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Fri 6th Sep 2013 - Cains, Gaucho, JW Lees, M&B and McDonald’s

Story of the day:

Mitchells & Butlers offers Toby Carvery as a case study of how it understands the market: Mitchells & Butlers has hosted City analysts to a briefing on how it understands the market through research - using Toby Carvery as a case study. The 152-strong brand has total turnover of £230m with each restaurant serving 3,000 main meals a week. Mitchells & Butlers told analysts its customers fall into six categories: explorers (adventurous customers looking to discover new things), indulgers (an older hedonistic group that are living for today), social butterflies (no responsibilities and love eating out as long as they can get a deal), squeezed families (squeezed in terms of time and resource but want to eat and drink out of the home with their children), worldly wise (an older group more concerned about health and more conservative in tastes) and habituals (consumers that embrace the familiar and chase value for money ahead of new experiences or provenance). M&B told analysts it had identified seven key needs: refueling, convenience, family time, the search for wholesome food, temptation, social time and “special” times. Toby Carvery’s core consumer falls into the worldly wise category and the family time core occasion, with an alignment with “wellbeing” as a core trend. The strategy for Toby Carvery is to update the brand image and drive like-for-like meals growth through organic growth an expansionary capex. Analysts heard that there will be a focus on a “Home of the Roast” message, tapping into the emotional resonance of a roast dinner. Brand director Jeremy Skingley said: “Strengthening brand options provides pricing options in the future.” Plans for 2014 include a Toby Academy training centre and the creation of a “personality carver role”. M&B will also try to maximise the Sunday occasion to increase cover turn and spend per head, continue to grow breakfast and improve margins by a reduction in promotional meals.
M&B picks its key macro headlines: Mitchells and Butlers has picked its seven key macro headlines that provide the current context in foodservice. It told City analysts that austerity is here to stay and consumer behaviour lags recovery; the London market continues to grow because of structural economic differences; the Baby Boomer generation is booming but Generation Y is economically challenged; alcohol decline continues and food is the only long-term route to sustainable growth; advocacy by customers is more important that awareness; and suburbia is less competitive as a marketplace. The company told analysts that foodservice is a “share-stealing game” with the “object to pinch someone else’s lunch”. However, M&B also reported that consumers have protected their eating-out spend during the recession whilst trimming spend on clothes, cars and other discretionary items.

Industry news:

Freedom of Information requests discover quick-service restaurants’ average hygiene score: The Sussex-based health and safety firm Tutorcare has used Freedom of Information requests to compile information from various requests for hygiene inspection scores to create the national average. The Food Standards Agency (FSA) issues guidelines to local authorities, with a hygiene rating score out of five. The Chicken Cottage chain achieved a three overall, while Wimpy was second from bottom with an average score of four. Papa Johns scored slightly higher than Chicken Cottage. Across the board KFC, McDonald’s, Burger King and Domino’s Pizza all received an average score of between four and five, with Burger King scoring the highest at 4.85. The lowest hygiene score obtained by a single Chicken Cottage, KFC, Wimpy and Domino’s branch was zero out of five.
Bookmakers are driving Chinese restaurants out of Chinatown: The future of London’s Chinatown is threatened by a betting shop invasion that is driving out its traditional Chinese restaurants, a community leader has warned. Christine Yau, chairman of the London Chinese Community Centre, has written to the Mayor of London, Boris Johnson, and Eric Pickles, the secretary of state for local government, expressing her alarm after an application for a tenth betting shop in the small West End enclave was lodged last month. The operators of the proposed new bookies, called Hoolabet, have applied for a gambling licence for 47 Gerrard Street, until recently occupied by one of Chinatown’s longest established restaurants The Friendly Inn.
Technomic – boxed meals on the rise in the UK: Research firm Technomic has noted the rise of boxed meals and snacks for takeaway on menus at several of the UK’s top limited-service restaurant chains, promising consumers either a “flavour-packed complete main dish or a hearty snack in the convenience of an easily portable (and easy to eat from) container”. Technomic’s Christine Lafave Grace said: “Chains such as Leon, POD and Crussh also position takeaway boxes as a filling, healthful lunch choice – a better-for-you alternative to a bagged burger and fries that also doesn’t leave customers juggling multiple grab-and-go items in an effort to create a full meal.”
KFC introduces deep-fried soup in Japan: Fast food chain KFC is launched deep-fried soup in Japan. The company is looking to capitalise in on the nation’s latest culinary obsession – a creamy soup known as corn potage. But instead of serving it in bowls with a spoon, the chain will somehow cover it in its usual secret recipe batter and fry it. The snack went on sale yesterday and will be available for a limited time only, say KFC Japan bosses.

Unite calls 24-hour delivery strike: The Unite union has called for a 24-hour strike by 1,000 Kuehne & Nagel Drinks Logistics (KNDL) workers next Wednesday. It is believed that around 30,000 pubs and other outlets will be affected. A spokesman for KNDL said the company had contingency plans in place.

Alcohol sales in the on-trade fell over the summer: A report by the Wine and Spirit Trade Association (WSTA) has revealed that alcohol sales in the on-trade fell by 6% to 6.2m hectolitres in the 12 weeks to 13 July. The decline compares to a 5% drop the previous year. WSTA Chief executive Mike Beale said: “Given the record hot summer, the fall in sales is a surprise and underlines the need for an early end to the alcohol duty escalator to provide some relief for struggling pubs, bars and restaurants.”

Company news:

Cains submits Brewery Village plan: Liverpool’s Cains Brewery has submitted plans which would see its site transformed into a one million square feet-plus development space dedicated to tourism, leisure and retail. Brewery Village Limited, a company owned by the Dusanj family, wants to develop the site and restore the Grade II listed brewery into a national and international visitor destination and increase the amount of Cains beers brewed at the site. The scheme would create around 528 full-time jobs. The plans would see the restoration of the Grade II listed brewery building to its former glory, housing the new Cains brewery and visitor centre with a ‘Sky Bar’ in the roof, which would offer views over the city and the River Mersey. English Heritage supports the plans, which it describes as ‘a constructive way of finding a new use for some otherwise challenging, nationally significant buildings’. The building would also house a 94-bedroom boutique hotel, courtyard bistro bar & restaurants and a large open plan retail hall for artisan food producers to make and sell their produce on site. There would also be a designer retail market for independent fashion businesses and function rooms. The existing historic Brewery Tap pub would be restored and retained. Sudarghara Dusanj, managing director of Cains, said: “We want to create a major new tourism and leisure asset for the city which would secure the future of the Cains beer brand and the Grade II listed brewery for decades to come.”

Bel and the Dragon to open fifth site this month: Longshot Country Inns, led by Joel Cadbury, will open its the fifth Bel and The Dragon in Churt, Surrey this month. Bel and The Dragon in Churt will have 13 bedrooms, each of them named after Jane Austen characters. 

Gaucho buys high-end Argentine restaurant: UK steak house chain Gaucho has bought a high-end restaurant in Buenos Aires. Its acquisition, Sucre, is ranked at number 28 in Latin America’s 50 Best Restaurants Awards. The deal to buy Sucre stems from the company’s relationship with its executive chef, Fernando Rocca, who for the past seven years as acted as a consultant to the British steak house chain.  Gaucho finance director Charlie McLean told The Times: “It gives Gaucho exposure to a new market and brings us closer to our brand roots.” Gaucho has 14 restaurants in the UK and a venue in Dubai.
Douglas Jack – we are “Buy” on Spirit shares: Numis Securities leisure analyst Douglas Jack has issued a “Buy” note on Spirit shares with a Target price of 90p for the shares after yesterday’s four quarter trading update. He said: “We are holding our 2013E forecast as a result of Q4 trading meeting expectations. We believe the risk to our 2014E forecasts (£58.0m PBT; consensus £59.8m) is on the upside; we assume just 1.7% managed LFL sales and -0.9% leased LFL net income. Despite this upside and circa £80m of cash tax credits, Spirit has the lowest valuation in its sub-sector on most metrics. We believe this reflects the onerous lease provision, a past slowdown in LFL sales and aggressive bond amortisation. As these issues are resolved, the rating should improve accordingly, in our view.”

Nightclub closes after business rate double: The nightclub Izi, in Witney, Oxfordshire, has closed, with its director blaming the doubling of its business rates. Club regulars have expressed their shock and some have suggested that its closure could see other town centre bars shut. Owner Shaun Hartless said: “We have been struggling, especially since Wetherspoon’s opened. But the biggest blow was the doubling of our rates, from £56,000 to £129,000 a year, ten months ago. We were making £500 a week and suddenly the rates went up by £600 a week. It was the end of the story then.”

JD Wetherspoon re-submits plan to open in Alnwick, Northumberland: JD Wetherspoon has re-submitted plans to open Alnwick, Northumberland. Last October, the company applied to set up a pub in the vacant Corn Exchange, which has been empty for two decades, in a £1.3 million scheme that would create 40 new jobs. In November, members of the town’s Chamber of Trade came out in opposition to the plans, voicing concerns that it would have a major impact on the town centre, but their position caused a backlash, particularly online on Facebook. A local newspaper poll of nearly 1,000 people then revealed that 72% supported the plans.

McDonald’s highlighting 100 personal moments in the UK: McDonald’s is highlighting its products through a plethora of personal stories of UK consumers on the new destination “100 McDonald’s Moments”. The site, by Razorfish London and Goodboy Digital, features a hundred feedbacks from real people who speak about how McDonald’s has left its mark in their life experiences, from personal relationship to travelling abroad. The stories include “Popping in with my best friend and having yummy McDonald’s Strawberry Milkshakes to help her get over her breakup” or “I once got stung by a jellyfish. A trip to McDonald’s helped cheer me up.” The company said: “All of the moments celebrate ordinary but very special reasons why people keep coming back to McDonald’s for years.”
Simon French – Enterprise bond move is ‘positive’: Panmure Gordon leisure analyst Simon French has described yesterday’s convertible bond offering by Enterprise Inns a positive move and put a 123p target price on the shares. He said: “Enterprise Inns has announced an offering of circa £100m of senior, unsecured convertible bonds due 2020 with an annual coupon of 3.5-4.0%. The convertible bond will allow for Enterprise Inns to reduce its overall cost of borrowing, reduce the number of pub disposals and enhance growth prospects, with proceeds used for reinvestment in the estate’s underperforming assets, rather than debt reduction. We believe this is a positive move, providing increased flexibility in the capital structure and the potential to return the estate to growth. The stock trades on a CY 2014E adjusted EV/EBITDAR of 10.1x and a P/E of 7.8x. Given the limited likelihood of forecast upgrades this seems broadly appropriate to us and we reiterate our Hold recommendation and 123p Target Price.”
Former Sunderland Town director partners Punch Taverns in £700,000 hotel scheme: Former Sunderland Town director Barry Batey and partner Ben Robson are linking with Punch Taverns to co-invest £700,000 in a refurbishment of the County Hotel in Hexham. The two Hexham businessmen run the local multi-site operator Priestpopple. Punch’s operations director, David Wigham, said: “We’re upgrading the property to create a flagship pub, dining and hotel venue for Hexham.” The venue, which has been closed since February last year, will re-open in October. Jason Ronan, a partner development manager with Punch, said: “We have worked very hard to find the right partners for the county, who have a real knowledge of the local market, and Priestpopple have a proven track record in running successful licensed businesses.”

Marston’s starts work on new-build in Fleetwood: Marston’s has started work on a new-build pub near Fleetwood docks in Lancashire. It is building the pub/restaurant on land adjacent to Amounderness Way and Herring Arms in Fleetwood, with the prospect of 45 new jobs. It is hoped the pub will be open for business early next year. Marston’s said it believes the pub is in an ideal location for residents in the new waterfront homes by developer Redrow, and will also be a draw for other residents in the town. The company said the pub was set to open early next year.
Cafe Rouge and Prezzo set for Cirencester: Both Cafe Rouge and Prezzo are set to take leases in a multi-million pound development in Cirencester. The Brewery Court development, proposed by the Cirencester-based property company Wildmoor, includes a multi-screen cinema complex, six new retail units, four restaurants or cafes, student accommodation in a 110-bed hall of residence for the Royal Agricultural University, and a revamped Brewery Arts Centre, comes before the local council planning committee next week. Wildmoor said: “We are delighted that these two prestigious restaurants want be part of this exciting project. They have all agreed a deal in principle, subject to the scheme being granted planning permission.” Prezzo is expected to spend £700,000 developing its restaurant, which will create 15 jobs. Prezzo chief executive Jonathan Kaye told the Wilts and Gloucestershire Standard: “We are looking forward to opening in Cirencester. We are confident that Prezzo will prove popular with diners of all ages and that it will be a great asset to Brewery Court and to its social scene.” Cafe Rouge is taking the prime restaurant unit at the heart of the scheme, with external seating facing onto the main piazza. Jonathan Havenhand, head of acquisitions at Tragus Group, said: “We are delighted to have secured our chosen unit at Brewery Court. Cirencester, the largest town in the Cotswolds, provides an ideal setting for Cafe Rouge and an offer such as ours isn’t yet available in the town.” If the application is approved, the project then has to go through a detailed design/consultation phase with all the parties affected by the proposals, with a definitive start date only determined after consultation. Building work would then take another 12 months.

YO! Sushi selects Aeromark for facilities and asset management: Aeromark, the developer of the Optimatics workforce management solution, has been selected by YO! Sushi to provide a single integrated system to manage assets and facilities maintenance. Mike Bonaker, facilities manager for YO! Sushi, said: “We selected Optimatics from Aeromark as it provides a single system to manage our assets, our facilities and our contractors. This will enable us to provide faster response times to our restaurants and will give us greater visibility of subcontractor performance, helping us to identify areas for improvement and efficiency gains. One immediate reduction will be in our management time and the associated administration, both of which will reduce considerably.”
Hertfordshire fish and grill chain opens third site: Lussmanns Fish & Grill has opened its third site in Hertfordshire this week, a venue in Leyton Road, Harpenden. It occupies a former 18th century coaching house overlooking Leyton Green in the centre of the town. Lussmanns was set up by Andrei Lussmann, who ran flagship PizzaExpress restaurants and worked as an international franchise manager. He also worked for Fish Diner and Corney & Barrow in the City of London before setting up Lussmanns in 2002.
Reform Bar and Grill to open in Dubai: The operators behind the bar and restaurant Reform Social & Grill at The Mandeville Hotel in London are bringing the “quintessentially British” concept to Dubai. TGP Consulting, which runs the hotel in London, is creating the outpost for Reform Social & Grill in The Lakes in Dubai’s Emirates Hills, due to open in October. Covering 15,000 square feet, both indoors and outdoors, the development will include not only a restaurant and bars but other elements such as a cinema, beach huts, a private event space and a “tuck shop” and ice-cream parlour. Reform Social & Grill opened last year in the former deVigne bar at the Mandeville Hotel in Marylebone, with an emphasis on English products including gins and twisted classic cocktails.

Camerons reports Ebitda of £5.8m: Hartlepool brewer Camerons has reported Ebitda of £5.8m in the year to 28 April although it posted a pre-tax loss of £100,000 after impairment costs of £500,000 linked to a debt refinance and a £1.8m impairment charge relating to four site. Turnover dropped from £21.8m to £19.8m. It reported a pre-tax profit of £1.9m in 2012.

Boutique hotel planned for Royal William Yard in Plymouth: Part of a former Royal Navy supplies yard in Plymouth is set to become a 60-bed hotel. Developer Urban Splash and the Watergate Bay Hotel in north Cornwall have agreed a lease on the clock tower building at the Royal William Yard. They hope work on the “urban boutique hotel” in the Melville building will start next spring. The Grade 1 victualling yard was closed in 1992 and parts have already been converted into flats and restaurants. Will Ashworth, Watergate Bay Hotel’s managing director, said: “When we first arrived at Royal William Yard and saw the potential of the Melville building, I immediately knew we could create something really exciting.”

Notting Hill restaurant freehold on the market for £1.95m: The freehold of Notting Hill’s Loading Bay restaurant in West London is on the market for £1.95m through agent AG&G. The basement and ground floor are run as an Italian restaurant, let on a 20-year lease from 2011 and currently generating £36,000 a year. Anthony Alder of AG&G, which is marketing the freehold off an asking price of £1.95m, said: “It’s upstairs where the real opportunity lies – a two-bed, self-contained flat with full vacant possession and historic planning permission to add a third storey, a roof extension, as well as an extension at the back from the ground to second floor.” 

JW Lees wins permission for river barge restaurant: Manchester brewer and pub owner JW Lees has been granted planning permission for a 23-metre long barge with room for up to 48 diners to be moored alongside the Boat House Inn on the Dee in Chester. Approval for the barge was given despite opposition from local rowers, who said the barge would create a navigation hazard for local rowing clubs. One councillor told Cheshire West and Chester Council’s planning committee: “This application is tantamount to an al fresco dining area in the middle of a motorway.” However planning officer Nick Howard said there were a number of pontoons up and downstream of the site and the barge “would not add a further obstruction” as long as vessels were not permitted to moor up against it. Councillors voted for the scheme, with nine in favour and one against.

Builder plans to return Wales pub to former glory: Tad Builders has bought The Waun Wyllt Inn in Carmarthenshire, which has been closed for over a year. The inn will be undergoing a major refurbishment scheme and will be opening its doors early in 2014. Delwyn Jones, a director with Tad Builders, said: “As a local company we feel very privileged to have been able to purchase The Waun Wyllt and it is our intention to restore and upgrade the property to again make it one of West Wales’ must-visit public houses and restaurants.” Nicholas Calfe, of agent Christie + Co’s Bristol office, said: “The Waun Wyllt attracted several bids from local applicants, with other interest shown from developers, highlighting the demand for pubs with land and potential to develop. We are pleased that the pub has been sold to a local buyer with local interests and who intends to return it to its former glory.”

Two-year-old Colchester hotel for sale: The Holiday Inn Express in Dedham, near Colchester, which opened in 2011, is on sale at £2.95m for the freehold. The sale is being conducted by Christie + Co on the instruction of the administrators of Winspective Ltd. Kew Green Hotels continues to operate the hotel under an interim management agreement. The hotel, five miles from Colchester and close to Constable Country, has three meeting rooms and bar, lounge and dining areas with a total of 80 covers. Jonathan Parrish, director and head of investment at Christie + Co, said: “Despite its relatively recent opening, the hotel attracts a regular and growing commercial and leisure customer base and it offers excellent growth potential, as the business has yet to mature.” 

Eric Pickles backs redevelopment of Young’s former Ram Brewery in Wandsworth: Communities secretary Eric Pickles and London Mayor Boris Johnson have both endorsed plans for the redevelopment of the Ram Brewery in Wandsworth, South London, which will create 661 new homes and more than 500 permanent jobs. The mayor and the secretary of state have both formally confirmed that they are happy for the landmark scheme to proceed, meaning that the redevelopment of the former Young’s brewery site in the heart of Wandsworth town centre has now moved a step closer. Around 266 construction jobs will be generated when work gets under way on the site. Hundreds more will be generated by the opening of nearly 11,000 square metres of office space, shops, cafes, bars and restaurants. One in ten of the new homes will be offered to low income families in the borough. The site’s historic buildings will be restored and brought into public use as a new micro-brewery and brewing museum.

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