The updated use class regime creates new opportunities for coffee businesses
Westminster recently introduced changes to planning with the express intent of permitting a greater range of commerical propositions on the High Street. It creates new opportunities for coffee businesses.
The new use class regime opens the door to revising existing coffee concepts and creating new propositions, including enhancing food menus, blending coffee shops with offices and the creation of urban café-roasteries. Plus, the new classifications can help reduce take-out packaging use, reducing both waste and carbon footprints.
Until the regime changed in September 2020, the majority of coffee shops operated in A1 use class premises. This use class was conceived as retail spaces and was distinct from the A3 use class, which was designated for cafés and restaurants.
The general constraints on coffee shops operating in A1 sites were that the majority of sales were to be consumed off site and that food couldn’t be cooked to order.
The new E use class does away with this distinction by creating a new broader commerical, business and service category that encompasses retail, dining, office space at ground level and some industrial uses.
It’s a positive change by the Government that creates new possibilities for coffee entrepreneurs.
In practice, the E use class is the predominate premises use class allocated to the majority of the commercial, ground-level spaces on high streets, incorporating the former use classes of A1 (shops), A2 (professional services), and A3 (cafés and restaurants) plus B1 (various industrial uses), D1 (clinics, health centres and creches) and D2 (gyms and indoor recreation).
New coffee concepts
United Baristas see significant changes coming to coffee concepts for three reasons.
Greater opportunity to meet consumer requirements
When specialty coffee shops first opened in the UK during the 2000s, they were designed to nudge customers towards takeout to be compliant with planning. This has contributed to the UK’s strong take-out coffee-culture – and the resultant levels of takeout packaging.
The new regime allows coffee proprietors to be more responsive to consumer requirements. As we explained in 2018 as part of our response to the proposed latte levy, ‘The use class requirements determine that entrepreneurs and operators develop concepts which are designed for the majority of their sales to be consumed off site.’
We anticipate some existing operations to shift towards increased on-site consumption as many people have both the need and desire to use coffee shops to meet, relax and converse.
And, more excitingly, we expect a new generation of coffee shop layouts and workflows to create on-site experiences. For example, table service can be reimagined, counters could be reduced in size, and ordering and payment processes can be re-designed. It’s an exciting time to be a coffee entrepreneur.
An Increased food focus
Secondly, menus can expand. Coffee shop menus have been constrained by the requirement for food to be pre-prepared. In practice, this has led to coffee shops offering a similar range of baked goods and pre-prepared sandwiches.
The breadth of coffee shop menus has waxed and waned in recent times. Around five years ago proprietors expanded menus to the limits of operational capacity and planning constraints in an attempt to maximise revenue. As this largely proved difficult to deliver profitably, many food ranges were subsequently trimmed and even virtually eliminated. Then, during the pandemic, many businesses expanded ranges again, this time primarily with grocery items. And now many establishments are simplifying menus in response to staff shortages.
Each of these phases has identified options for greater profitability and we now anticipate fragmentation amongst coffee shop formats under the new use class regime to explore these niches.
Using the definitions established in our recent article One Size Doesn’t Fit All on segmenting retail coffee businesses, we now anticipate some ‘coffee shops’ to become more espresso-bar-like in their proposition while others will extend cooked food menus, essentially becoming cafés.
For example, it’s now possible to reheat and cook food to order. Expect new businesses to take advantage of these possibilities and to design counters, workflows and product ranges that incorporate food categories such as salads and quiches.
Operators are beginning to take note. As Matt Bushnell, director of south London restaurant business Levan notes, “We were able to open our all-day, bistro concept Larry’s because it is adjacent to our main restaurant in Peckham. The planning changes make it easier for us to consider opening future standalone sites elsewhere in London”. At just 55 square meters, Larry’s is smaller than many coffee shops but it has a full, open kitchen serving breakfast, lunch and dinner. It’s an example of what is now more widely possible in an E use class premises.
Entirely new concepts are now possible. Coffee entrepreneurs can now more easily create fusion or hybrid concepts. Some ideas are straightforward and have already been partially explored, such as offering desk or meeting space alongside coffee. Given changes to patterns of work stemming from the coronavirus pandemic, continued development of even more flexible and casual work spaces seems likely.
All sorts of new concepts can now be explored. For example, childcare and coffee now falls in the same use class, so one could conceivably open a crèche by-the-hour-cum-café business. And, from our coffee-loving perspective, an exciting option is the creation of small, micro-roasteries in coffee shops. As Sam Mason, owner of Association Coffee notes, “the possibility of adding roasting facilities in-store provide the potential to open up profit margins and gives customers greater like of sight on green coffee – something specialty coffee is renown for.”
Many more possibilities exist and we look forward to seeing what the coffee community creates.
With old habits upended during covid and new trends being established, both landlords and consumers are open to trying new concepts. The regulatory environment is also currently more flexible. “The planning changes signal a much more permissive approach to new concepts from central government. There’s currently a window-of-opportunity to push the possibilities as far as possible before the use class boundaries are more firmly identified by local authorities”, says Rob Fay of central London commercial property agents Shackleton.
Constraints on concepts
There are still, of course, various practical and legal constraints. The most relevant are the challenges of obtaining an alcohol license and the difficulties installing kitchen extraction.
Comprehensive kitchen propositions require good extraction and finding routes that are compliant and meet the satisfaction of overhead tenants and title owners can be tricky. Clearly, the forthcoming generation of buildings are going to have more options in this regard than the pre-existing building stock. However, for many coffee businesses that do not require full kitchen facilities, it is going to be interesting to see both how far food menus can be developed with current extraction requirement.
The use class regime in Scotland, Wales and Northern Ireland remains in place for the time being, although consultations are in the pipeline. In response to our questions a Scottish Government spokesperson said, “We are carrying out a comprehensive review of permitted development rights in Scotland. This is being taken forward in phases, with each phase focusing on particular development types.”
They noted that Phase 1 measures were introduced last year and that “Phase 2 of the review will look at measures to support the resilience and recovery of Scotland’s high streets and centres – including potential amendments to the use classes order – and a consultation paper will be published in the first quarter of 2022-23.”
Coffee businesses would do well to engage in the respective consultations with the devolved administrations to explain the potential commerical and environmental benefits of revising the use class regime.
The new use class regime is now more similar to the well-established coffee markets of the North America’s and the Antipodes and well as much of Europe.
Visitors from these regions have often wondered at the United Kingdom’s peculiar coffee shops and contemplated opening, what is for them, more familiar coffee formats. UK proprietors can now take more direct inspiration from these markets and localise international trends and concepts such as cafés, bistros and canteens.
Local operators should also be mindful that the changes also make it more likely that foreign operators will bring their concepts to the English market.
Greater environmental opportunities
Finally, the creation of the E use class has potential to do more environmental good than the Latte Levy ever could have achieved. An uplift towards two-thirds of customers drinking coffee in the premises from porcelain cups would be better for the environment and have a much greater reduction in carbon emissions than BYO cup programmes.
There are even greater environmental benefits across food retail businesses. Establishments such as Pret, Itsuu and the high street coffee shops are no longer compelled to be takeout focused. If they fail to move quickly enough to redevelop their propositions we anticipate new competitors seeking to gain market share by tapping this consumer demand. And Greggs, who has been at the forefront of pushing what has been possible inside an A1 use class site, can now establish a diversified bakery business.
An opportunity for coffee ☕️
The planning changes present a once in a decade opportunity to reimagine coffee businesses, to identify consumers’ preferences and to build stronger, more viable businesses. We’re pleased for the change and look forward to seeing what the coffee community does next.