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Mon 26th Nov 2012 - Domino’s, M&B and Real Greek Food Company

Story of the day:

Domino’s franchisees selling individual sites for up to £800,000: Domino’s UK franchisees selling their sites are earning premiums of up to £800,000 per site, chief executive Lance Batchelor has reported. Domino’s franchisees earn an average of £115,000 per site per annum and it costs around £250,000 to open a new site. The total number of franchisees within Domino’s is reducing as smaller franchisees retire and sell sites to bigger franchisees. Batchelor told Propel Quarterly magazine: “When franchisees exit, price really does depend on where in the country it is, the profitability of the store and the prospects that the potential buyers see. What I can say is it costs around £250,000 to open a store from scratch and we rarely sell a store for less than £500,000. Typically the day you open the store it is worth double what you paid for it - and we often see stores going for £700,000 to £800,000. Recently, we have had two franchisees exit - one selling eight stores, one selling seven and they went away very happy!” Batchelor reported that there is natural evolution going on within Domino’s. He said: “There is no definite goal to having fewer franchisees with more sites. But the reality is (that) franchisees are either exiting or adding. So over the last three or four years we have lost about ten franchisees a year but added about five from a peak of 170 franchisees. So the net number has shrunk down to about 120 franchisees on average with six stores each, making a profit of £600,000 a year. We had over 4,000 applications (to open a Domino’s) last year and we accepted only five people - so the bar to get in is really high now. It involves a detailed paper application, five rounds of interviews and a three-week course that you pay for. And we assess applicants and we may fail them - and then at the end of all of that they have to wait and try and get a store.” Lance Batchelor's comments are part of an interview contained in the Propel Quarterly magazine, which is published this week.

ALMR National Restaurant Show Study Tour in Chicago open for bookings: The Association of Licensed Multiple Retailers (ALMR) has opened its study tour to the National Restaurant Association Show in Chicago in May 2013 for bookings. Next year’s visit takes place between Thursday 16 May and Monday 20 May. The ALMR launched its first study tour trip to the NRA show this year, with the trip led by Propel Morning Briefing managing director Paul Charity. The NRA draws 58,000-plus industry professionals from all 50 states and 100 countries, all seeking the newest innovations and up-to-the-minute information about trends and issues. The ALMR trip provides: insights from industry experts on the rise in fast-casual dining, social media, new and emerging brands, menu development, staff management and a host of other issues – with 70 free education sessions; involves a tour of Chicago’s hottest concepts and a market overview briefing sessions from US experts. ALMR chief executive Nick Bish said: “Our first trip in May this year was a tremendous success with our attendees reporting they had benefited enormously from the visit to the Show and the chance to study the key trends in the innovative US market.” Paul Charity, managing director of Propel Info, said: “The NRA show is a fantastic opportunity to find fresh inspiration and understand the emerging trends shaping the fast-changing US market.” To book a place, e-mail Jo Charity on or call her on (01444) 810304. Places are limited.

Industry news:

Study shows consumers are spending more per visit but going out less: A study of UK consumers suggests that the rising cost of visiting pubs and restaurants means people are going out less. A report released today by Zolfo Cooper, the advisory and restructuring specialist, reveals that people are spending 7.3 per cent more per visit at restaurants and 4.2 per cent more at pubs:  the average spend per visit was now £17.06 and £15.30 respectively. While this could be interpreted as good news – with leisure operators successfully driving average spend per customer – the rise comes at the same time as consumers report a decrease in the number of visits, suggesting that rising cost of eating and drinking out, amid on-going duty rises and significant retail price inflation, is prompting people to go less often to restaurants and pubs. Paul Hemming, partner, corporate advisory services, said: “Many pub and bar operators are having the life squeezed out of them by a combination of cheap supermarket booze and escalating duties. The government will not want to become even more unpopular by increasing supermarket prices so the focus needs to be on getting a fairer deal on VAT and duties. It’s time everyone got behind the likes of Tim Martin and Jacques Borel or we will end up losing another 10,000 pubs.  “There is worse to come with further scheduled alcohol duty increases in March and well documented increases in food and drink input costs, so 2013 looks like being another challenging year for operators.” Tim Martin, founder and chairman of JD Wetherspoon, said: “It seems clear to me from the figures contained in this report show that the rising cost of going to the pub, from alcohol duty increases and January 2011’s VAT rise, is impacting how often people visit.” Hemming said: “It is the increasing cost of going out that is driving the increased spend rather than an extra indulgence by the consumer. The reality is that over the five consumer studies we have undertaken since summer 2010 each wave has seen a further drop in overall leisure spend. This means the market continues to shrink which will inevitably lead to more business failures.”

Treasury presses for 45p minimum unit price: The Treasury is pressing for a consultation on a 45p minimum unit price for alcohol amid reports that the Cabinet is split on the controversial policy, the Sunday Telegraph has reported. Of the 45p plan, a source told the newspaper: “This is what the Treasury wants and what the Treasury wants it usually gets. But the rows are still going on and nothing has finally been decided.” The Treasury has warned that income from alcohol could be severely affected if minimum pricing is set too high. Two Cabinet ministers – Commons leader Andrew Lansley and Education Secretary Michael Gove – are opposed to minimum pricing.

Minimum pricing could be a vote loser: Plans by David Cameron to introduce a minimum price on alcohol and ban supermarket multi-buy booze deals looks like a certain vote loser, according to a new study of UK consumers. A report released today by Zolfo Cooper, the advisory and restructuring specialist, reveals a significant majority of people are against a national minimum price per unit of alcohol, with 60 per cent saying they were against such a move. The research of more than 2,000 consumers revealed that Britons love the discounted alcohol deals deployed by the nation’s grocery chains to drive people to their stores. When asked ‘do you think supermarkets should be prevented from discounting the price of alcohol to attract customers to visit their stores?’ 60 per cent of respondents said no.

France restaurant trade body considers end to service charge: The biggest trade body in France, the UMIH, is considering putting an end to automatic 15 per cent service charge on bills in restaurants. The tip would be left to customer’s discretion in a big to improve the quality of service. UMIH head Roland Huguy said: “In France, service isn’t our strong point – we should be training waiters to be more pleasant.”

ALMR – Government on track to publish alcohol strategy by the end of the year: The Association of Licensed Multiple Retailers (ALMR) has reported that the government plans to publish its Alcohol Strategy – including health as a licensing objective, mandatory conditions and minimum pricing – before the end of the year. Strategic affairs director Kate Nicholls said: “A number of government technical working groups will be established as part of the consultation and will meet over December and January. ALMR will seek to be represented at all events and members wishing to participate or assist in this process are asked to contact the office.”

Co-operative of Soho restaurants aim to set up energy-producing waste centre: A collective of 15 Soho restaurants aim to band together to set up their own anaerobic waste collection centre. The restaurants aim to collect their waste and produce methane as a by-product. The gas would be burnt to create electricity, which could then be fed back into the national grid or used directly to power businesses in Soho. Jamie Poulton, who owns Randall & Aubin in Brewer Street, has set up a working group of 15 West End restaurants to develop the idea. He said: “There are 60-plus waste collectors that come into Soho weekly and only one or two of them have good recycling credentials.” The new waste collection centre could be in place in as little as 18 months. Poulton added: “If we had our own collection centre in Soho, every restaurant could take their waste there when they wanted to.”

Hakkasan co-founder stop paying interest rate swap “on principle”: Hakkasan co-founder Sami Wasif has stopped paying RBS the monthly interest on an interest rate swap “out of principle”, The Sunday Telegraph has reported. Wasif has skipped one payment of nearly £4,000 already. Wasif, who has paid RBS almost £200,000 in interest on the swap already, told the newspaper: “I feel very strongly about this. I trusted the bank to charge me fairly and I don’t know what I’m paying for.” Wasif has already lodged a complaint with RBS that has been rejected by the bank. Barclays and HSBC has allowed some customers to suspend interest rate swap payments in cases being reviewed by an independent compensation scheme examining mis-selling.

Academics discover the rules of pub toilet etiquette: Academics from the University of London have discovered the strict rules of male behaviour in pub toilets. Hundreds of men were observed and interviewed for the study, which appears the British Journal of Criminology. It was found that men followed a special “toilet etiquette” to avoid fights in the gents. The key rules are: Never catch someone else’s eye; never draw attention to yourself; and never squeeze in next to someone else – unless it is the last space available.

CGA Strategy – pub beer sales down by 1.1 million pints since 2008: CGA Strategy research has revealed the number of pints of beer sold in British pubs has dropped from five billion in 2008 to 3.9 billion pints this year. The Sunday Mirror reported the company’s research shows Lancashire, Wales and the Midlands as worst hit, with the latter’s sales dropping 27 per cent in the last year. Phil Tate, CGA’s chief operating officer, told the newspaper: “The duty escalator has made an already challenging trading environment even more difficult.”

Company news:

Mitchells & Butlers fined £235,000 over cleaner’s death: Mitchells and Butlers (M&B) has been fined a total of £235,000 and ordered to pay £65,000 in costs following the death of a cleaner. Richard Pratley, who was 65, died from head injuries after falling from a ladder while cleaning the roof inside the Snuff Mill Harvester on Frenchay Park Road, Bristol. Bristol Crown Court heard the restaurant's only stepladder was "unfit for service" – too short for the job, damaged, dirty, greasy and rusty. An investigation by health and safety inspector Heather Clarke, found an unlocked electrical cupboard had 83 defects, including live exposed wires. She also found slip hazards in the kitchen when wet and trip hazards in the outside yard. Prosecutor Alan Fuller said the Harvester's risk assessments were "inadequate". There were six slipping accidents between 2007 and 2009. An M&B spokeswoman said: "This was a tragic accident and we would like to reiterate our condolences to Mr Pratley's family. The safety of our employees and guests remains paramount and following a detailed review of the circumstances of the accident, the company has implemented a comprehensive programme of remedial measures at the premises and across the entire estate." M&B admitted three health and safety offences at Bristol Crown Court. They included failing to ensure the safety of employees in relation to working at height and in the use of ladders. The court heard that the roof is now cleaned with a long-handled mop.

Real Greek Food Company reports profit up: Real Greek Food Company, headed by David Page, has reported pre-tax profit rose to £180,000 in the 15 months ended 1 July, up from £49,000 the year before. Turnover rose to £8,816,000 from £6,022,000 the year before. The company opened a site during the period but sold its restaurant in Hoxton last month to Matailer, a company of which David Page is a director – the value of the site had been impaired by £188,000 in the most recent accounts. The company was sold by Gourmet Burger Kitchen to Kefi in June 2011. The company’s operating profit before opening costs, exceptional items and impairments was £495,000 compared to £240,000 the year before.

Marston’s plans ten new-build in Scotland in three years: Midlands-based Marston’s is planning to invest around £25 million building up to ten new pub restaurants in Scotland in the next three years, managed division boss Peter Dalzell has told the Glasgow Herald. Works has begun on the first site at Dunbar, with others at Braehead near Glasgow and Edinburgh well advanced. Dalzell told the newspaper: “Our original target (nationally) was 60 pubs in three years, which we have just completed. We are pleasantly surprised at how little damage it has done to our own pubs – for a new pub-restaurant the biggest competitor is the living-room sofa, people staying in. So if we are not affecting our pubs we must be pulling people out of their houses. If you are good enough and build a pub in the right place, have the right offer and engage with the local community, you can get them out.”

Stephen Goodyear – Young’s will invest £20m in the estate this year: Chief executive of London pub operator Young’s, Stephen Goodyear, has reported the company will invest £20m in the estate in the coming year. Writing for The Daily Telegraph, he said: “What makes a pub consistently successful is the right fabric and feel, the right range of liquor, restaurant-quality food and most crucially the impeccable service itself. The proof is in the pudding with one of our chefs recently reaching the Masterchef semi-finals. We invest intensively in training and career development, and expect people to see the pub industry as a long-term career path, not a jumping-off point for something else. We are proud to employ nearly 4,000 people who are amongst the best in the industry. This year we will invest nearly £20m in our pubs and over a million hours in recruitment, training and service development.”

Sunday Times reports Charles Dunstone will be Five Guys UK joint venture partner: The Sunday Times has reported that Carphone Warehouse founder Charles Dunstone will launch US better burger concept Five Guys in the UK in a joint venture with the US parent company. Dunstone hopes to open the first site in London in 2013. A Companies House search by Propel Morning Briefing shows a company called Five Guys JV was incorporated at Companies House on 20 August this year as Oval (2254) before adopting the Five Guys name this month. Aside from Dunstone, Gregory Decelle, who is chief development officer at Five Guys, and Sam Chamberlain, chief operating officer at Five Guys, have also become directors of the UK company this month. 

JD Wetherspoon sets March 2013 opening for Deal pub: Managed operator JD Wetherspoon has set a March 2013 opening date for its pub in Deal, Kent, which will be built on the site of the former Job Centre. It will be called The Five Bells - a name that has upset local people who wanted it to be called The Norman Wisdom, in honour of one of Deal’s most famous former citizens. Deal has a population of 29,248.

Orchid to open Maidenhead Pizza Bar and Kitchen: Managed operator will open a Pizza Bar Kitchen site in Maidenhead on Friday, 7 December. The company is spending £250,000 converting The Bell pub to its key growth brand, which has a “100 per cent fresh dough guarantee”. The pizza kitchen will be in the bar area and will feature a new layout incorporating more big screen TVs and a family-friendly feel during the day.

Greene King submits new-build Hungry Horse plan for Wallsend, North Tyneside: Suffolk-based Greene King has submitted a planning application for a new-build Hungry Hose in Middle Engine Lane, Wallsend, North Tyneside. The new-build would be located between the Safe Storage Unit and the B&Q Warehouse in Middle Engine Lane and would create ten full-time jobs and 30 part-time roles. Councillors will make a decision on the application in the New Year.

Inns & Leisure reports turnover up, small profit decline: Preston-based Inns & Leisure, founded by John and George Clarke, has reported pre-tax profits rose to £424,058 in the year to 29 February, up from £435,716 the year before. Turnover climbed to £3,649,033 from £3,338,561 the year before. The company stated: “The continued low prices of supermarket alcohol and the effects of the smoking ban have compounded the downward turn in the economy, making trading conditions the toughest for several years. All managed houses have experienced trade decreases and all but the most robust and experienced tenants are struggling to meet their outgoings. The management are doing all they can to work with tenants to renegotiate their terms in an effort to keep their doors open, whilst many around are forced to close theirs. Many of these closures will be permanent and those businesses which emerge from these times should have less competition as a result of the recession.”

Wharfebank Brewery takes over third pub: Wharfebank Brewery, based in Wharfedale, Yorkshire, has acquired its third pub, The Rook and Gaskill Inn in York, a Castle Rock site. WharfeBank Brewery already operates The Fleece in Otley and Pool’s Half Moon Inn. WharfeBank plans to showcase its ales, along with those from Castle Rock, at the traditional venue, which is a previous York CAMRA Pub of the Year award winner.

Veteran Manchester restaurateur opens new concept: Veteran Manchester operator of Italian restaurants, Bahman Ghojehvand, has opened a new concept, Avalanche, which he hopes to roll-out. Ghojehvand, who founded Don Giovannis in the city, said Avalanche is “inspired by the great establishments of London and Paris”. The Italian restaurant and bar, which is on the site of the former Lime Bar at the intersection of Booth Street and Clarence Street, will cater for up to 180 diners.

Sojourn Hotels re-opens historic Oxford site in £1.5m spend: An iconic Oxford building which has lain empty for more than a decade has been brought back to life as a new boutique hotel. The Vanbrugh House Hotel in St Michael’s Street opens today after a £1.5m restoration by Sojourn Hotels. The hotel has 22 bedrooms which have been created in the Grade II listed Vanburgh House, parts of which date back to the 17th century and the former vicarage next door. The building is owned by Oxford City Council but has been empty for more than ten years. Sojourn managing director Clive Viner said: “It has taken us three years to get to this point and gain planning permission.” It is the second boutique city centre hotel to launch this year following the opening of The Bocardo in George Street in April.

Derwent Brewery to open first pub: Cumbrian brewer Derwent Brewery will open its first pub, to be called The Vaults, in former bank building in Aspatria. Brewery founder Stuart Richardson said: “It’ll be more of a restaurant than a pub.” Planning permission has been given by Allerdale Council for the restaurant, which will open in the former HSBC bank on King Street.

La Tasca in Derby replaced by Moroccan-themed bar: A La Tasca site in Derby’s Friar Gate has been replaced by a Moroccan-themed bar called Bar Marrakech. It will serve African and Mediterranean cuisine once kitchen alterations are completed. Co-owner Steve Rouse, who is also owner of Bar 5 in the city, said: “We’re currently altering the kitchens to accommodate our new menu, which will take another few weeks.”

Jamie Rollo – we wouldn’t buy Enterprise shares right now: Morgan Stanley leisure analyst Jamie Rollo has argued that Enterprise Inns looks to be making progress but that it is too early to be tempted to buy its shares. He said: “Enterprise Inns’ final results were in-line with expectations and contained few surprises. Trading in the last eight weeks of the year seemed to lose a little momentum, and it appears to have remained negative in the new financial year. The company made good progress on disposals and reducing bank debts, though it said it is not appropriate to commence a dividend at this time. We nudged our 2013 Earnings Per Share forecast up one per cent, but trimmed 2014 onwards by four per cent to reflect our expectation that disposals will continue, which are slightly dilutive. Enterprise continues to outperform most of its leased peers, trading should stabilise later this year, and its imminent funding needs have been addressed. However, the leased pub sector remains challenged, and the company’s debt levels remain very high, so we would not be tempted to buy the shares right now.” 

Caprice Holdings underlying profits dip: Caprice Holdings, which runs high-end restaurants like Le Caprice and The Ivy, has reported underlying profits dipped to £5.7m in 2011 compared with £6.3m in the previous year, according to the Mail on Sunday. The lower profits came after a £800,000 investment opening a new site in Mayfair. 

Jamie Rollo - Mitchells & Butlers shares our top pick: Jamie Rollo, leisure analyst at Morgan Stanley, has noted that “despite a recent bounce, Mitchells & Butlers shares are still trading towards the low end of their historical average”. Commenting on the full year results due tomorrow (27 November), he said: “We expect solid current trading, but little news on strategy given that the new chief executive has only just started. The shares have had a good run and remain our top pick in pubs.”

Orchid partners Daily Express in free bottle of wine promotion: Managed operator Orchid has teamed up with The Daily Express and Channel Five to offer a free bottle of win to diners visiting an Orchid pub. The campaign aired on Channel Five and involved collecting vouchers from The Daily Express. 

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