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Morning Briefing for pub, restaurant and food wervice operators

Wed 20th Feb 2013 - Chicago Rib Shack, Elior and Giraffe

Story of the day:

British private equity companies plan catering company swoop in biggest deal since 2008: A British pair of private equity companies are planning a 3.5 billion euros bid for French contract catering company Elior in the biggest deal of its sort since 2008, The Financial Times has reported. CVC Capital Partners and BC Partners are working together on the deal, which underlines the return of confidence within Europe’s private equity players. The British private equity firms would bid for the whole of Elior, valuing the company, including its net debt, at €3.5bn. Originally, Elior’s current owner Charterhouse had planned to sell only its two billion euros catering arm. The Financial Times stated: “The move partly highlights how recovering debt markets and the easing of the Eurozone debt crisis have triggered an improvement in sentiment among Europe’s leveraged buyout groups. Buyout groups are now able to finance larger deals and are showing stronger appetite to put their investors’ capital to work. It also shows that buyout groups are finding it difficult to sell companies by breaking them up into pieces, partly due to the lack of a liquid market for private equity-backed initial public offerings in Europe.” The start of this year saw the re-emergence of private equity interest in the tenanted pub sector when US private equity firm Cerberus Capital, advised by Sapient Corporate Finance, bought Lloyds Banking Group’s majority stake in tenanted pub operator Admiral Taverns for an estimated £200m. The deal was the biggest in the sector since Heineken bought 916 RBS tenanted pubs in December 2011 for £412m. The new majority shareholder in Admiral, which has 1,100 pubs, described the company as the “ideal platform” for acquiring more tenanted pubs.

Industry news:

Full-service restaurant sector seen 4.5% annual sales fall since 2008: Insights firm IbisWorld has reported revenue in the full-service restaurant sector is estimated to have declined at a compound annual rate of 4.5% during the past five years to reach £18.7 billion in 2012-13 due to the economic downturn causing many consumers to cut back on discretionary spending and trade down to cheaper takeaway options or choose to cook at home. Industry revenue is forecast to return to growth over the next five years through 2017-18 as a recovering consumer environment makes diners less value-conscious and encourages them to spend more on quality and provenance. IbisWorld analyst Lewis Sutton said: “Restaurants that tap into prevailing social and environmental trends and continue to emphasise high-quality, locally sourced produce should perform best.”

Technomic reports pubs prospering in Canada: Insights firm Technomic has reported that pubs are emerging as a force in the Canadian casual-dining segment. Technomic stated: “Particularly popular with Millennials, pubs are popping up as laid-back gathering places with varied menus. And while a classic look and feel is central to how some operators are developing new pubs, others are veering toward a more contemporary positioning. For example, Oxley Public House has positioned itself as an “upscale” gastropub with an authentic British look. Along with its sister concept The Queen & Beaver, the independent casual-dining restaurant features a menu touting food made in-house - from bread to ice cream to condiments. Signature offerings include curried vodka, housemade tonic syrups and cask beers from small local producers. The Firkin Group of Pubs - ranked 73rd among Canada’s Top 200 restaurant chains—recently relaunched some of its Toronto-area locations after rebranding them with the chain’s new “Cool Britannia” theme.”

Rank cleared to become UK’s largest casino operator: The Competition Commission has given the go-ahead to Rank to buy 19 of Gala’s casinos, making it the biggest casino operator in the UK. However casinos in Aberdeen, Stockton-on-Tees, Bristol and Cardiff owned by Gala are excluded from the deal. The deal to buy the Gala casinos is worth £205m.

1,700 apply for eight jobs at Costa site in Nottingham: 1,700 people have applied for eight vacancies at a new opening in Nottingham. Costa area manager Sham Ramparia said: “There have been a lot of good, high-calibre applicants, some with ten to 15 years of experience at the likes of Comet and HMV, who are now looking for work because of big companies going into administration.”

Booker withdraws ten products as a precautionary measure: Cash and carry firm Booker has withdrawn ten products as a precaution in the wake of the horsemeat scandal, according to The Sun. Eight burger lines - as well as diced and minced Halal beef - were taken off the shelves on Sunday. The move came two days after staff were told it was not implicated in the scare. Sources claim the withdrawal follows concerns about products supplied by Paragon to Beefeater owner Whitbread. A Booker spokesman said Paragon had recommended the removal of a limited number of products as a “precautionary measure”. Booker is in the process of buying rival Makro, which withdrew 16 lines and found one contained horse meat.

48 tons of horse and donkey meat seized at border in past seven years: Border Agency officials have seized 48 tons of products that contained horse or donkey meat in the last seven years, The Daily Mirror has reported. The newspaper reports that stretched officials are struggling to contain the influx and fear much more could be slipping through the net and getting into the food chain. A government source said: “It’s mainly horse and donkey meat from Eastern Europe as it’s so cheap for the gangs to get.”

UK’s top dozen licensees named: Twelve licensees from across the UK have made it to the semi-finals in the prestigious British Institute of Innkeeping Licensee of the Year Award. Licensee of the Year 2013 semi-finalists are: Steve Herbert, The Old Spot Inn, Dursley Gloucestershire, Jo Eden, Reflex Arcadian, Stirchley, Birmingham, Simon Bailey, The Bell Inn, Hampton, Middlesex, Ashely McCarthy, Ye Old Sun Inn, Colton, York, Richard Bell, The Silent Woman Inn, Wareham, Dorset, Tom Helliwell, The Woodman, Highgate, London, Philip Cutter, The Murderers, Norwich, Annie Power, The Coal Hole, The Strand, London, Marc Jones, The Sportsman, Tadworth, Surrey, Dennis Forsyth, Cheers Café Bar & Tavern, Fraserburgh Aberdeenshire, Cheryl Hickman, The Bull Inn, Barton Mills, near Mildenhead, Suffolk and Frazer Sutherland, The Thatch, Thame, Oxfordshire. The winner is unveiled at the BII Annual Lunch on 14 May.

Croydon plans UK’s largest cumulative impact zone: Three-quarters of Croydon could be subject to a cumulative impact zone in the most ambitious scheme of its type unveiled by a local authority. The plan would see 17 of 24 wards – including the entire north of the borough – designated as ‘cumulative impact zones’. The council will have the power to reject all licence applications – including amendments to existing agreements such as extending hours – unless a licensed premise can prove its will not add to existing drink-related problems in the area.

Company news:

Smashburger plans 60 openings in 2013: Smashburger, the rapidly expanding US better burger restaurant concept, added a total of 58 new locations globally in 2012, comprised of 17 corporate locations and 41 new locations opened by its franchise partners, representing 36% total new unit growth over 2011, with a total count of 193 restaurants. Chief executive David Prokupek said: “We are very excited about the record growth we have had over the past year with Smashburger.” In 2013, Smashburger is targeting 30% unit growth, with the addition of 50-60 restaurant openings. In the last year, Smashburger received dozens of best burger awards as well as several notable rankings, including being named number one in Fast Casual’s Top 100 Movers and Shakers list, in both the brand and industry executive categories, with Prokupek topping the executive list. Additionally, the company was ranked ninth on Inc. magazine’s Hire Power Awards list, for its role in job creation, as well as QSR Magazine’s 2012’s Best Franchise Deals. Smashburger chief executive David Prokupek is to present at the Propel Multi-Club Conference on Tuesday 19 March. Operators can claim two free places by e-mailing

Private Equity News – Giraffe sale predicted: Private Equity News has reported that deal advisers are predicting a sale of private equity-owned restaurant chain Giraffe this year as its owners continue to discuss future options with advisory firm PricewaterhouseCoopers. Private Equity News stated: “Giraffe, owned by Risk Capital and 3i Group, has been working with PwC since 2010, though both parties are keen for an exit in 2013, according to three sources familiar with the situation.” Giraffe, founded by husband and wife team Juliette and Russel Joffe, reported like-for-like sales grew by 5% in December with overall turnover at the 48-site company up by 17%. The company made a profit of £4m on turnover of £40m in its most recent financial year. The next site will open in Leeds in May with six planned for this calendar year. It has opened it first overseas site at the new airport terminal in Dubai.

PizzaExpress offers Orange customers four nights of discounts to celebrate British film: PizzaExpress is marking Oscars nights and “British film being at the top of its game” by offering Orange customers four consecutive nights of 2 for 1 on pizza, starting this Sunday (24th Feb). The offer is available after 5pm on Sunday 24th and all day Monday 25th - Wednesday 27th. Orange customers can already enjoy 2 for 1 pizza every Wednesday at PizzaExpress with Orange Wednesday.

Rockpool adds two directors to Chicago Rib Shack board: Investment company Rockpool, which is currently raising £1.7m of development capital for Chicago Rib Shack, has added two leisure sector entrepreneurs, Julian Coppock and Stephen Thomas, to the board. Coppock joins as non-executive chairman and Thomas as a non-executive director. The new non-executive chairman gave up a senior corporate position as chief marketing officer of Kentucky Fried Chicken in the UK to start his own business. Over the next 17 years, he built a chain of 25 KFC and Pizza Hut franchised restaurants, also chaired the KFC Franchise Association for several years. Following a profitable exit in 2012, Julian is now building a portfolio of private investments, focussing on housing, retailing and fast-casual restaurants. Thomas was the founder of Luminar, which became the leading UK operator of nightclub venues and was in the FTSE 250, reaching a market capitalisation of £1 billion. He is both an existing investor in Chicago Rib Shack and was instrumental in bringing the current investment opportunity to Rockpool – and is also investing in the current funding round. Chicago Rib Shack chief executive Christian Arden said: “I am absolutely thrilled to be welcoming Julian and Stephen to our board. They are both very successful entrepreneurs, who will bring vast knowledge and experience to our business. This is really good news for the new investors who will be coming into Chicago Rib Shack”.

River Cottage Canteen adds squirrel to the menu: Television chef Hugh Fearnley-Whittingstall has added fresh squirrel to the menu of one of his restaurants. Grey squirrel braised in a tomato and red wine sauce is being served up to customers at River Cottage Canteen in Plymouth, Devon. The squirrels were shot at River Cottage headquarters at Park Farm. “It will be interesting to see how the guests react to it, because it is nice for us to offer something different,” said front of house manager Marie Mitchel.

Luminar signs ten-year deal in Preston: Nightclub company Luminar has signed a ten-year lease on its existing Lava and Ignite nightclub in Preston. The company, which ran the nightclub on a short-term lease in the wake of the administration of the company in 2011, is now planning a £500,000 refurbishment on the site, due to start in the coming months. A spokeswoman for Luminar said the company will start work on the refurbishment in the coming months. She said: “We are committed to Preston and to being the best late-night operator in the city. We have, therefore, signed a long-term lease and will be investing up to £500,000 in Lava and Ignite. These are exciting times for the club, we have instructed designers and will be able to reveal the details of our investment over the next couple of months.”

Tavistock Leisure to re-open Chester-le-Street pub after £500,000 refurbishment: Tavistock Leisure is to re-open The Lambton Worm, North Road, Chester-le-Street this Friday (22 February) after a £500,000 refurbishment. The venue is to be re-named Lambton Worm Sonnet 43 Brew Pub and Restaurant and houses a separate bar and restaurant area, serving ‘classic cuisine’ and real ales created by Tavistock’s own brewery in Coxhoe. Jonathan Graham, director of Tavistock Leisure, said: “The Lambton Worm Sonnet 43 Brew Pub and Restaurant has been specifically designed to look and feel like a traditional English gastro-pub. The menus include a lot of dishes that diners will be familiar with, as well as some they probably won’t.”

Spirit to convert Werrington pub to John Barras brand: Spirit Pub Company is to invest £150,000 to convert The Windmill Inn in Werrington to its John Barrad brand – it closes on 25 February 25 and reopens on 8 March. The Ash Bank Road pub will be fitted with new HD TVs, furniture and a refurbished bar, with new signs and lights outside. Meanwhile, Spirit is to invest a further £150,000 to convert its Pippins pub in Carlisle’s Lowther Street to its original name, Apple Tree. It will close on 4 March and re-open on 13 March. The plan is to restore the listed building and return it to its former glory. The refurbishment will give the pub a new look and feel both inside and out, including updating the decor, bringing in additional furniture and improving the menu.

Entrepreneur to invest £1m in Derby coaching inn: Entrepreneur Paul Hurst and a group of private investors are to spend £1m restoring the Old Bell Hotel in Derby’s Sadler Gate to its former glory. Hurst, a director of Stoll Moss, the company that owns and runs the Sadlergates café, is taking a step back from his other business concerns to oversee the Old Bell Hotel refurbishment project. The idea is to bring in a third party to run the pub following the restoration. Hurst told the Derby Telegraph that there had already been expressions of interest from both local and national operators. He said: “It will take at least £1 million to put it back to how it should be but it has to be done because this is such an important part of Derby’s history.”

Greggs to increase amount of hot food served: High Street baker Greggs is to increase the number of hot snacks it sells that are subject to 20% VAT. Six months after forcing the government into a U-turn over the pasty tax, Greggs said it will trial hot pasties, sausage rolls and other hot food, all be subject to VAT at 20%. Greggs bakes savouries in-store at its 1,600 branches before leaving them to cool. It was this method of selling hot food that enabled Greggs, following extensive lobbying of MPs, to escape the imposition of 20% VAT slapped on hot takeaway food in the 2012 Budget. But feedback from customers on Greggs’ Facebook page shows many customers are unhappy if they are served lukewarm. A Greggs spokesman said: “Greggs already offers toasted sandwiches but is looking at extending the range of food that could be served hot or heated up. If something is served hot, it will attract VAT.”

Freehold of London pub sells for more than £1.25m guide price: One of the oldest pubs in Fulham, the Vintage Bar, which was called The White Hart for most of its history, has sold for “substantially more” than its £1.25m guide price by agent AG&G. “Now it looks likely to become a restaurant with an excellent catchment area, subject to the usual permissions,” says AG&G’s Michael Penfold. “There was strong interest in the freehold, leading to several offers.”

De Vere to be marketed for up to £350m: Industry reports suggest De Vere Group, which is part-owned by Lloyds Banking Group, is planning to appointed Lazards to sell the venues business which generates annual earnings of around £30m. A final decision on whether to sell the division will be taken once the sale of Principal Hayley, a rival hotel and conference business also backed by Lloyds, has been completed. De Vere currently has £1.1bn of debt with Lloyds. The portfolio comprises 29 venues across the UK.

St Austell picks up 200 new customers with acquisition of Real Beer Company: St Austell brewery marketing director Jeremy Mitchell has reported that the company has acquired 200 new customers with the acquisition of The Real Beer Company earlier this month. He told Insider: “St Austell has long been famous for our own cask beers but we’ve also got our wholesale business which provides about £40m of our £100m turnover. We’re a wholesale drinks provider to the pub and hotel trade selling everyone else’s products, not just our own, and there was a gap in being able to offer guest beers. The Real Beer Company has carved out a very successful niche in providing guest beers from around the UK so it was a really good fit.” On acquisitions, he said: “We bought five last year and we’d love to buy another five this year. The only thing that’s driving (that) is finding the right sites in the right towns.”

JD Wetherspoon invests £1.4m in Kirkby in Ashfield: Managed operator JD Wetherspoon has spent £1.4 million re-developing the site of the former Regent Cinema in Kirkby in Ashfield, Nottinghamshire (population: 25,030) as a pub called The Regent, which opened yesterday. The Regent Cinema originally opened in October 1930. Renamed the Essoldo in 1961, it was converted into a bingo hall four years later. Part of the old building re-opened as The Regent in 1988, and as the Cineplex in 2004.

Papa John’s launches franchise incentive scheme: Pizza delivery firm Papa John’s has reduced its franchise fee and is giving away a top-of-the range oven and electronic point of sale equipment worth £30,000 plus £10,000 worth of marketing spend to new franchisees who open sites this year. “Last year, we hit our target and opened the 200th Papa John’s stores in the UK and we are now delighted to roll-out this amazing incentive scheme to brand new franchisees as part of our strategic plan to grow store numbers further in the future,” said Dave Bancroft, business development director, Papa John’s. “We are specifically encouraging franchisee applications from Wales, the Midlands, the North of England and Scotland.”

Breakfast Group to launch second Salvador and Amanda bar restaurant: Breakfast Group, led by Eric Yu, is to officially open its second Salvador and Amanda site on 1 March. The original site opened in Covent Garden 12 years ago. Breakfast Group, whose sites include The Social, Opium and Jerusalem, has never before opened a site for a particular brand.

Brakspear publishes guide to best pubs: Brakspear has published the ‘Best of Brakspear’, a guide to its finest pubs, in a bid to encourage customers to visit more sites across the estate. The pocket-size guide includes all the pubs which scored 75% or higher in Brakspear’s twice-yearly mystery customer visits. Each pub is given a dedicated page with an image and description including opening hours, food style and a range of facilities such as dog-friendliness, letting rooms, free Wi-Fi and Cask Marque accreditation. The ‘Best of Brakspear’ will be sold in pubs for £2.50, with Brakspear donating 50p from every sale to Sue Ryder, the nationwide charity providing care for people with life-changing illness.

Domino’s adds Chimichurri pizza to menu: Domino’s UK has added a pizza to its menu that won a competition held by This Morning. The Chimichurri pizza, created by Maria Tyrrell from High Wycombe, won a national competition run by ITV’s This Morning - it features chicken, yellow and red peppers, and Chimichurri sauce. Tyrrell said: “Food is a massive part of my family – my grandmother was a cordon bleu chef and my parents and brother run an Argentine restaurant in Middlesex so I’ve always loved cooking and using my Argentinean heritage in recipes. When I saw this competition, I just had to enter.”

Heineken appoints new boss for Star Pubs and Bars: Heineken has appointed Chris Jowsey, currently the on-trade commercial director of Heineken, as the new trading director for its Stars Pubs & Bars business where he will lead the management team. Former trading director Chris Moore has been appointed to the new role of property and strategy director for Star Pubs & Bars. He will also be responsible for all other property interests across Heineken UK. In addition, he will lead the strategic development of the business and continue to represent Heineken UK on external industry forums. The changes will take effect from the 25 February. In November, Heineken re-named its pub estate Star Pubs and Bars, almost a year after it bought the freeholds of the RBS-owned Galaxy estate of 918 pubs to add to its Blue Star estate of freeholds to create a 1,300-strong high quality estate. Star Pubs and Bars has also expanded its range of leases to increase flexibility for licenses. A new three-year “Business Start-up” Agreement has been created for pubs where operators have the opportunity to significantly increase trade. Entry is low cost (starting at £10,000 including a flat £3,000 deposit) and - in a groundbreaking move for the pub industry - operators can terminate their contract with three months’ notice at any time. A “First Year Support Package” has been launched for pubs requiring additional financial backing to fulfill their potential. The package is designed to assist with cash flow in the crucial first year, giving operators the time to establish themselves and build up trade. Additional measures to helps pubs range from payment of business rates and Sky license fees to additional discounts on beer.

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