Rolls of honour
19 November 2012 | By James Swift
When Jonathan Jowett took the GC job at Greggs he expected a bit of stability. He soon found himself organising anti-pasty tax demonstrations
If stability in the face of recession is high on your list of requirements from a prospective employer, you could do a lot worse than get a job at Greggs. Despite profit falling 4.6 per cent to £16.5m in the first half of 2012, the bakery has been a big downturn success story, and now has more UK outlets than McDonald’s. Austerity has stoked Britain’s hunger for comfort food, it seems.
Stability was certainly at the forefront of Jonathan Jowett’s mind when he was approached by Greggs in 2010 to fill the post of company secretary and general counsel, having not long ended a four-year stint as legal director at car parts maker Wagon by dealing with the fallout from its collapse.
“It was a highly leveraged company with customers in the auto industry,” says Jowett. “The administrators said Wagon had run into the perfect storm.”
Following the administration Jowett landed a temporary assignment as general counsel at ready-meals supplier Bakkavor. Jowett had just been offered the chance to stay on at the company permanently when he got the call from Greggs. He says it was at once the easiest and hardest career decision that he has ever had to make.
On one hand Jowett was looking forward to getting stuck-in full-time at the company he was just getting to know. On the other, Greggs was based near his home in the North East, was debt-free, growing organically and already an instantly recognisable consumer brand on the high street. Having not long before watched a company he worked for go into administration and witnessed the impact this had on people’s lives, Greggs’ proposition was too good to pass up.
In his short tenure at Greggs Jowett has had to grapple with a number of innovative commercial agreements as the bakery explores new channels to market. Earlier this year it signed its first franchise deal with Moto Hospitality to introduce shops at motorway service stations, following a successful trial scheme in the North West, bringing in Field Fisher Waterhouse to help with the documents.
Jowett was also in charge when Greggs began selling its products wholesale to supermarket Iceland, helped arrange a 12-week trial in September with the Navy, Army and Air Force Institutes to supply Greggs’ goods to members of the armed forces stationed in Germany. Jowett says that if the trial is successful, Greggs will look at rolling out a similar initiative to other countries where soldiers are based.
Not that Jowett does it all by himself. Given the limited legal resources at Greggs - Jowett was only joined by another lawyer earlier this year - much of the company’s work is still outsourced, with Squire Sanders, Eversheds and Maclay Murray & Spens on its roster of external counsel.
People and places
“One of our biggest spends is commercial property - we open 120 shops a year, refit 150 and close a number as well,” says Jowett. “The other is employment law. We’ve got 200,000 employees so we need a lot of advice.”
Jowett became Greggs’ first-ever general counsel when he joined and was consequently given a wide brief. In addition to being company secretary - which until then had been a role outsourced to a corporate partner at a local law firm - he was put in charge of internal communications, corporate social responsibility, risk management, pensions and the Greggs Foundation, a charity that operates as a separate trustee.
While it was the promise of stability that attracted Jowett to Greggs, his time at the company has been anything but dull. Jowett’s initial job description almost certainly did not include organising protests and lobbying the Treasury, but that is what he had to do in the wake of chancellor George Osborne’s ‘pasty tax’.
The furore began with the Budget, which stated that all food - excluding bread - heated to “above air-ambient temperature” and meant to be eaten in or near the shop or restaurant would be subject to 20 per cent VAT. This would mean a price hike for Greggs and the news reportedly wiped millions off its share price.
“I spent most of my time dealing with that for nearly three months,” says Jowett. “And it wasn’t just the legal aspects of the change we had to deal with. We had to prepare a formal response to HMRC’s proposals, get people to look at what the impact would be if the change went ahead, and have a team looking at how we could persuade the Government it wasn’t a good idea.”
Greggs decided the best course would be to influence rather than litigate, says Jowett. So, with the backing of The Sun newspaper, it delivered a petition containing almost 500,000 signatures to Downing Street, while Jowett and others from Greggs met the Exchequer Secretary to the Treasury David Gauke in late March.
Greggs also considered staging a protest march from either Baker Street or Pudding Lane - for obvious reasons - but following advice from the police decided on a static protest instead.
In any event, the lobbying worked and the Government revised its proposal in a way that would not affect Greggs’ pricing, leading to an almost immediate 6 per cent share price boost for the company.
Cue celebratory jumbo sausage rolls all round.
Jonathan Jowett, Greggs
Position: Company secretary and general counsel
Reporting to: Chief executive
Company turnover: £701m
Total number of employees: 20,000
Total legal capacity: Two
Main external law firms: Eversheds, Muckle
Total annual legal spend: Not disclosed
Anna Lindsay Mortenson, corporate counsel, Subway Realty
Subway life is fast-paced and varied. I work at all levels of the Subway franchise system, handling legal matters for the UK and Irish markets, the second biggest Subway store market globally. There are 1,571 stores – 55 new in 2012 and 70 more projected for 2013.
2012 has seen a challenge to VAT legislation brought by a franchisee, in Sub One Ltd v HMRC. The case focuses on the discrimination between competitor traders regarding the VAT treatment of Subway’s toasted sandwiches. The outcome will affect franchisees and other operators who have suffered anti-competitive effects of ambiguous rules on hot food takeaways. The Upper Tier Tribunal dismissed Sub One’s appeal. Permission to appeal is being sought.
New laws on hot food takeaways came in on 1 October. As a result of an historic artefact, pasties and baked products that are served hot after cooking benefit from an exception to the rule that all hot food to take away is subject to the standard rate of VAT. This places purveyors of pasties, pies and sausage rolls at a competitive advantage compared with those who sell healthier products such as toasted sandwiches. Also, both products meet the same needs of consumers - who are unlikely to differentiate between them - from a tax perspective.
Subway franchisees are often small, family-run businesses employing a total of 21,000 people in the UK and Ireland.
Given the pressures felt by franchisees, due in part to the VAT situation, these jobs and future jobs are at risk.