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Fri 12th Oct 2012 - Oakman, Costa and Spearmint Rhino

Story of the day:

Oakman Inns – slow growth preferable to binge expansion; turns down two investment offers: Peter Borg-Neal, chief executive of award-winning Oakman Inns and Restaurants business, has argued that businesses need to show restraint in expansion terms rather than take the route of “binge-growth”. Writing for Propel’s Friday Opinion section he revealed that his company has turned down two offers of investment in the business, preferring slower growth to expansion on unacceptable terms. He said: “Too often businesses in our sector tend to be akin to binge drinkers. Flushed by the good feelings generated by some early success (or the first couple of drinks of the evening), they often lurch forward with a feeling of indestructability. The end result is often similar to that of a big night out. A spectacular crash followed by the mother of all hangovers. The smart move, today more than ever, is a slow enjoyable session only taking on what you can afford and handle. The silver lining, therefore, is that we will all have to proceed in a more moderate fashion. If we can’t have self-discipline, the capital markets will provide it for us. The funding for irresponsible growth is no longer there and the industry will have to proceed with more caution and wisdom than was the case before 2008. I believe that this will prove to be a good thing in the long term. Of course there is a converse danger. Will good, well-managed businesses struggle to attract funding? There is no doubt that that is already the case. The even bigger danger is that investors will only back our industry on terms that are hugely unattractive to us. My business is going through a funding round at present. To date we have grown using only our own funds plus some senior debt. We have consistently performed well and the business is in real long-term growth. However, if we are to further accelerate our growth, we will need external funding – but not at any price. We have had two offers to date. Whilst we were flattered and grateful to receive them, the terms were not attractive to us and we have politely rejected them. If we can’t get the right terms, we will revert to a slower growth model.” To read the full article, see the separate Propel Friday Opinion e-mail.   
Did you know four of the top five companies in the sector by turnover run pubs? The Propel Info Hospitality Sector Turnover and Profits Blue Book ranks the 200 leading pub, restaurant and foodservice companies in the UK by turnover and profit, provides a five-year overview of performance and lists directors’ salaries. To buy a copy e-mail Jo Charity or Sharon Dickinson on or

Industry news: 

Deputy Prime Minister visits Flying Kiwis venue in Norfolk; speaks in favour of minimum pricing: Deputy Prime Minister Nick Clegg has visited The King’s Head in Letheringsett, operated by Chris Coughbrough’s Flying Kiwi Inns, and backed the role of the pub – and minimum pricing.  He said: “Local pubs are absolutely integral to the fabric of a local community, particularly but not only in rural areas, and that’s why I’m very supportive of any campaign which encourages people to use their local pub. There are things we can do and indeed there are things we have done. We have doubled the business rate relief for small businesses and extended rural business rate relief to pubs.” He added that minimum pricing “done sensibly” would help pubs. But local licensee Dan Searle, who runs The Rumsey Wells in St Andrew’s Street and the Reindeer in Dereham Road, Norwich, told the newspaper: “The industry has been lobbying hard for a reduced rate for restaurants, pubs and hotels of five per cent to bring it more into line with our neighbours in the European Union. It would show the government was really behind the hospitality trade, would lead to greater prosperity and create more jobs.”
Voucher company Groupon diversifies: Groupon has launched a low-cost checkout software system in the US for restaurants that it hopes will help to retain customers and broaden its own business beyond coupons with a new subscription-based revenue stream. The company’s cloud-based Breadcrumb point-of-sale system will cost bars, cafés and restaurants between $99 and $399 per month. It runs on an Apple iPad tablet computer, rather than requiring a PC or more costly dedicated hardware. Groupon’s vice-president of mobile and merchant products Mihir Shah said that the system was more affordable than older systems from providers such as Micros and Aloha for functions such as adjusting menu items, managing staff and gathering sales reports.
Artesian named World’s Best Bar: London luxury hotel bar the Artesian at the Langham has fought off global competition to take the top spot at the prestigious World’s 50 Best Bars 2012. Unveiled by Drinks International, the  magazine for the global drinks industry, the coveted awards uncover the hippest places to drink around the globe. The results means Artesian has bumped last year’s winner New York speakeasy PDT (Please Don’t Tell) into second place. Drinks International’s Lucy Britner said: “The list reveals the incredible wealth of diversity and expertise around the world, with the Artesian being a very worthy winner.”
Costa Coffee Europe’s top coffee operator: Costa Coffee took top position in Europe in 2011 for operating the most number of coffee shop sites. The company grew to 1,550 sites, up by 15 per cent on the year, with outlets in 15 different European countries. McDonald’s McCafe brand rose from third to second place with 23 per cent growth to take it to a total of 1,493 sites in 23 different European countries. Previous market leader Starbucks dropped from first to third, growing by just eight per cent to operate 1,478 sites across 21 European countries. The top ten coffee bar operators had a total of 7,320 units in 2011, up from 3,584 in 2005. Starbucks has the highest density of sites in London with 260, followed by Costa Coffee with 225 and Caffe Nero with 180. European Foodservice editor Gretel Weiss said coffee bars enjoy the highest average profit in Switzerland but the highest sales per unit in Moscow.     
Jamie Oliver hailed as European game changer: Jamie Oliver has been hailed as one of three European foodservice game changers by European Foodservice editor Gretel Weiss. Businessman Oscar Farinetti, who founded Eataly in Turin and Claus Meyer of Denmark, who founded Noma, ranked top in Restaurant Magazine World’s 50 Best Restaurants, and who also runs a cookery school and publishes cookery books, were the other two named as game changers by Weiss. “For all three it’s about improving life through better food and educating the consumer about quality. They are ambassadors for the future of our industry,” she said.
Scottish bed and breakfast operator wins right to sue Tripadvisor: Outer Hebrides bed and breakfast operator Richard Gollin has won the right to sue Tripadvisor over “false and malicious” criticisms of his guesthouse. Previously, US base Tripadvisor has argued it was based in the US and therefore could no be sued in the UK.

Visitors down during the Olympics: Tourism visitor numbers to the UK fell to a ten-year low during the Olympics. Office for National Statistics figure show 176,000 fewer tourist came to the UK during August – a total of 3.03 million – that the same month the year before.

Company news:

Collyer – pub groups with London presence have outperformed; Mitchells & Butlers slipped to sixth in like-for-like sales growth table:  Deutsche Bank analyst Geof Collyer has argued that the latest round of trading updates show pubs generally enjoying better sales growth than restaurants. Those with a strong London trading presence, such as Greene King and Spirit, have enjoyed the particular benefits of geographic outperformance. Collyer noted that Mitchells & Butlers (M&B) has “slipped to sixth place amongst the major groups in terms of like-for-likes”. He said: “The London theme remains consistent as a guide to outperformance for Greene King, Fullers’ and Young’s. We see Greene King’s recent mergers and acquisitions activity, extending its reach within the capital, as helping to step-up its level of underlying like-for-like growth from three per cent last year to around four per cent now. This geographic exposure is also helping Spirit to play catch up as much as the new management team’s more stable hand on the tiller. We see this geographical skew helping to segment the sector’s major players. In the first division (for like-for-like sales growth) are Greene King, Fuller’s, Young’s (each of which have strengthened their hands with acquisitions) plus Spirit. Then (comes) JD Wetherspoon, Marston’s and Mitchells & Butlers, plus Restaurant Group and Whitbread’s (pub) restaurants. Caffe Nero, whilst nowhere near Costa in terms of like-for-likes growth, would probably still join its coffee peer in the top division. M&B’s slide to sixth over the past two years is understandable, given the uncertainties that have prevailed, and which most people seem to think will now have ended with the appointment of the new chief executive. Let us hope so, for all concerned. However, M&B is a bit of a super tanker and we think it will be some time before it is heading back up the rankings. It will also be interesting to see if the new chief executive decides to have a go at his old business – M&B, after all, is the biggest and most direct geographical competitor to Marston’s. Whitbread’s performance in (pub) restaurants has been sliding and we see this as a more likely candidate for disposal, should the board decide that a tighter business mix is the next stage of strategic evolution.”
Simon French – follow the directors lead on Domino’s shares: Panmure Gordon leisure analyst Simon French has issued a note suggesting that shareholders follow the lead of the Domino’s directors who have sold shares. He said: “After the market closed (on Wednesday night) Domino’s announced that non-executive chairman Stephen Hemsley sold 1.07m shares at 520p a share raising £5.5m and Nigel Wray, non-executive, sold one million shares at 520p a share raising £5.2m. The bulls will point out that directors have been consistent sellers of the stock as the share price has risen but we would also point out that Patricia Thomas, who heads the group’s German operations, sold 100,000 shares (over half her shareholding) at a price of 537p on 26 September. Whilst Domino’s is an excellent business this is simply too rich for a stock we forecast to grow earnings at a CAGR of 11.9 per cent over the next three years and into which additional complexity has been introduced through the on-going expansion into continental Europe. We reiterate our Sell recommendation and 360p target price – based on a 2013E P/E of 15.0x - implying circa 31 per cent potential downside.”
Stonegate introduces menu changes across brands and segments: Managed operator has revamped menus across its various brands and segments. Student brand Scream menu has seen the range of burgers increased, the introduction of 23 new dishes and tapas style bowls made available. Locals’ pubs introduced a new booklet style menu with clearly defined sections, making the menu look more premium and stylish and easier for customers to make choices. Seasonal winter dishes have been added to the menus such as the Boozy Beef pie and seasonal soup.  Classic pubs have added new sharing dishes and improved favourites such as haddock & chips and a classic beef burger. Yates's have introduced a new 'Yates's Specials' section - new tacos and 13 new dishes, including two new burgers, the Moby Dick and the Sloppy Joe. Great Traditional pubs have a redesigned menu with improved offers, including 'two-for-one' meal deals enhanced with new dishes and the introduction of a new burger topper using Franks Red Hot Cayenne Pepper Sauce.
Spearmint Rhino reports operating profit; owes HRMC £2,056,907: Lap-dancing business Spearmint Rhino’s parent company has reported turnover rose to £9,920,229 in 2011 from £8,448,966 the year before.  It made an operating profit of £429,681compared to a loss of £583,227 the year before. But “group reconstruction charges” of £2,507,181caused a loss of £2,135,627 compared to a loss of £733,265 the year before. It also revealed it had a £2,056,907 liability to Her Majesty’s Revenue and Customs and had negotiated a Time to Pay agreement. The company said this liability created “a material uncertainty which may cast significant doubt about the group’s ability to continue as a going concern”.

Tragus to open Café Rouge in Coventry: Restaurant operator Tragus is to open a Café Rouge in Coventry’s Belgrade Plaza early next year. Tragus reported on Wednesday that turnover increased 3.2 per cent to £286.2m in the year to 27 May 2012. However, like-for-likes sales declined by 0.9 per cent due to increased promotional activity during the period.

Greene King acquires Enterprise Inns pub for Hungry Horse conversion: Greene King has bought The Robin Hood pub, in Sherwood, Tunbridge Wells, to convert to a Hungry Horse venue. Greene King is working on planning and licensing applications with building work expected to begin in January. A spokeswoman said: "We are very excited about this addition to our Hungry Horse network, which will offer good food, outstanding value and an inviting atmosphere for the whole family.” The Robin Hood has been closed since 19 August. 

Beds and Bars reveals bed income at new Barcelona site: Pan-European hostel provider Beds and Bars, headed by Keith Knowles, has released further information on takings at its new 415-beds Barcelona site. The 26 million Euros hostel, which officially opens later this month, has been taking £25,000 per week in accommodation income, with 85 per cent occupancy, on top of £16,000 food and drink sales, making a total of £41,000-a-week during its soft opening.  

Costa Coffee’s Coffee Snobs franchisee overcome opposition from coffee snobs in Wendover: Wendover has become the latest town where Costa Coffee has overcome strong local opposition to open a site.  A bid by Berkhamsted franchisee Coffee Snobs to convert the former Barclays Bank to a Costa was originally thrown out by Aylesbury Vale District Council, but the plans will now go ahead following an appeal. Coffee Snobs director Paul Messenger said it was the outcome they had expected and he believes the shop will go down well in the village.

Gladwin brothers plan vertically integrated family restaurant: Richard, Oliver and Gregory Gladwin plan a restaurant that uses their respective skills to create a farm-to-fork experience for diners. The Shed in Notting Hill will launch on 23 October on the former site of the Ark. Restaurateur Richard Gladwin, whose previous ventures include Brawn and Bunga Bunga, will manage the restaurant, chef Oliver Gladwin, who has worked at Oxo Tower, Launceston Place, Just St James and River Cottage, oversees the kitchen, and farmer Gregory Gladwin will supply the restaurant with hand-reared livestock from the family farm at Nutbourne in West Sussex.

Spirit’s Flaming Grill brand reinforces sports link: Spirit’s Flaming Grill brand has reinforced its sport credentials by creating a new steak menu that links with the athletes nominated for the BBC's Sports Personality of the Year award. Sports personalities like Andy Murray, Mo Farah and Jessica Ennis will feature on the menu in the run up to the awards ceremony in December, expected to be the most hotly contested of recent years.  Menu items include "Flaming Mo Farah", "Sir-Loin Chris Hoy" and "Jess-steak-a Ennis".
Collyer issues Whitbread results preview: Deutsche Bank analyst Geof Collyer has issued a “hold” recommendation on Whitbread share ahead of results on 23 October. He said: “The coffee business continues to go from strength to strength. The high UK revenue growth should also help margin expansion. Increasing growth overseas should be starting to generate some economies of scale. However, given the recent infrastructure investment to cope with this rapid expansion, we now see the inflection point on Chinese profits being passed in the first half of 2014 as opposed to the second half of 2013. The market will also be looking for any signs of a recent softening of the pace of growth here, given YUM!’s comments this week on slower China demand.”
Channel Four hotel is sold: The Grosvenor Hotel in Torquay, which featured in television series The Hotel, has been sold to Keith Richardson, owner of the rival Grand Hotel in a deal worth around £1million. Interest in the high-profile business saw 2,200 inquiries when owner Mark Jenkins announced it was for sale last month. It will now see a substantial  investment to bring it up to three star standard. The hotel will appear in another series next year.   

Bar Fever acquires Barnstaple nightclub Toko: The Toko nightclub in Barnstaple has been acquired by expanding late-night operator Bar Fever. Boss Mark Shorting, whose company owns a number of nightclubs in Cheltenham and Gloucester, said the venue has been bought with a view to investing in it.
Domino’s Pizza links up with This Morning: Domino’s Pizza has teamed up with ITV morning show This Morning to create “the people’s pizza”.  A competition starting Monday (15 October) will invite viewers to submit their top pizza topping ideas to create the People’s Pizza. Entries will be whittled down by a panel of experts including Phil Vickery and Chris Denoven, new product development chef at Domino’s Pizza. Once a shortlist of entries has been selected, the top three will then be put to the public vote on London’s Southbank on November 29. The winning pizza will be available to buy at Domino’s UK stores from early next year.
Pub People Company sets up own hostelry at Nottingham Beer Festival: Pub People Company, the Midlands multiple headed by Kevin Sammons, has set up its own pop-up hostelry at the Nottingham Beer Festival in the grounds of the castle – the venue is called Sir Blondeville’s Tavern after the company’s own in-house ale. Operations director Andrew Crawford said: “Alongside our own pale ale, Sir Blondeville 1194, we have beers from Nottingham Brewery, Blue Monkey, Thornbridge and Ossett Breweries.”

Liberation brewery ships 50,000 pints to Wetherspoon beer festival: Liberation Brewery has shipped 50,000 pints of its seasonal ale Rouge to take its place on the bar at the 2012 JD Wetherspoon Autumn Beer Festival. The Wetherspoon event runs from 24 October until the 11 November.  The Festival features ten international ales from countries as far away as Guam and Canada, as well as 40 specially chosen ales from UK breweries of all sizes, featuring a wide range of ABVs, colours and styles. Liberation Rouge is the only ale from the Channel Islands present and reflects the seasonal theme of the Festival. It is a 4.5% ABV refreshing autumn ale with a deep ruby colour and a slightly citric aroma, leading to a nutty, bitter flavour in what is described in the tasting notes as a unique, robust and balanced beer.

Did you know? US-based Cheesecake Factory, which is looking for its first UK site and averages sales of $10m at each of its 160 sites, stations a kitchen manager at the counter where the food comes off the line. He rates the food on a scale of one to ten. A nine is near-perfect. An eight requires one or two corrections before going out to a guest. A seven needs three. A six is unacceptable and has to be redone.
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