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Fri 2nd Nov 2012 - Loungers, Perritt & Perritt and Restaurant Group

Story of the day:

JD Wetherspoon property legal action next phase expected to be heard in first half of 2013: The next stage of the long-running legal action over fraud by JD Wetherspoon against former property advisor Van de Berg and associated parties is expected to be heard in the first half of 2013. The cost of the property fraud perpetrated by former property agent Van de Berg has been put at between £50m and £100m by company founder Tim Martin. Wetherspoon, which started legal action against Van de Berg in March 2005, won a legal action in March involving five freeholds that were diverted to a third party by Van De Berg, which earned £15m from JD Wetherspoon in the period it was seeking new property for the company. Legal sources tell Morning Briefing that legal action against two other parties linked to Wetherspoon property deals involving Van de Berg, is now expected to be heard in the High Court in early 2013. The two parties are thought to be a north London property agent and a private investor. Martin has previously told Morning Briefing: “It was quite a big fraud. If you add together the excess rent we’ve paid over interest we would have paid if we had acquired the freeholds - and add the value of those freeholds now, it’s probably between £50m and £100m. We really are talking about quite a big heist by Van de Berg. This is partly about making sure people understand we will take legal action if we are defrauded by unscrupulous people in the property market. It has good educational value for people setting up property businesses that rules apply. To my mind, the property market is more open to abuse than the stock market.”

Industry news:

Beer duty escalator e-petition originator calls for pressure on government to continue: Wychwood brewery manager Chris Keating, who started the ‘British Pubs Need You’ e-petition to halt the beer duty escalator, has called for pressure on the government to continue after yesterday’s debate. He said: “It’s encouraging that so many MPs attended the debate, however it’s crucial as an industry that we continue to pressurise the government. This is not the result we were striving for and it’s vital that we continue to have our voices heard and not just accept this ‘hidden tax’ on our beer every year. 104,000 people can’t be ignored and it’s simply not good enough to just sit back and let this be the final word on beer duty. If this beer duty rate continues, then we will certainly be looking at more pub closures and job losses as a result - we must do what we can to stop pubs suffering, which are after all the cornerstone of British communities.” A total of 20 MPs made speeches condemning the escalator in yesterday’s debate. Treasury minister Sajid Javid told MPs: “I’d like to assure members I’m in absolute listening mode.”

Agent – landlords keen to place pop-ups to refresh appeal of sites: Agent Davis Coffer Lyons has reported property landlords have become very keen to recruit restaurant pop-ups to reinvigorate the appeal of their sites. Tracey Mills, director of development leasing at Davis Coffer Lyons, said: “We are working with a wide range of landlords now to help them engage with pop-up operators as part of their general strategy for developing their estates. Pop-ups deliver great benefits to landlords by generating interest in their holdings and a huge number of hits generated from social media, which are very tangible and would have a huge price tag if paralleled with advertising. For the customers and visitors, it ensures that they have something new to see and experience each time they visit. From the operators’ stand-point , it enables them to trial new concepts and see the reaction from the consumers and social media before considering a permanent site. The impact of pop-ups has been so positive, many landlords are deliberately keeping units back to facilitate them.” Meanwhile, the latest pop-up to take a permanent site is Flat Iron. The company traded above Shoreditch’s Owl and Pussycat Pub – and will open in Soho’s Beak Street in early December. It serves a single dish - a little known butcher’s cut called ‘the flat iron’. Flat Iron was created by Charlie Carroll, with collaboration from Lost in Catering consultant Mike Palmer.

Nottingham pub and restaurant airs concerns over the Late Night Levy: Nottingham city centre Business Improvement District group We Are Nottingham Leisure has called on Nottingham City Council to allow the exemption mentioned in the guidelines issued by the Home Office this week when it comes to introducing the controversial Late Night Levy. David Lucas, chairman of We Are Nottingham Leisure, said: “Our primary worry was always that our members would be forced to pay a levy on top of the fee that they already pay to the BID. Money raised by the BID goes towards making the city centre a safer place to be at night, paying for initiatives such as the Taxi Marshals and organising the city’s Best Bar None scheme. Asking them to pay another levy, at a time when many are already struggling, will impose a greater financial burden on businesses.”

New app to find kosher food launches in the UK: A new app has been released that allows consumers to find kosher restaurants around the world. Launched in the US last April, the service is now available via the Apple store in the UK. Software developer Jonathan Myron said: “I had always said that there was no one place for people looking for kosher food to go. There were websites with a hotch-potch of information but, often, these were out-of-date. There was no definitive source that understood the nuances of the kosher consumer.”

“Natural”, “organic” and “gluten-free” descriptors on UK menus increasing: There are currently 310 menu items billed as “organic” on leading UK restaurant menus, up from 290 in the second quarter and 294 in the first quarter, according to research company Technomic. Lauren Edwards, of Technomic, said: “The types of menu items that are most likely to be organic have shifted. Currently, the bulk of organic menu mentions refer to non-alcohol beverages, which increased nearly 25 per cent since the second quarter. Mentions of organic milk, tea, coffee and juices jumped significantly. All of AMT Coffee Bars’ speciality coffee and hot chocolate drinks, for instance, feature “organic milk as standard.” The chain’s newest specialty coffee, Palomino Espresso, features “organic” in the menu description twice. Meanwhile, Le Pain Quotidien boasts that “our coffee and milk are certified organic.” “Natural” presently appears in 135 menu descriptions, making it the third most common “health-halo” term. That number is up an impressive 24 per cent from 109 menu mentions in the previous quarter. Gluten-free is by far the most prevalent of these health-halo terms, appearing a total of 494 times in the July–September 2012 period, up from 480 in the prior period.”

Company news:

Loungers site Ebitda rises to £3,136,000: Café bar concept Loungers, led by Alex Reilley, has reported that site Ebitda rose to £3,136,000 in the year to 30 April this year, up from £2,309,000 the year before. Turnover rose to £15,065,197 from £10,925,044 the year before. Underlying Ebitda grew 46.5 per cent from £1,480,000 to £2,170,000. Like-for-like sales grew by 1.3 per cent during the period. During the period, a total of £2,900,000 was invested in opening new sites, an increase of £880,000 or 43.1 per cent on the year before. Total assets less current liabilities increased to £3.4m from £2.4m in 2011. Companies House documents state the company believes there is room for more than 200 sites in the UK. Loungers revealed its Cosy Club site in Bath is achieving in excess of £1.5m of annualised sales. In June 2012, the company renegotiated its debt facilities with Santander. The company said it plans at least nine new openings in 2013 – and a further acceleration of growth in 2014. Piper Private Equity took a substantial minority stake in the business in April this year. Crispin Tweddell, from Piper, joined the Loungers board as non-executive chairman and Peter Kemp-Welch, of Piper, joined as non-executive director. Co-founder David Reid stepped down from the board in April. Loungers also owns 36.92 per cent of West Country-based pub company Flatcappers.

Andrew Page – Restaurant Group could double to 800 sites: Restaurant Group chief executive Andrew Page has claimed that the company could double estate size to 800 restaurants from its current 410 – with a focus on out-of-town retail parks and airports. He told The Daily Telegraph: “Habits are moving on and families are going to these destinations where they can park their cars, it’s safe, they know what they are going to get and their kids are not going to be confronted by lager louts.”

Reuters puts a Europe-wide focus on Starbucks tax bill: Reuters, which discovered how little tax Starbucks has paid in the UK, has found the US coffee firm has paid just £700,000 in taxes across its European business last year although it has claimed a $40m profit. Accounts filed for its German, UK and French units, which produce 90 per cent of European sales, show apparent losses of $60m despite Starbucks claiming its European business is profitable. Reuters found Starbucks’ France and German operations exploited the same accounting loopholes as the UK business. The company will appear before the Public Accounts Committee on Monday to answer questions on the tax bill for its UK business.

TLC Inns reports 104 per cent sales uplift from synthetic ice rink: TLC Inns, the award-winning multiple operated by Steve Haslam and Jo Drain, has reported a 104 per cent sale uplift in the first six days since it installed its own synthetic ice rink at a pub. The White Horse in Ramsden Heath opened its own ice rink for the winter months last Saturday, in time for school half-term, after a £20,000 investment. Haslam said: “Sales have topped £3,000 each weekday this week and at times you haven’t been able to move in the bar. We’re expecting it to drop off next week after half-term but this will be great at weekends. We’re up against the alternative attraction of fireworks this weekend but so far, so good.” The ice rink was previously sited on the roof of Harrods and the store’s Father Christmas could be spotted skating on it.

Nicholson’s and Thornbridge Brewery team up again for Home Brew Challenge: For the second year, Nicholson’s, the Mitchells & Butlers traditional pub brand, has teamed up Thornbridge Brewery again for the Great British Home Brew Challenge. Over 100 entries were submitted last year - Paul Carruthers’ ‘Frank as Apollo’, a 4.6 per cent premium bitter, emerged as the winner and was then brewed at Thornbridge and enjoyed across 80 Nicholson’s pubs.

Alan Yau Thai café concept Naamyaa to open on 19 November: Wagamama creator Alan Yau’s eagerly anticipated Thai café concept Naamyaa will open in London’s Angle Building, Islington on 19 November. The concept is based on the cafes of Bangkok, offering authentic Thai dishes alongside Western ones. The new concept is planned to be more accessible than Yau’s Busaba Eathai’s brand, which is being held back by immigration laws limiting chef recruitment.

Ormond Hospitality invests £500,000 in converting 16th century inn to Italian pizzeria: Ormond Hospitality Group has invested £500,000 in converting the Pickwick Inn, St Anns Chapel, Plymouth to an Italian pizzeria. The Plymouth based restaurateur, who also runs the Glassblowing House Restaurant on the Barbican, is offering classic Italian dishes in a modern setting but with takeaway options too. Ed Steven, of Ormond Hospitality, said: “We are hoping to attract a year round local custom and recognise that to become a genuine regular, as opposed to a special occasion, venue, we have to offer great value for money all year round. Our menu, along with the food and drinks pricing strategy, achieves just that.”

Fire and Stone pizza operator CG Restaurants reduces losses: Fire and Stone operator CG Restaurants, owned by the Coffer family, has reported it has increased gross margins by six per cent in the year to 31 December 2011, reducing losses. CG Restaurants (UK) was placed in administration at the beginning of 2011 reducing turnover from £9,666,009 in 2010 to £8,664,877 in 2011. The fall in turnover was mitigated by a full year of trading at the company’s Fire and Stone restaurants, acquired in 2010. Losses before tax were £395,654, down from £6,800,246 in 2010.

Flagship £3.5m Manchester pub and restaurant opens on Thursday next week: The £3.5m flagship Albert Square Chop House opens in Manchester’s grade-II listed Memorial Hall next week. The Chop House also offers a boardroom and function room and has created 72 new jobs. There are plans to develop boutique hotel bedrooms above the restaurant at a later date. Roger Ward, owner of the site’s operator Victorian Chop House Company, said: “We are hugely excited at the prospect of giving the city centre’s finest historic square a high-quality dining and drinking destination.” Victorian Chop House Company also runs Mr Thomas’s and Sam’s Chop Houses in the city.

Perritt & Perritt acquires fourth site; re-badges original Kensal Green pub to reflect market movement: London operator Perritt & Perritt has acquired its fourth pub, The Hope in Richmond, its third Enterprise Inns site. The company will trade it until the New Year and then refurbish it to trade in a style akin to its newly-re-badged first pub, the Regent in Kensal Green, which has been re-opened as The Parlour. The company has operated The Regent, a Trust Inns site, for six years. Jonathon Perritt told Morning Briefing: “We opened the site in 2006 and there’s been a shift in demographics and the competitive landscape. There is a lifecycle for neighbourhood pubs – our original customers who were 27/28 are now in their mid-30s.” The pub originally traded from 4pm onwards but has increased opening hours over the years. The latest refurbishment means the pub now opens for breakfast at 8am weekends and trades until 2am, serving late-night food. Perritt & Perritt spent five full days training staff before it re-opened.

Miller & Carter adds top-end dishes: Miller & Carter, the 26-strong steakhouse brand owned by Mitchells & Butlers, has added top-end dishes to its menu for winter. New items include half a lobster tail with garlic and herb butter, a chicken and chorizo skewer, chicken mezzaluna and Black Pearl scallops as a starter.

Sizzling Pub Company refreshes menu: Sizzling Pub Company, the Mitchells & Butlers (M&B) value brand, has refreshed its menu with the addition of a new “sizzling sausages range” served on the brand’s sizzling skillets. In addition, the brand has introduced new sauces and skillet load ups - two more reggae, reggae varieties, and a garlic and herb sauce voted for by its Facebook fans. The menu also has new burgers, including the Sizzling hot chicken stacker with Louisiana hot pepper sauce and a “Season N Shake family bundle” – a choice of chicken or ribs, sauce, extra chips, seasoning and two sides. The brand has also introduced boneless BBQ ribs. M&B chairman Bob Ivell has argued this year that Sizzling may have neglected its traditional drinking audience at certain locations.

Douglas Jack – we estimate The Restaurant Group like-for-likes rose by 3.9 per cent in third quarter: Numis Securities analyst Douglas Jack has estimated that Frankie & Benny’s operator Restaurant Group’s like-for-likes rose by 3.9 per cent in its third quarter, higher than the 3.5 per cent average for the rest of the year. Commenting on yesterday’s third quarter update, he said: “Overall, it was a resilient performance during a period of falling cinema attendance. Trading was slightly helped by a softer like-for-like comparative of 2.4 per cent. In November and December, trading should benefit from a strong cinema release schedule, partially offset by the comparative toughening to 4.75 per cent. There is no comment on margins The Restaurant Group’s brand websites have been offering some strong food/soft drink promotions (demand sensitive) over the last few months, offset by 11.6 per cent higher average drink prices (less demand-sensitive until customers suffer bill shock) as at June. Margins were only flat in the first half of 2012 despite like-for-like sales rising three per cent and average drinks prices rising 11.6 per cent. We are forecasting a similar outcome in the second half, but estimate there is 40bps margin downside to 2013E forecasts if overall like-for-like volumes continue to remain flat and drinks price inflation slows to a more realistic five per cent. As usual, new sites are performing well. After its trial in Brighton Marina, Coast To Coast is being rolled out into a further four sites this year and possibly 10 next. Next year’s total expansion target is expected to remain at 30 sites, implying fewer Frankie & Benny’s openings.” Jack’s Target Price for shares is 340p with a “Reduce” recommendation.

Agent Christie + Co sets deadline for Travelodge bids: The level of interest in six Travelodge Hotels brought to market recently has led specialist property adviser Christie + Co to set a deadline for first offers of midday on Wednesday 14 November. The six hotels, currently leased to Travelodge Hotels Limited, are being marketed for sale by Christie + Co on behalf of Piccadilly Hotels. The hotels are situated in key trading locations and are marketed for sale on an individual basis with a view to selling with vacant possession. Jeremy Jones, director of Corporate Hotels for Christie + Co, said: “We have received a significant amount of interest in all six of the hotels since we brought them to the market in early October. In order to make progress, we have set this deadline for first offers.” The six hotels are: Travelodge Edinburgh West End, EH4: 178 bedrooms; Travelodge Newcastle Silverlink, NE28: 126 bedrooms; Travelodge Oldham Manchester Street, OL8: 102 bedrooms; Travelodge Leofric, Coventry, CV1: 120 bedrooms; Travelodge Stevenage, Little Wymondley, SG4: 69 bedrooms; Travelodge Bath Waterside, BA2: 124 bedrooms.

Tommy Flynn Group co-invests £250,000 with Punch Taverns on Leytonstone pub: The Tommy Flynn group has co-invested £250,000 with Punch Taverns is re-opening the former Sheepwalk pub in Leytonstone as The Crown. The pub, situated on High Road, has been styled with contemporary décor including a feature screen with fireplace recess, period lighting and a new feature staircase leading to the second floor function room – and will start serving food. “The pub has been completely gutted and refurbished - it looks fantastic,” said Averil Flynn, partner of The Tommy Flynn Group. “We are looking to transform the pub operationally by utilising the new facilities and trading areas. By serving food, which is a first for the premises, we will be able to tap into a new growing market.”

Hotel du Vin owner suspends shares: The future of the MWB Group, which owns Malmaison and Hotel du Vin, suspended its shares yesterday. The company’s carries large amounts of debt and the shares suspension relates to an overdue loan of £8m it owes to a subsidiary company MWB Business Exchange, the service office company. Publication of its annual results have been delayed. The sale and leaseback of five hotels and the refinancing of Malmaison and Hotel du Vin in 2011 resulted in a reduction of the company’s debt to around £180m.

McDonald’s unveils plan for a dozen new openings in Ireland: McDonald’s will create 700 jobs in Ireland by opening a dozen new sites by the end of 2015. The company revealed it planned to spend 20 million euros in its Irish operations. New sites will be based all over the country, including locations in Dublin, Kilkenny, Ballina and Kildare Village.

Which? magazine surveys places Premier Inn top of budget firms: ‘Which?’ magazine has published the results of a survey of 6,280 of its members, undertaken in June 2012, who gave their views on up to three UK hotel chains they had stayed in over the past 12 months. The average score for each hotel rated in the survey (34 hotel companies) was 64 per cent. Whitbread’s Premier Inn scored 74 per cent while its major competitor Travelodge scored 46 per cent. 

Michelin adds 81 more venues to its 2013 Pubs Guide to reach 550 entries; multi-site companies earn entries: Pubs runs by Noble Inns and ETM Group have been added to the latest guide to the UK’s best pubs produced by Michelin – a picture of The Lady Ottoline in Bloomsbury, one of three pubs operated by Noble Inns, makes the cover and ETM’s Jugged Hare, City of London both make the guide. The two women, Abigail Osbourne and Tamsin Olivier, who formerly ran the Engineer in Primrose Hill, which Mitchells & Butler converted from franchise to managed, have seen their new pub, The Hampshire Hog in Hammersmith, join the guide. “The standard of pub cooking just keeps getting better and better”, said editor Rebecca Burr. “Pubs are often the heartbeat of the local community and it’s been exciting to see that more and more of them are specialising in their own regional ingredients.” Many pubs are also rising to the challenge when it comes to offering value. “Chefs are becoming more adept at using lesser-known cuts as a means of creating cost conscious set menus, particularly at lunch,” said Burr. “They are also more flexible than in the past, with bar and restaurant menus becoming more easily interchangeable.” Michelin said the proof of the continuing rise in standards comes as two more pubs were awarded Michelin Stars this year: Heston Blumenthal’s Hinds Head in Bray, and Guy and Britt Manning’s Red Lion Freehouse in East Chisenbury. “The food in these two pubs is simply terrific and they make you appreciate that not only do we have a proud culinary heritage of our own in this country but we also have a huge number of very talented and imaginative chefs working in or owning pubs.” The Gunton Arms in Thorpe Market has won Pub of the Year. Burr said: “This pub is beautifully located in a 1,000 acre deer park. It has a great bar, a terrific terrace and a buzzing yet laid-back atmosphere. The cooking is unfussy, British and seasonal, and many dishes are cooked over the open fire. There are also eight luxurious bedrooms and two lovely residents’ sitting rooms. This really is a special place”. Michelin also argued that pubs had upped their game on accommodation. “More and more pubs are giving hotels a run for their money,” said Burr. “Many people prefer to stay somewhere that offers a more personal touch, where they can feel part of the local community.” Noble Inns, run by former Pitcher and Piano managers Scott Hunter and Maria Larsen, is one of the rising stars of the London gastro-pub scene. The company opened its third pub, The Pig and Butcher in Islington, in the summer to rave reviews from The Independent and The Evening Standard. Noble Inns’ first pub, The Princess of Shoreditch, won Time Out Gastro-Pub of the Year in 2010.

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