although it will know a small set back when the pandemic is fully over, is here to stay.
Unfortunately the horeca sector was already a sector with a lot of difficulties before the crisis. The sector historically copes with one of the highest percentages of businesses bankruptcies , especially when looking at the first 5 years following the establishment of the business. This is often caused by the fact that many people consider the horeca as an easy way to entrepreneurship, founding their businesses with a poor of even no business plan. At the same time there is of course the strong dependency on labor. As this sector is very labor intensive, margins are low due to the high labor costs. Furthermore with hard work and irregular and long working hours, horeca businesses have more and more difficulties to find motivated and qualified personnel. Additionally the sector, being so fragmented, often lacks professionalism, not really for the horeca-activity (i.e. the preparation and serving of food and drinks) itself, but rather for the supporting activities like financial management, supply chain management (like good stock management), procurement… This makes that many restaurants have a poor view on the breakdown of their costs and revenues, thus losing a lot of money in inefficiencies like expired stocks due to too large ordering, certain dishes which are not sold at the right price, employees being paid too much expensive overhours, bad negotiations with suppliers…
Apart from the above very obvious trends, there are still a lot of other trends. These map perfectly with the 8 universal trends, I described in my earlier blog "Universal trends - Common over all industries?" - https://bankloch.blogspot.com/2021/01/universal-trends-common-over-all.html, i.e.
Pressure on margins: margins are historically already low in the horeca sector, but are becoming even more under pressure, due to new forms of competition, like meal boxes (like HelloFresh or Foodbag), prepared meal services (like Mealhero), sharing platforms (like Thuisafgehaald or Menu Next Door), virtual restaurants (also called Dark Kitchens, i.e. restaurants without a physical location, but only serving online delivery platforms), living room and concept restaurants… This forces restaurants to work more professionally and efficiently and find a specific niche (of clientele willing to pay extra for specific product or experience). These efficiency gains can be achieved via digitalization (with regards to personnel management, cash register, stock management…) and new technologies (like 3D printers or cocktail machines like "Tenderone", "Bottletender"…), but also by being more selective on opening hours/days (especially for weekends and holidays), putting less (more specialized) choice on the menu card, making dishes less complex by investing more in the quality of the ingredients, by pushing more self-service (e.g. let the customer cut the food for the whole table, which has as a welcome benefit that it increase the customer experience).
Trustworthiness: clients must have confidence (trust) in a horeca place they are visiting. Obviously, the customers must have the feeling of being treated fairly and respectfully (e.g. via a transparent and correct pricing), but they also want to be able to trust the product they are consuming (eating or drinking). This means providing more transparency, like providing more info about each dish and more its ingredients (important for specific diets and allergies), nutritional value and origin of the product (i.e. farm-to-table).
Frictionless experience: the customer experience should be at pleasant as possible, meaning any friction should be removed where possible. This consists of frictionless ordering processes, via digital menu cards (providing details of each dish and allowing easy filtering) and direct ordering (directly to the kitchen), all the way to a frictionless checkout, consisting of digitally receiving and paying the bill. A multitude of solutions are available here, like full ERP solutions for horeca businesses (like Apicbase, Horeko, Square for restaurants, HorecaMakers, Growzer…), digital menu card solutions (like Kimeru, Digital Wizards, Futuresto, EasyButler…), ordering terminals and apps (like Futuresto, EasyButler, MyOrder, QCard, PayMyTable…), cash registers (like Lightspeed, RestoMax, Gastrofix, HorecaMakers…).
Personalization: the most important trend for the horeca is obviously the personalization. This results in products and services adapted to the specific needs and desires of every customer. Additionally horeca businesses are being converted more and more into "Experience" places (i.e. surprise your customers, by selling them moments and letting them escape from the stress of day-to-day life), i.e. ensure to give the customer a unique, unforgettable experience, not only via the food and service, but also via the texture and color of the dishes, the building, the interior design…
More in detail this trend means:
New types of restaurants, like living room restaurants (enforcing a more personal touch and home feeling), concept restaurants, food markets, pop-up restaurants…
Accommodating for different food and drink choices. Already around 20-25% of people have a specific food choice, meaning restaurants have to accomodate for people wanting to eat vegetarian, vegan, lactose-free, gluten-free, halal, kosher, paleo, biological… Additionally people want alternatives for the traditional wine-card like different types of water, mocktails, non-alcoholic wine, champagne and spirits (e.g. Seedlip), luxury soft drinks (e.g. Crodino, Finley, Pinky Rose, Fentimans & Fritz-Kola) or special types of tea to drink the meal.
Horeca places should become places to socialize, i.e. provide a home-feeling (i.e. a feeling of comfort, stability, trust, intimacy, warmth…), engage socializing between guests via guest tables, street food or sharing plates…
Allow customers to compose their dishes themselves, cfr. Subway, Hawaiian Poke Bowl…
Democratization: by working more efficiently, more automation and digitalization, it becomes possible to offer certain services and products in higher volumes and at lower costs and thus at a lower pricing. This means certain horeca products, which were before only available to the happy-few cannot be offered to a larger segment of the population. A good example are star-restaurants offering a standardized (simpler) version of their dishes via a take-out or catering service.
Authenticity: restaurants are focusing more and more on providing an authentic experience, e.g. by transforming old factories or churches to restaurants, integrating open kitchens where guests can see the cooks preparing the dishes, chefs finishing plates at the customer’s table… Additionally there is a trend towards pure, simple and honest, meaning natural, artisanal and/or high-quality products (ingredients), which are prepared and served in a simple way. A good example of this are also the traditional dishes in a more luxury fashion, e.g. new types of éclairs (Chez Claire), croques (RemorK), hamburgers (Ellis Gourmet burger), meat balls (Balls & Glory)…
ESG (Environment, Social and Corporate Governance): with customers being more sensitive about the environment and society, horeca places need to accommodate to this customer desire. Restaurants are working more and more with local, healthy (e.g. use of superfoods, use of less salt and fat…), biological/organic and Fairtrade products, but also with products with a lower ecological footprint, like e.g. replacing meat with insects, soya-based meat replacements or vegetables. Additionally horeca players need to avoid waste, via a no-waste kitchen concept (via e.g. smaller portions, trash cooking, creative usage of waste…), via anti-food-waste platforms (like Too Good To Go) and by reducing/avoiding packaging (e.g. avoiding plastic straws, cups…).
Partnerships: as many businesses, a horeca business is more and more integrated in a concept, like incorporated in a shop or combined with an experience (like a horeca place in a brewery). Additionally due to the digital revolution, horeca places need to partner more and more with online ordering and delivery services (like Deliveroo, TakeAway.com or UberEats, potentially integrated via Deliverect), social media (like Facebook and Instagram) and food review platforms (like Yelp, TripAdvisor, Zomato, Foursquare…), reservation platforms (like TheFork, Tablebooker, Resto.be…) ordering and payment apps (like Dorst.app or Yummy.app). Additionally new players are coming on the market to help horeca businesses with their typical problems, like procurement (e.g. Tippr or Horeca Direct Shop) or recruitment (e.g. Mise en Place).
It is clear that although the horeca sector is already centuries old, it is also undergoing major disruptions. In the end let us hope that all those evolutions can give us an even more enjoyable horeca experience.
Read MoreJoris Lochy | August 18, 2021
Treasury management or more generally Supply Chain Finance management is still a neglected topic at many SMEs.
While large international corporations make the investment into expensive treasury management solutions (often part of their ERP solution) and even setup their own In-House Banks, this is considerably more difficult for the mid-corp segment and even more so for the smaller segment of the SMEs. Often SMEs lack the funding, time and expertise to deploy those platforms and often those platforms lack the flexibility required by an SME.
Nonetheless in this globalized competitive market with fast moving cash, even SMEs are in need of an effective treasury management. Every SME has its own specific challenges, due to its specific payment cycles and cash reserves. Nonetheless most SMEs (estimated to about three-quarters) still do their treasury management via (complex) Excel sheets, requiring a lot of manual effort. This gap forms a big opportunity (in Europe SMEs account for more than half of all gross value added) for incumbent banks and Fintechs to offer easy and user-friendly tooling for this. In recent years, more and more Fintech players try indeed to provide an answer to this gap, often via SaaS platforms, which connect easily to the customer’s banks (via Open Banking APIs) and for which the setup cost is limited.
The gains for an SME in optimizing their treasury processes can be very substantial. A good treasury management can reduce costs in multiple ways:
Reduce working capital by reducing the time to collect money from customers, by reducing inventory and/or by paying suppliers only at the payment due dates.
Reduce unpaid invoices by a better follow-up and good debt collection techniques
Reduce penalties (such as administration costs or late-payment interests) due to late payments and indirectly also improve the relationship with suppliers.
Reduce effort (resource workload) for financial management, like the follow-up of payments of incoming and outgoing invoices, automated generation of payment instructions for incoming invoices…
Optimized cash management allowing to keep on your current account only the required cash amount to run your business, thus allowing to invest excess cash, but also to avoid requiring short-term debt when too much cash is invested (and blocked in medium- to long-term assets)
Reduce foreign currency costs and exposure risks by keeping the right reserves of foreign currencies, applying hedging (like swaps or options) techniques, correctly taking forex rate fluctuations into account in future cash flow predictions…
Reduce transaction commissions for bank transactions, by selecting the right banking products, but also by using the right banking partner(s) (especially for international foreign currency payments big price differences exist between different banking parties)
Reduce cost of fraud by improving control, transparency and accountability via a pro-active, automated monitoring of all cash flows, allowing to detect anomalies as soon as possible
…
This can be achieved in multiple ways:
Setup and optimize the processes and tooling with the help of specialized services companies (like e.g. the offering of BelPay)
Setup or acquire software solutions (often in the form of SaaS offerings, i.e. Treasury in a Box) for cash & liquidity management, like invoice generation and follow-up (including invoice and payment matching), debt collection, incoming invoice processing (including payment), cash pooling, cash forecasting/capital planning… These software tools allow a more pro-active treasury management and reduce manual effort by automating certain steps in these processes. Examples of such platforms are HighRadius, Gtreasury, CashForce, Kyriba, Nomentia, Monite, Pair Finance, AiVidens… But there are also more specialized tools, offering only a specific service, like debt collection (e.g. Virteo, recovr, Pair Finance, TrueAccord, CollectAI, CollectionHub, inDebted, Attunely…), digitalization (through OCR) of paper invoices (e.g. Tangentia, Contract.fit, Metamaze, Klippa, SimpleOCR…), expense management (e.g. Payhawk, Rydoo, Expensify, Spendesk, Pleo, Circula…), account aggregation and payment initiation (e.g. Isabel 6/Ponto)…
Capture revenue by allowing customers to pay for products or services in a way that is most efficient for them and for the SME, allowing to increase sales, but also to ensure the best possible payment ratio. This includes solutions like digital onboarding and management of Direct Debits (e.g. via Twikey or DigiTeal), including a Pay button (e.g. via Twikey or POM) in invoices which allows to pay the invoice with a pre-filled credit transfer, card payment or other payment option, integration with PSPs (like Adyen, Mollie, MultiSafePay, Ingenico, Stripe…) for online payments, digital invoicing allowing to combine invoicing and payment (e.g. PEPPOL platform or offering invoices with immediate payment option via UnifiedPost, ZoomIt or Doccle), "Buy Now, Pay Later" solutions (like Klarna or AfterPay) or new solutions like PSD2 Payment Initiation or the upcoming new scheme of SEPA Request to Pay (SRTP).
Improve integration between accountancy software (and/or accountant) and the cash management solutions and associated bank accounts. Solutions like Silverfin, TOCO, Yuki, OkiOki, Billit, Furoo, Clearfacts, Billtobox, sevDesk, Candis… can provide (a part of) a solution to this.
Usage of solutions for cash management (e.g. international cashpooling, sweep accounts…) and more general treasury management services offered by banks to their customers. These can be incumbent banks or new Fintechs, which specialize in the niche of serving SME customers. Examples are Tide, Qonto, Azlo, Arival, Fyrst…
Reducing costs of international payments and forex transactions via new Fintech offers, like XE.com, TransferWise, CurrencyTransfer.com, WorldFirst, iBanFirst, Ebury…, but also via specialized software tools, like Kantox, FiREapps, Money Mover, Acumatica…
Get cheaper financing via specialized credit institutions and banks (e.g. OakNorth, CapitalBox…), by issuing commercial paper (short-term paper) or long-term debt, via crowdfunding and peer-to-peer lending (e.g. Funding Circle, Auxmoney, LendingCrowd, Iwoca, Look&Fin, Crowdcube…), via Credit Lombard loans or inventory-based loans (e.g. Finventory) or via invoice factoring (e.g. Edebex, Previse, Optimum Finance, GapCap, BlueVine, BillFront, Crowdz…). There are also more and more marketplaces and comparators assisting SMEs to find the best financing option, e.g. Funding Options, BusinessComparison, Crowdz…
Improve risk management (like currency risk, interest-rate risk, market risk, credit risk, counterparty risk…) via trade finance, like bank guarantees (cfr. Ebury), via better authorization and fraud detection mechanisms (detecting patterns and anomalies) or by better assessing counterparty risk (e.g. DueDil, InsideView, PitchBook…)
Apply tax optimizations, by optimizing for different tax regimes worldwide and also optimizing for tax deductions (like e.g. generate revenue on entities which have collected losses in the past)
Clearly the Fintech market for SMEs is in full evolution, but still quite immature. As a result dozens of offers exist, making it very difficult for SMEs (which was one of the reasons in the first place they work with Excel) to select the best and right offering(s) for their company. As such there is a big market for consultancy and other services firms, specialized in helping SMEs to improve their treasury management processes.
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