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Morning Briefing for pub, restaurant and food wervice operators

Thu 18th Apr 2013 - Real China, Southern Fried Chicken and Spirit

Story of the day:

Downing boss – it’s a good time to invest in pubs: Steve Kenee, who is investment director for the Downing Pub EIS that has invested with Antic London, Pub People Company and recently funded Geragrious in buying 12 London pubs out of administration, has argued that it’s a good time to invest in the sector. In London, Downing aims to acquire pubs in areas that are undergoing gentrification, popular with workers priced out of more affluent neighbourhoods, but which lack a decent pub. “The big pub companies do not have the nimbleness to support those new areas, but they will buy a pub off you when it is established,” Kenee told Investment Week. In 2008, a pub would have sold for ten times annual earnings, whereas now that price has fallen to around seven times. For EIS investors confident in their management team’s ability to grow the pub’s profitability, this represents a significant opportunity, he said. “The pub sector isn’t dead, particularly in London. People still want to socialise but people want value for money. Our target market wants everything you can’t get from a supermarket – good environment, range of ales, knowledgeable staff and quality food.” While the downturn has squeezed discretionary spend, the last few years have seen growth in money spent on ‘little luxuries’ – so perfume, cosmetics, and upmarket food ranges have thrived. This extends to the pub sector, too, and Kenee said there had been a “huge explosion” of interest in craft cask ales - products a supermarket finds harder to offer. “It has been a saviour of the industry,” he said. “Whenever there is a recession, individual and artisan products come out. Consistency used to be the most important thing, now it is diversity and change.”

Industry news:

Jacques Borel, Tim Martin and Jens Hofma at the Propel Multi Club Conference on Thursday 20 June at the Oxford Belfry: Jacques Borel, who is campaigning to reduce VAT to 5% in the UK hospitality industry, JD Wetherspoon chairman Tim Martin, and Pizza Hut chief executive Jens Hofma talk about progress in the campaign and plans going forward at the Propel Multi Club Conference on Tursday 20 June at the Oxford Belfry. Jens Hofma, chief executive of Pizza Hut, will also present on how the company is being turned around in the wake of its acquisition by Rutland Partners. Operators can book two free places on a first come, first basis by e-mailing

Expectations low on McDonald’s result this Friday: McDonald’s is expected to report an increase in first-quarter profit on Friday but Wall Street analysts fear the fast-food company’s sales growth will be disappointing. Chief executive Don Thompson warned that the company’s profit growth will be tempered this year as the chain sacrifices margin in order to better compete for cost-conscious consumers. McDonald’s sales at locations open at least 13 months have improved since it began advertising its Dollar Menu more aggressively in January. McDonald’s realised a need for more emphasis on value last year after its promotions of higher-priced menu items weren’t “resonating with consumers”. 

Tesco – ‘In buying Giraffe, we’re making important steps in broadening retail appeal’: Tesco reported yesterday that it is making key steps in broadening its retail appeal by buying foodservice companies. It stated: “By investing in the Harris + Hoole coffee chain, working with the Euphorium bakery brand in London and acquiring the Giraffe restaurant chain, we have made important steps towards turning our stores into compelling retail destinations for customers.”

Company news:

Geof Collyer – Marston’s new segmentation will make it almost impossible to benchmark it against peers: Deutsche Bank leisure analyst Geof Collyer has argued that Marston’s segmentation will make it almost impossible to benchmark the company against its peers. He said: “The new segmentation, flagged in embryonic state last November, will eventually see the size of the retail estate shrink by around 30% with the Destination & Premium estate (339 pubs - all the new builds, plus Pitcher & Piano and Revere sites) accounting for around 33% of the group’s pre-overhead pub profits based on 2012 proforma. This will be the prime driver of group growth. The 156 managed pubs going into the Taverns estate are expected over time to be converted into the group’s franchise model, expanding this estate to around 1,000 outlets. One side effect of the new structure is that it will now become almost impossible to benchmark Marston’s pubs against the peer group, apart from showing how well the top 65% of the old managed estate and the top 25% of the old tenanted and leased estate are doing.”

Star Pubs and Bars lease in London sold off £235,000 asking price: The Albion, a Star Pubs and Bars lease close to Kensington High Street in West Kensington, has been sold by sold by Phil Slater off an asking price of £235,000 to multi retailer Sanko Venos. Carl Steer, of Christie + Co’s London Office, said: “We were instructed to sell The Albion public house after we sold The Crown & Sceptre in Holland Road, West Kensington, a few months earlier. The Crown & Sceptre was another of our client’s pubs. We quickly generated a lot of interest in The Albion and received numerous offers. The deal was agreed to an experienced operator looking to expand.”

Peach Pub Company celebrates tenth birthday: Peach Pub Company, founded by Lee Cash and Hamish Stoddart, is celebrating its tenth birthday this week. The company opened The Rose and Crown, Warwick, a decade ago. Last October, Peach opened its sixteenth pub, The Star and Garter in Leamington Spa, which is located just off the town centre on Warwick Street.

Domino’s tipped as front-runner to sponsor Football League: Domino’s Pizza has emerged as a rival to B&Q to sponsor the Football League. The Football League - which encompasses the Championship and Leagues One and Two - has been in talks with a number of companies after Npower confirmed it would not be renewing its £21m three-year deal. According to reports in Marketing News, Domino’s and B&Q are thought to be the two frontrunners to seal a deal and an announcement is expected in the coming weeks, to begin sponsorship from the 2013/14 season.

Wok & Go looking for ten sites: Asian food concept Wok & Go has hired property consultant Cushman & Wakefield to find ten new sites.The company was founded in 2007 by former financial analyst Des Pheby and offers a fusion of Thai, Malaysian, Chinese, Japanese and Indonesian food. It has nine sites in total, including two in Chester, two in Liverpool, two in Nottingham, and sites in Birmingham, Hull and Leeds.The company is looking for edge of prime retail units with A3/A5 planning consent, ranging from 800 sq ft to 1,200 sq ft, in high footfall locations such as primary shopping centres, high streets and even high-quality retail parks. Matt Illingworth, partner in Cushman & Wakefield’s retail team, said: “Wok & Go is a premium quality brand which has established itself very well since opening its first store in Chester only six years ago. There is clearly widespread appeal of the product as a healthy and convenient hot food offer and Cushman & Wakefield is looking forward to working closely with Des Pheby and his team to secure locations which will enable this business to build on its success and extend its UK reach.”

Gerald Eve puts 13 Premium Bar and Leisure sites on the market: Agent Gerald Eve is selling 13 Premium Bar and Leisure bar and nightclub sites in the north east, with an estimate combined value of circa £10m. A total of 12 of the 13 sites, part of the former Ultimate Leisure estate, are either freehold or long leasehold. Ten of the sites are valued at a combined £7,625,000 with offers invited on the remaining three. Trading since year ended January 2011 has been reasonably steady with combined turnover slipping from £10,066,728 to £9,686,853 in the year end January 2013. The sale of the sites will allow Premium Bars and Leisure, which is managed by Eclectic Bars, to reduce its debt and invest in other parts of the estate. The sites are; Coyote Wild in Derby (£800,000 freehold); Boathouse, Durham (£1,750,000 freehold/part long leasehold); Klute, Durham (offers invited on freehold); Cotton Factory, Huddersfield (£750,000 freehold); Halo/Quilted Lama, Leeds (£600,000 for the long leasehold); Prohibition, Leeds (£100,000 for the leasehold); Chase, Newcastle (£850,000 for the freehold); City Vaults, Newcastle (£1,000,000 for freehold); Riverside, Newcastle (£650,000 for the long leasehold); The Lodge, Newcastle (offers invited on the freehold); Waterside Hotel, Newcastle (£750,000 for the freehold); Chase, Sunderland (£375,000 for the freehold); and Rex Hotel, Whitley Bay (offers invited on the freehold/part long leasehold).

Menu unveiled at Spirit’s first premium pub: Spirit has unveiled the details of the menu at its first “premium” pub, The George in Belsize Park, which opened last week after conversion from the Taylor Walker brand. Head chef Robbie Velasio said: “I’ve had so much fun putting our menu together. It stays true to traditional pub food but uses some fabulous ingredients and some great twists.” The pub offers 11 evening main dishes, ranging in price from £11 (chilli, honey and soy noodles, stir-fried vegetables and toasted cashews) to £18 (10oz Cornish beef rib-eye steak, herb butter sauce and triple-cooked chips). There are two sharing boards (a Farmhouse Deli Board – wild boar Scotch duck egg, roast Cornish sirloin, duck liver pate, Blacksticks blue cheese and ale chutney costs £15). The dessert menu is offered in miniature sweet treats with four for £6 and three for £5.

Real China opens 24th site – and first in North Wales: Buffet restaurant chain Real China has opened its 24th site after a £500,000 investment– in Wrexham’s Eagles Meadow shopping centre. The fast-growing Real China chain has invested £500,000 in opening the eatery at the Eagles Meadow shopping centre. Real China’s deputy managing director Chen Zhang said: “We are delighted to open this new buffet restaurant and its launch marks the culmination of a three-year project to have a presence in North Wales. We prefer to be in large leisure or shopping centres and we believe Eagles Meadow is therefore the perfect location for us. Our aim was to create a high quality restaurant with an authentic yet modern Chinese look and to do that we had many of the fittings brought in specially from China.”

Ernst & Young extends Luminar administration: Administrator Ernst & Young has been granted curt approval to extend its administration of Luminar Group Holding, which went into administration in October 2011. The administration period has been extended until 26 April 2014 as the administrator seeks to finalise the affairs of the company.

Woburn Center Parcs to host new restaurant concept: Woburn Forest Village, the new Center Parcs set to launch in spring 2014, will host a new restaurant brand The Shearing House. Its menu will feature classic dishes with a contemporary twist using fresh, seasonal produce and good, honest cooking. It features ‘grazing’ dishes which have been inspired by ‘British Tapas’ and are designed to be shared – it will have communal kitchen tables. The outdoor terrace provides panoramic views of the forest. Martin Dalby, chief executive, Center Parcs UK, said: “Creating a space for families to eat together is always key, as well as providing a variety of meal options so that every member of the family can choose something they can enjoy. From sharing menus to communal dining areas we think this restaurant will be perfect for guests of all ages and will complement our existing restaurant concepts.” Other brands to feature at Woburn Forest will be The Pancake House, Huck’s American Diner and The Canopy Café and Bar.

McDonald’s plans fifth site for Gloucester – and first drive-thru: McDonald’s has applied for planning consent for a fifth McDonald’s in Gloucester – and its first drive-thru. The drive-thru takeaway will be located next to Frankie and Benny’s restaurant in St Oswold’s. A McDonald’s spokesman said: “I can confirm that we are submitting plans for a new drive-thru restaurant. A new McDonald’s would bring investment to the area and provide jobs for the community.”

South West Pubs plans cider and sport venue: South West Pubs, the company led by Paul Wrigglesworth that operated pubs in Somerset and The Boutique nightclub in Honiton, Devon, is to convert the White Rooms and Club Rouge venue in Salisbury to a sports and cider bar. Club Rouge is to be turned into a sports bar, to be open seven days a week. Wrigglesworth, who owns a couple of pubs in Somerset and The Boutique nightclub in Honiton, Devon said: “We’re also looking at converting a barn at the back of the site by the end of the year for live music – it will feature a cider theme, showcasing Wiltshire, Somerset and Devon ciders.”

Frankie and Benny’s set for Taplow, Buckinghamshire: The Restaurant Group’s Frankie and Benny’s brand has been granted a premises licence at the Bishop Centre in Taplow. South Bucks District Council’s licensing sub committee approved the licence for a Frankie and Benny’s restaurant in unit nine of the upcoming development, starting on January 1, 2014.

Reading-based Southern Fried Chicken plans 200 sites in next five years: Southern Fried Chicken, which was launched by UK entrepreneur Andrew Withers, is planning 200 more sites around the world in the next five years. The brand currently has 600 sites in 30 countries. Current boss Andrew Withers launched a major re-branding and re-training exercise after he appeared on Channel 4’s Undercover Boss programme and discovered low standards at many of his franchises. He said: “When my dad Arthur started the business we just sold the recipe to franchisees, but we found our brand was going out of control. In the UK the issue has been we had about 300 fish and chip shops which used our recipes and there were some good ones and there were some not so good ones. Now we are controlling it and being more proactive and that seems to have taken off.” Southern Fried Chicken has opened ten new stores in the UK and 30 internationally in the last 12 months.

Marston’s launch US craft ale in the UK: Marston’s has partnered Shipyard Brewing Co to launch of Shipyard American Pale Ale in a draught 30 litre keg format in the on-trade in May. James Coyle, sales director for Marston’s comments: “The popularity of craft beer is growing and forecast to continue to rise over the coming years as UK consumers search out new beer experiences. Our research has shown the market for ‘craft beers’ combines more established continental speciality beers with an emerging market of American and UK craft brewers producing lighter lager/pale ale hybrid beers with more fruity hop character, which we classify as ‘new world craft beers’. We feel that the launch of Shipyard’s American Pale Ale will further quench the thirst of UK drinkers who have been swift to adopt American craft beers.” Shipyard founder Fred Fursley, who runs the US’s 15th largest craft brewer with 150,000 barrels of volume a year, told Propel: “The craft beer scene is just starting to come alive in the UK - there are signs of the excitement we saw in the US ten years ago.”

Yummy Pub Company reports success with cinema at Gorringe Park opening: Yummy Pub Company, the four-strong operator led by Tim Foster and Anthony Pender, has reported success with the basement cinema at its latest opening, the Gorringe Park in Tooting, a Charles Wells pub. The cinema is holding “Some like it Tots” film showings for families and adult showings in the evenings. Foster told Propel: “It’s a huge assets for the pub – and it’s also gaining momentum in respect of private hire.”

JD Wetherspoon to start work on Bideford pub; wins licence in Darwen: JD Wetherspoon will start work next Monday on a new pub in Bideford, Devon (population: 14,599). The £1.5 million development is expected to create up to 45 full and part time jobs and should open for business on 23 July. The building was formerly the Bideford Carpet and Furnishing Centre and the new pub, which has yet to be named, is expected to take up two storeys. Meanwhile, a plan to open a JD Wetherspoon pub in Darwen, Lancashire (population: 31,570) has moved a step closer after a licence application was granted. The company is now waiting for the sale of the former Railway Road Methodist Church to be completed before work on the building can start. Planning permission for changes to the building interior have already been granted. The building was most recently A&M Bargains, which closed in January last year after 14 years.

Robert Cain Brewery compulsory strike off suspended: The strike off of Robert Cain Brewery at Companies House has been suspended. The company faced a strike off after failing to file annual accounts due at the end of 2012. Last week, managing director Sudagarha Dusanj told Propel that accounts would be filed imminently.

SAB Miller reports UK volumes up 4%: SAB Miller has reported this morning that in Europe, full year lager volumes were up 6% on an organic basis in the full year to 31 March with fourth quarter volumes up 3%. It stated: “Despite a challenging economic backdrop, volume growth was delivered through successful launches of brand and pack innovations.” In the United Kingdom, increased distribution contributed to lager volume growth of 4% for the full year.

Luke Johnson – red tape is stifling my little pub: Sector investor Luke Johnson has criticised the stifling red tape that hit small businesses like the rural pubs he owns in the Malverns. In his Financial Times column, he wrote: “The only pub in the village near my house in rural Malvern went bust and shut down. As an adventure, I bought it, refurbished the premises and relaunched the business late last year. The idea was never to make a significant profit but to open an establishment that would suit the community and of which I could be proud. Trading there has been tough, partly because of the poor weather. But we are making progress, and the locals have been supportive. The ones who have not been so encouraging are the bureaucrats, despite the challenges facing the region. This part of the country is not wealthy: there are dozens of closed pubs and almost no outsiders putting money into the region. Yet the only communication of any kind I have had from government since I started the business has been bills, especially from the various tax authorities: property, employee, corporation, value added tax, licensing and so on. Never so much as a “thank you” or “good luck”. Possibly worse than this barrage of aggressive demands have been the attentions of the health and safety busybodies. They visited our pub and insisted on expensive changes to the way we stored heating fuel. This alteration is costing many thousands and the result will look ugly. The previous arrangement had been adequate for many years but it seems now is their moment to pounce. These public servants, funded by the taxpayer, have no concept of how much small businesses have to struggle just to stay alive in this economic climate.”

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