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Morning Briefing for pub, restaurant and food wervice operators

Fri 3rd Aug 2012 - PizzaExpress, Costa Coffee and July trading

Story of the day:

Peter Marks – the last part of Luminar turn-around strategy has started but regulatory environment is ridiculous: Luminar chief executive Peter Marks has reported that the company has embarked on the last phase of its strategy to restore the nightclub company’s fortunes. However, he has reported that the regulatory regime is “getting ridiculous”. Writing for Propel’s Friday Opinion, he said: “The last piece of our strategy has now commenced - the much-needed refurbishment plan. We are currently on site in York and Aberdeen and others will quickly follow. For all the best management practices, you cannot win a loyal and regular customer if you are running tired and out-of-date premises, and this was at the heart of the problem in the first place. Much trade was lost to bars and newer clubs, but it can be won back again with a good refurbishment, sensible pricing and good management. There are plenty of examples of this and many successful clubs, yet there are those that think nightclubs can’t survive in this market. I completely disagree. The latent potential within the estate is huge. We have well-located premises and with sensible investment we will transform the clubs.” Marks reported, however, that the regulatory regime is “frustrating”. “The regularity environment is getting ridiculous. I have always tried to think like a customer and put customer experience at the forefront of our thinking. Yet I am told repeatedly that we should have plastic ‘glasses’ in some of our clubs as one glass incident is one too many. This is usually driven by policy not facts! If I go plastic we end up with a poorer demographic (and usually more incidents) as better customers go to other venues or stay at home.” Luminar was acquired out of administration last December. (See Propel’s separate Friday Opinion e-mail for the full Peter Marks article.) 

Industry news:

Takings at London restaurants down by 40 per cent: Restaurants in central London have reported an average drop in takings of 40 per cent in the first week of the Games, according to a survey by the British Hospitality Association (BHA). Hotels are operating at around 83 per cent occupancy levels. The BHA said: “There is very little corporate demand and demand by leisure travellers to London, outside the Olympic Games, is very weak. It is apparent that visitors to the games are not acting like normal tourists, where visiting restaurants, attractions and shopping is a typical activity.” Market insights and consultancy firm Horizons has predicted that the Olympics will reduce overall spending on eating out in 2012 by minus £74 million compared with what it would be without the Olympics, equivalent to -0.2 per cent over the base line for the year – and London will see a fall of -£8 million in August alone or a fall of minus 0.6 per cent over the baseline. Warnings not to go into London will be dropped after Boris Johnson called in tourism and trade bodies on Wednesday afternoon to discuss the situation. An estimated four million Londoners are working from home for at least part of the Games.

Music festivals hit by weather and Olympics: Poor weather and the Olympic Games seems to have hit demand to attend music festivals. Music Festivals, the promoter established by Vince Power that organises Hop Farm and Benicassim, reported yesterday that it would need to raise more money. It reported it would make a “material loss” after weak ticket sales at Hop Farm and lower profits at Benicassim.

Technomic - UK sandwich sales on the rise: More consumers report purchasing sandwiches away from home today versus just two years ago due in a large part to operators becoming increasingly innovative and responsive to consumers’ demand for lower prices, greater variety, fresher fare, flexible portions and healthier items.“Today’s consumer expects greater opportunities for customisation and broader sandwich options,” said Technomic executive vice president Darren Tristano. “Trends in portion flexibility, variety, freshness and shareability have come to the forefront of this segment. Shareable options give operators a chance to go beyond the standard menu and try new ethnic sandwiches. Often these ethnic and next-level sandwiches, which focus on gourmet ingredients and toppings, are introduced through mini sandwiches or wraps. Giving consumers smaller, shareable portion options can be considered as healthier with less calories. This trend shows no signs of slowing down.” Technomic has developed the UK Sandwich Consumer Trend Report with findings that include: breakfast sandwiches have tripled on Limited Service Restaurant menus (from 34 items in 2009 to 100 items in 2011); the vast majority of consumers (72 per cent) purchase grab-and-go sandwiches, reiterating the importance of convenience and speed of service for the sandwich category; more than a quarter of all consumers (27 per cent), and 41 per cent of women, show a strong demand for mini-sandwiches at restaurants; more restaurants are taking culinary cues from abroad by introducing new sandwich-style handhelds that are popular in world regions stretching from the Americas to Asia. Technomic’s UK Sandwich Consumer Trend Report can be obtained from David Wilkinson on (0771) 5291520 or

Time Out London to go free: Time Out London, which contains extensive restaurant listings, is to go free in the autumn. The decision to give away the magazine is part of a new strategy to move from publishing to becoming an e-commerce business that makes most of its revenue from ticket sales.

Company news:

PizzaExpress starts recruiting restaurant managers for Mumbai openings: Gondola Holdings has begun to recruit restaurant managers for its first openings in Mumbai, India, later this year in a joint venture with the Bharti family. Interviews will take place at the end of this month in Mumbai. The company states: “We are now looking to recruit a team of people for our new restaurant openings in Mumbai later this year, who can be part of creating an amazing business for both customers and employees – and help us to deliver “Pizza in Style”. Ideal candidates will already have a good knowledge of the restaurant industry within Mumbai.” There are already 60 PizzaExpress outlets overseas, in locations such as Hong Kong, Shanghai, Indonesia, Cyprus and the Middle East.

Collyer – Starbucks provides overseas expansion benchmark for Costa coffee: Geof Collyer, leisure analyst at Deutsche Bank, has argued that Starbucks’ overseas expansion plan provides a benchmark target for Whitbread’s Costa Coffee brand. Collyer said: “In terms of growth, Starbucks is targeting 1,500 stores in China within five years. We have Costa getting to 564 stores within chief executive’s Andy Harrison’s five year plan (announced in April 2011), and he has discussed the possibility of close to 1,000 stores in China at some stage. We would look more to the growth opportunity by comparing the number of stores that each group has outside of both North America and the UK – the home markets. By the end of (this year), we estimate that Starbucks will have over four times the number of stores - 4,398 – versus Costa. This should be the scale of growth targeted by Costa and Whitbread management over time and one very good reason why we expect Costa to continue as a driver of value creation within Whitbread for some time to come.”

Orchid rolls-out free Wi-Fi across the estate: Orchid Group is set to rollout Wi-Fi connectivity across its entire portfolio thanks to a new partnership with Sky. The company has signed a deal to bring The Cloud Wi-Fi into every one of its bars, restaurants, pubs and nightclubs right across the UK. It means that customers of Sky Broadband Unlimited and Sky Connect will be able to auto connect whenever they are at one of Orchid’s businesses. Research commissioned by The Cloud, which has 11,000 hotspots across the UK, found that 73 per cent of smartphone owners use their phones while out and about to check prices or look for offers, and nearly a third use their phone for social networking on the go. But faced with no Wi-Fi, 31 per cent say they are frustrated that they cannot get online. This trend is something that Orchid is very aware of and it has driven the move to Wi-Fi from The Cloud in all businesses to ensure that customers do not go somewhere else simply because of internet connectivity. Arnaud added: “Having Wi-Fi from The Cloud in our businesses means even better value for our customers and enhances the excellent experience we offer.”

New Tragus boss re-organises company: John Derkach, the former Costa Coffee executive now running Tragus, has re-organised the company into two divisions with their own managing directors – Café Rouge in one division and Bella Italia and Strada in the other. Former managing director of The Restaurant Group’s Chiquito and Garfunkel’s brands, Nick White, becomes managing director for Bella Italia and Strada with a new boss for Café Rouge being sought. Operations director James Parsons is leaving Tragus after almost ten years with the company.

Burger King reports 4.4 per cent like-for-like sales rise in the US: Burger King has reported a 4.4 per cent like-for-like sales rise in the US after a menu revamp. The results, contained in the company’s first announcement of a quarter’s results since it went public, follows the largest menu revamp in its history in the Spring. The brand has broadened its appeal to women and older customers with smoothies and frappes, more chicken items and sweet potato fries. Burger King plans more themed limited-time offers during the rest of the year. Like-for-like sales in Europe, the Middle East and Africa rose 3.3 per cent. 

Joe Lewis’s Freebirds World Burrito buys seven sites: Mitchells & Butlers shareholder Joe Lewis’s Freebirds World Burrito brand, operated by his US company Tavistock, has agreed to buy seven restaurants in the Central Valley of California from Qdoba franchisee 4G Management. The sites are located in Sacramento, Tracy, Fresno, Clovis, Turlock, and Modesto (two locations). The restaurants will be converted to company owned and operated Freebirds locations and will open by the end of the year. The deal will bring the total number of Freebirds sites in California to 23.

British Sausage Company opens permanent Luton site: British Sausage Company, which sells its own recipe sausages at 200 events around the UK each year, has opened a permanent site on the concourse of Luton airport, which sees 11 million visitors a year. The company founded by David Nye, cousin of Anglian Country Inns managing director James Nye, opened the British Sausage Company Kiosk a fortnight ago. Nye told Morning Briefing: “I set the company up because the quality of food at festivals and events was so bad. The early response at Luton has been strong. We’ve customised a couple of 1937 phone-boxes as part of the site and lots of people are coming up and taking pictures.” British Sausage Company has a range of six own-recipe sausages made from 100 per cent traceable sources.

Worcester restaurateur plans Nando’s-style concept: An established Worcester restaurateur is planning a Nando’s-style chicken concept for his second site. The owners of Pasha in St John’s, which has been open since 1987, will convert a former newsagents in Lower Wick for its second site. Sam Ahmed, Pasha’s manager, said: “After much thought and research, we have decided to open a Nando’s concept at the new restaurant. [It’s] definitely a big challenge and we will still be offering a takeaway service, perhaps even a home delivery service.”

Bacon combines with Byrne in quest for Michelin star: Tim Bacon, the managing director of Living Ventures, has launched a joint venture with chef Aiden Byrne to establish a restaurant in Manchester’s Spinningfields area that will aim to win a Michelin star. The new venture will occupy several floors of Tower 12, formerly Manchester House, and will be called The Restaurant & Lounge @ Manchester House. Aiden Byrne was the youngest chef to be awarded a Michelin star in the UK when he was 22 years old working at Adlards in Norwich. Bacon said: “It is incredible that a city of Manchester’s size and pedigree does not have a starred restaurant. There should be three or four at least and we at Living Ventures would like to get the ball rolling. I invite other chefs and proprietors to join in the endeavour.”

Inventive Leisure plans Revolucion de Cuba opening in Derby: Inventive Leisure, the company that operates the Revolution Vodka Bar chain, is planning to open its latest Revolucion de Cuba site in Derby. The company has been placed in “The Sunday Times Top 100 Companies to Work For” five years consecutively. Inventive has Revolucion de Cuba sites in Sheffield, Norwich, Cardiff, Richmond and Cambridge.

Trade in July:

Flavour of trade: How was trade in July?

Bravo Inns trades in line with expectations: Ken Buckley, founder and managing director of Bravo Inns, said trade in July was “very similar to last July and, to be honest, it was in line with what we expected despite the terrible weather”. Bravo operates 30 community pubs in the north west and not many have gardens. Therefore, the company isn’t as prone to wide fluctuations in trade when the weather is bad as some other operators. Nevertheless, Buckley said the wet weather that has blighted the country since April has had a depressing effect on customers. “It’s not easy to get people to go to the pub when it’s raining.” Bravo’s pubs are wet-led and geared heavily towards sports, especially showing Premier League football matches. However, Buckley said showing the Olympic Games did not seem to have made any discernible increase or decrease in trade. “There isn’t much interest even in the Team GB football matches.” Buckley is “quietly confident” that trade will start to improve when the new Premier League season starts on 18 August.

Fixed fortunes affect C2 Investment: Matt Jackson, co-founder of Lancaster-based C2 Investment, reported mixed fortunes across the four-strong estate. The Mill, a pub restaurant in Ulverston, witnessed a 4.5 per cent drop in like-for-likes compared with the same period in 2011, while The Palatine real ale house in Morecambe posted a 14 per cent increase. The same pattern of one venue doing well while the other suffered was repeated at the company’s two hotels. Takings at The Sun Hotel & Bar in Lancaster were down 3.5 per cent, whereas The Duke of Edinburgh hotel in Barrow reported an increase in excess of 17 per cent. Jackson said one of the reasons for the strong performance from the 34 bedroom Duke of Edinburgh was a bulk booking by an engineering firm working in the naval dockyard. This helped offset a drop in tourist numbers, said Jackson. He also said the bad weather had created odd trading patterns. “Our city venues, The Sun and The Duke, tend to do better in the rain and it is the destination pubs, The Mill and The Palatine, that suffer.” July’s figures show that The Sun and The Palatine didn’t conform to the usual trading patterns.

Nothing in Olympics for Head of Steam: Head of Steam’s founder Tony Brookes hasn’t completed a detailed analysis of July’s figures, but said: “We are definitely down on last year. Some of the pubs traded as per our expectations, but a couple are experiencing great difficulty.” Head of Steam operates eight managed houses and one tenanted pub in the north east, Yorkshire and Merseyside. All are predominantly wet-led and located in town and city centres and none has a beer garden. Brookes said the poor weather had affected trade, particularly during the first half of the month. “We desperately need some good weather to make up for lost trade.” Although one of the company’s outlets is near Newcastle United’s ground, which is a venue for Olympic football, Brookes said the pub was quieter than normal on one of the match days. “I think the Olympics will have a zero effect on trade. People will watch at home because the sports and activities are not those that draw people into a pub to watch.”

No change at Whiting & Hammond: South east operator Whiting & Hammond’s managing director Brian Whiting reported: “Across the estate, trade was very similar to last July – not up and not down. Last Friday night, most of our sites were pretty quiet because people were staying at home to watch the opening ceremony. I have always maintained that I don’t think the Olympics will have any real effect on trade. If we win some gold medals, there might be the feel good factor, but I don’t think that will have much of an impact on trade.” Whiting & Hammond runs six pub restaurants together with Stanmer House, a conference, restaurant and banqueting centre near Brighton. Whiting said trade at Stanmer House was “very much up and down, and last week, when the weather was good, it didn’t do that well because people went to venues on the sea front”. The company did strike lucky at The Mark Cross Inn, Mark Cross, East Sussex. The pub hosted a beer festival coinciding with the good weather over the weekend of the 20th and 21st. “We had our biggest ever one day’s trade at the pub.” He added: “We depend on the weather at our pubs and it has got to be a prolonged period of good weather to feel the benefits.”

JW Bassett wants football and rugby not Olympics: Jon Bassett, proprietor of South Wales and West Country operator JW Bassett Pubs & Bars, said sales across the estate were up five per cent on last year, but added: “There are going to be tough times ahead because of cost pressures.” Bassett attributed the growth to the weather. “Most of the pubs are in town centres and they do well when the weather is poor. I’d rather have 40 weeks of bad weather than 12 weeks of good weather.” Bassett said during spells of good weather the eight sport-oriented pubs “trade reasonably during the week, but not at the weekends – we lose out to the barbecues”. Like Head of Steam, JW Bassett has a site outside an Olympic venue, namely Cardiff’s Millennium Stadium. And like the Head of Steam pub, Bassett said his pub hasn’t benefited from any increased trade. The average weekly take across the estate is £10,000 net, but this can increase dramatically during major football and rugby matches. “I can’t wait for the Premier League to start on 18 August or the rugby internationals in the autumn.”

Better than expected for Tailor Made Dining: Home Counties operator Tailor Made Dining said performance across the five-strong estate was “very mixed”. Co-founder Ted Doherty said: “The first half of the month was better than the second half. The second half was obviously affected by the opening of the Olympics (on Friday 27th) although not as badly as we thought and the month ended very well for us.” Turnover at The Chequers in Marlow, Buckinghamshire, rose by eight per cent which Doherty said “does better on inclement days. He said the figures were influenced by a recently completed refurbishment at one outlet to a refurbishment that was currently underway at another site. Doherty predicted the coming weeks would be challenging. “We have got the Olympic blue riband track and field events coming up, which people will watch at home. Also, from a room prospective (the company has a total of 37 letting bedrooms across three sites), August is not a great month for business travellers (who form the mainstay of customers).”

New Pub Company flourished in the rain: The wet weather did nothing to dampen the performance of New Pub Company. Peter Linacre, head of the seven strong London group, remarked: “We have had some good results. Overall, we are up 11.5 per cent over last July’s figures.” Even more astounding was the performance of the company’s “most weather dependent” pub – The Black Lion in Hammersmith, which has a large outside trade area next to the bank of the Thames. Linacre said trade rocketed 50 per cent above last July’s takings. He thought the reason for the increase was: “Everyone was so used to the weather being bad for months on end that people said ‘we’ve had enough’ and decided to go out.” Linacre thought the pre-Games warnings of transport chaos had not materialised. “It is clear, you can get around London.”

No ups or downs at Black Country: “There or there about” is the way Angus McMeeking described the trading performance of his company, Black Country Traditional Inns, over the past month when compared with July 2011. “I think the bad weather in the early part of the month didn’t help, but generally we don’t tend to suffer great ups or downs no matter the weather.” McMeeking’s estate comprises 28 wet-led, real-ale focused, community pubs. “We don’t have Sky Sports in any of our pubs, but we will be showing the Games on terrestrial TV because it is a point of interest for some of our customers. I don’t think people will be meeting at our pubs just to watch the Olympics. Money is still tight, but people are still prepared to pay for the occasional night out.”

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