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Mon 23rd Sep 2013 - Cosmo, Itsu, Restaurant Group, Spirit and Starbucks

Story of the day:

Julian Metcalfe – Itsu has more potential than Pret A Manger: Julian Metcalfe has claimed that Itsu could grow to be a bigger business than Pret A Manger, which he previously co-founded. Itsu, which has annual sales of £55m including revenues of £12m from sales of Itsu products to supermarkets, has grown sales almost 30% in a year at its West End sites and will open its fortieth store in Oxford. Metcalfe told The Sunday Telegraph: “We are now nearly at a wonderful point where some of our shops last week did nearly 40% hot food. That has taken nearly five years of relentless work every day. There is no point trying to build a fast food business on sushi; it’s lovely but it’s not everybody’s cup of tea.” Itsu was developed to challenge the fast food dominance of McDonald’s, Burger King and KFC. Metcalfe added: “You can’t imagine how difficult it is to get a team of 20 to work from 7am in the morning to make (our food) perfectly day after day and sell it for £3.79. For our shop in Oxford we have paid £400,000 in rent. Can you imagine how much food at £3.79 we have got to sell? That’s where the challenge lies. If you can do that, you have the whole world at your finger tips. You can open an unlimited amount. I think it is fascinating that a UK company has possibly cracked this affordable fast food.” Metcalfe said the company had enough cash for 30 more openings and then would look for an investor. Any investor “would make a huge amount of money”, Metcalfe added.

Industry news:

Tesco chief executive – we’re in the midst of radical generational change: Tesco chief executive Philip Clarke has argued that the UK is in the midst of the biggest generational change in consumer behaviour since the 1960s. Writing for The Daily Telegraph, he stated: “The digital world is having a deep impact on emerging customers. Just like the 1960s, retail will evolve to meet the needs of the new consumer. There will be retailers that fade away because they don’t or can’t adapt and their customers desert them. The trick is all in the timing, knowing when you will need to change, preparing early but not switching too soon so you lose your existing customers.”

Starbucks launches largest ever investment in food with launch of La Boulange range: Starbucks has launched its La Boulange bakery range in the US, its largest ever investment in food. It includes chocolate croissants, caramelised apple cakes, spiced pumpkin loaves swirled with cream cheese, savoury croissant tarts with toppings like tomato, butternut squash and spinach, all served warm. “We need to bring great food to great coffee,” Pascal Rigo told The Huffington Post. To illustrate his point, Rigo pointed to lunchtime competitor Subway. Between 11.30am and 2pm, a Subway outlet that serves 140 customers sells 140 lunches, he said. During the same time period, a Starbucks shop that serves the same number of customers sells only eight lunches. “There is a problem,” Rigo said.

ALMR – Milton Keynes late night levy plan will be challenged: The Association of Licensed Multiple Operators has told members a decision by Milton Keynes Licensing Committee to impose a late-night levy to all alcohol licensed premises from 1am to 6am every day except 1 January will be challenged before the proposal is formally adopted by the whole council. Strategic affairs director Kate Nicholls said: “Contrary to trade press reports, this was an intra-committee meeting not an open hearing with the ability to make presentations. Detailed, robust representations were made by the trade throughout the consultation process – and at three meetings that have been held to debate police proposals. After the consultation closed, the police submitted large volumes of information that were not available for public scrutiny or comment. We will be highlighting concerns about this and the procedure followed in committee meetings ahead of the final decision by the Council later this year.” 

Boutique Bar Show starts tomorrow: Leading operators will offer business insights at the Boutique Bar Show, which takes place tomorrow (24 September) and the day after at Victoria House, Bloomsbury Square, London. Propel Info managing director Paul Charity is to chair a panel of top operators at 11am tomorrow. On the panel discussing current industry trends are former Novus chief executive Steve Richards, Yummy Pub Company founder Tim Foster and Cavendish Bars founder Christian Arden. Register for free at

Croydon food hall promises Harrods quality at half the price: The man behind a new 25,000 sq ft food hall in Croydon, south London, has promised “the same high-quality artisan offering as the likes of Selfridges, Harrods and Borough Market but at half the price”. Marco Cash, chief executive of the Croydon Village Outlet, told The Grocer after the opening day of the enterprise, which houses more than 50 brand-name outlets in the town’s Allders department store building, that in the Greenhill Food Hall “you can have an artisan sausage baguette here for £3 or a fine dining experience for £50. This food hall will be bigger and cheaper than what’s on in the West End.” Current tenants in the food hall include a noodle bar, a rotisserie and a sushi outlet. Cash said he wanted to expand the food hall to 38,000 sq ft by February next year, adding that it would eventually have up to 200 staff. “We are looking to bring a new kind of customer to Croydon and change its run-down image.” The Croydon Village Outlet’s opening day last Thursday (19 September) was hit by glitches which saw it close after 90 minutes when tills failed to work and it did not open again until Saturday (21 September).

Company news:

Spirit launches Flaming Grill “lite” with two food challenges on the menu: Spirit Pub Company has converted The Clock Tower pub in Milton Keynes, a former John Barras pub, to its new ‘Flaming Grill Lite’ concept. The new sub-brand features two Flaming Challenges – a 24oz steak and the Flaming Challenge Burger, two stacked 12oz burger patties, two breaded chicken breast fillets, beef chilli, bacon, cheese, onion rings and a double portion of fries for £9.95. The brand features a “Wall of Flame” for those that complete the challenge. Felix Barber, of public relations and marketing agency Elliotts, who visited the Milton Keynes site, said: “If this is what the ‘Flaming Grill Lite’ has on offer, it looks like it’s going to work well as it rolls out over the rest of their estate.”

Charles Wells opens ninth pub in France: Charles Wells has extended its estate into France by opening its ninth John Bull pub and its second in Lyon. The Elephant & Castle will feature cask beer – in a visible cellar – brewed and imported direct from Bedford. Anthony Wallis, managing director of John Bull Pub Company, said: “It is a great site in a prime location which we have transformed into a traditional and quirky English pub set across two floors with an additional riverside terrace area.”

Hawksmoor pair named among London’s most influential foodies: Will Beckett and Huw Gott, the men behind the four-strong Hawksmoor chain of steak houses, have been added for the first time to The London Evening Standard newspaper’s list of the capital’s most influential foodies. The first Hawksmoor opened in 2006 and all four now serve 10,000 customers a week. Other newcomers to the list include Dom Cools-Lartigue, founder of Street Feast, which organises street food events in east London. They join established names including Richard Caring, Des Gundewardena, Christopher Corbin and Jeremy King, Heston Blumenthal, Chris and Jeff Galvin, Ruth Rogers and Fergus Henderson.

Site in Liverpool that includes Cavern Club and Flares site to be auctioned: The freehold of Cavern Walks Shopping Centre that includes the Cavern Club and a Flares site, operated by Stonegate Pub Company, is to be auctioned for £1m plus by Allsop on Wednesday 16 October. The site earns current total rent of £1,144,000 and is being sold on behalf of administrators. 

Who Wants to be a Millionaire? mogul buys village pub: Media mogul Paul Smith, the man behind TV show Who Wants to be a Millionaire? has bought the village pub in Amberley, West Sussex, The Black Horse, threatened with closure. The Black Horse pub has been the centre of village debate for 15 months after property developer Paul Marston, of Hirsh Marston, bought the closed venue and revealed plans to convert it into two holiday homes. Residents formed The Black Horse Action Group, which has been campaigning to re-establish the pub in the community and offered to pay £500,000 to purchase the site. New buyer Smith told villagers: “Cregagh Properties will lease The Black Horse to an operating company that is yet to be established and which will be owned by me along with Angus Davies (general manager) and Dan Howes (executive chef). My background is the entertainment business but as the years have progressed my interests have broadened. The renovation of your village pub will be carried out to the highest standard and we intend to utilise every corner of the space contained within the buildings, to create as much as possible of that which the local community and visitors will demand.”

New Cosmo restaurant hit with one-star hygiene rating on opening wins top marks in second inspection: The Derby branch of the Cosmo “Pan Asian banquet” buffet chain, which was given just one star out of five by the city’s food hygiene inspectors when it opened in June, has now been given five stars after a spot-check re-inspection. The company, which currently has 14 eat-all-you-like restaurants around the UK, spent more than £1m refurbishing the former Zanzibar nightclub building in Derby, which now seats 330 diners, who can chose from 180 dishes. Cosmo said soon after the Derby premises opened that the restaurant had been such a success, the firm plans to replicate the concept at new outlets in Edinburgh, Preston, Nottingham, Sheffield and Leeds, which will open later this year. However, when the premises were inspected by Derby Council, just ten days after they opened, council staff gave them the lowest possible mark, just one star. Operations director Kan Koo said: “The first inspection was only ten days after we opened and within hours of the council’s visit we had made all the inspector’s recommended improvements and invited them to come back. Frustratingly, we had to wait three months for the inspectors to return but we were confident that we would receive a high rating because standards of food safety and hygiene at our restaurant are of the utmost importance.”

Losses at Gaucho climb 27%: The Argentine-themed steakhouse chain Gaucho saw pre-tax losses for 2012 climb 27% to £13.1m as sales costs rose, interest payments hit £14m and turnover fell 3.4% to £53.7m. Ebitda for the year slipped 4.8% to just over £10m compared to the previous year. The chain, which runs 14 Gaucho restaurants in the UK and one in Dubai, plus three Cau restaurants, in Cambridge, Guildford and Amsterdam, and the Galante cocktail bar in Knightsbridge, London, is believed to have written off £1.5m closing its restaurant in Beirut in 2012. Gaucho’s accounts for 2012, filed this week at Companies House, said it wished to grow turnover “though continued expansion of restaurants”. Gaucho, founded by Zeev Godik, was the subject of a management buy-out in 2010 backed by Intermediate Capital Group.

Two PizzaExpress freeholds go to auction: The freehold of the PizzaExpress in Reigate, Surrey will be auctioned by Allsop on Wednesday 16 October. The venue has current rent of £65,000 per annum and is leased to PizzaExpress until 2021 – a rent review is due in 2016. Guide price is £975,000 to £1,025,000, with any buyer earning a 6.67% yield on their money. In Witney, Oxfordshire, a freehold let to PizzaExpress until 2038 on a rent of £67,500 per annum will also be auctioned on the same day with a guide price of £1,150,000 to £1,250,000, with any buyer earning a 5.87% yield. Meanwhile, a freehold in South Woodford let to Ask Restaurants on a rent of £62,520, with a lease expiring in 2033, is being auctioned with a guide price of £925,000 to £975,000, meaning a buyer will earn a 6.76% yield.

JD Wetherspoon site in Worthing goes to auction: The freehold of The Three Fishes, in Chapel Road, Worthing, is to be auctioned by Allsop on Wednesday, 16 October with a guide price of £1,000,000 to £1,100,000. JD Wetherspoon pays £78,000 per annum in rent on a lease due to expire in 2035, with any buyer earning a 7.7% yield on their investment. 

Greene King executives sell £1.6m of shares: Greene King has announced that the LTIP awards granted to a number of senior executives in 2010 have vested in full. Chief executive Rooney Anand has 160,000 shares vest, of which he sold 75,576 for 807.1p on 19 September, raising £681,301. Simon Longbottom, head of the tenanted division, had 57,000 shares vest, of which he sold 44,500, raising £359,115. Managed boss Jonathan Webster had 79,000 shares vest, of which he sold 69,000, raising £556,830. Jonathan Webster transferred his 10,000 retained shares to his wife. As a result of this vesting and the subsequent sales, the beneficial interests of the executives in the ordinary shares of Greene King are: Rooney Anand - 366,552; Simon Longbottom - 17,480; and Jonathan Webster -37,074.

Mitchells & Butlers scoops turkey category at foodservice awards: A new British Turkey Awards category has seen Mitchells & Butlers (M&B) awarded the Foodservice Operator of the Year title. The category was introduced to the retail and catering awards in 2013 to showcase the all year round support that pubs, restaurants and other foodservice establishments provide to the British turkey industry. M&B was deemed winner for its long term support and including turkey on their Toby pub menus in four different areas – Toby Pie of the Day, New Toby Tasters, Roast Carvery and Toby House Salad. Runners-up in the category were Subway and Greene King.

PizzaExpress opens in Gerrards Cross: PizzaExpress has opened a 117-cover restaurant in Packhorse Road, Gerrards Cross, Buckinghamshire. The new outlet, in what is generally regarded as one of the most affluent towns in the country, lies between other PizzaExpress restaurants a few miles away in Uxbridge and Beaconsfield.

KFC appoints South African as UK and Ireland marketing chief: KFC has appointed David Timm, currently chief marketing officer for KFC in Africa, as its next UK and Ireland vice-president for marketing. Timm, who will be moving to the UK from Johannesburg, and takes up his new role in December, is replacing Jennelle Tilling, who is to be chief marketing officer at KFC’s parent, Yum! Restaurants International. Timm, who gained an MBA at Heriot-Watt University in Edinburgh in 1999, will report to Martin Shuker, managing director for KFC UK and Ireland. Timm joined KFC in South Africa from SABMiller in 2010. His previous jobs include stints with the advertising agency Leo Burnett in South Africa, Hungary and South Korea and two years as an account manager with AC Nielsen. Tilling, who has been in her present post for seven years, will now be responsible for the global strategies for the Pizza Hut home delivery and Taco Bell restaurant chains. Her previous posts include director of marketing strategy for Pizza Hut UK.

Ed’s Easy Diner opens 20th site: Ed Easy’s Diner has opened its 20th site, in Norwich’s Chapelfield shopping centre. The diner employs 30 full-time and ten part-time staff. Andrew Guy, chief executive of Ed’s Easy Diner, said: “During 2013 we’re intending to add another seven restaurants to our line-up along with several milkshake stands. Intu Chapelfield sits well within this expansion programme and will allow more people than ever to enjoy our classic diner experience.”

Vince Power sells Kilburn site for £1m: Music entrepreneur Vince Power has sold Kilburn’s Power’s Bar through agent Davis Coffer Lyons to Will Partridge and Jimi Pearce, the pair behind Wax Jambu in Islington. The 3,500 sq ft bar will be renamed Kilburn Ironworks and undergo an extensive refurbishment. A second bar and a kitchen are planned for the first floor, significantly increasing the amount of trading space. The bar will serve a selection of local beers and craft ales complemented by a carefully crafted wine list, a hand-picked, high-quality spirit selection and an ever-rotating cocktail list. There will also be a selection of sharing food jars and small plates. Kilburn Ironworks will open in early 2014. Partridge said: “Having recently acquired Power’s Bar on Kilburn High Road, we intend to refurbish the site, developing it into a prime north west London eating and drinking establishment. Our focus is very much on providing a great neighbourhood bar for local residents, giving them an offering that cannot currently be found anywhere else in the surrounding area.” Jonathan Moradoff, associate director at DCL, added: “This part of north west London is really starting to develop into a leisure destination in its own right and operators are really starting to realise its potential. These early adopters are trading exceptionally well and Kilburn Ironworks fits perfectly with what we believe the area needs. Given the pairs track record running popular bars we have no doubt that it will be a success.”

Ignite Group hires new chief financial officer: Ignite Group has hired Matt Jones as its new chief finance officer. Jones was previously chief finance officer at Leon Restaurants. Ignite chief executive Matt Hermer said: “I am delighted to welcome Matt to our board and am excited to work alongside him to enable us to fulfil our substantial growth strategy”.

Wayne Brown – a trip to Restaurant Group’s Coast to Coast and Frankie & Benny’s has boosted our confidence in the company: Canaccord Genuity analyst Wayne Brown has reported that a Restaurant Group sites visit has boosted his confidence in the company. He said: “Restaurant Group and Canaccord hosted a site visit earlier this week, to its Coast to Coast and Frankie & Benny sites in Brighton. Our confidence in the group’s outlook and in its market positioning is significantly enhanced. We feel the combination of many macro-signals, market share movements and the investment in its new brand and management structures bodes well for growth to accelerate over the next few years: the group has circa 65 new sites signed up which secures the opening programme for the next two years (current management guidance is of circa 35 new openings per annum); there are a further 70 sites at advanced stages of negotiations. This means the group’s pipeline is pretty much secured for the next four years. The group is achieving sector leading like-for-like sales growth with little help from the macro-environment, and investment in its new brand, Coast to Coast, and depth of management that we were exposed to at the site visit, underpins our confidence in the group’s ability to manage a meaningful acceleration in growth. The current rate of openings (30-35 new sites per annum) and circa £25m spend on dividends leaves the group with around £20m of excess internally generated cash per annum. This is currently being used to pay down the small level of debt it has but with this turning into a net cash position in 2014E, and the visibility in the pipeline, suggests a rather healthy problem for the company. Does it increase the rate of openings, does it increase cash returns to shareholders, or does it do both? The group can increase its rate of openings by 55-60% (circa 20 sites) from internally generated cash before it even considers using any debt facilities. This will occur at a time when unemployment is falling – ASDA income tracker and other lead indicators are signalling a recovery in spending patterns – whilst at the same time its competitors are still struggling under the burden of large debt piles and underinvested estates. The current market cap places a value of circa £2.3m/restaurant versus an average circa £1m/site fit-out cost. A multiple of 2.3x is not excessive for a business that achieves cash payback in just over two years. The very strong pipeline, which secures four years of openings, and its strong cash flow provides our target price at 650p.”

Gift offer for early bookers at Harvester: The Harvester pub-restaurant chain is offering anyone who books a meal from its Festive, Christmas Day, Boxing Day or New Year menus by Friday 25 October a £5 gift card to spend on a future visit. The Mitchells & Butlers-owned chain, which has more than 200 outlets across the country, begins its Festive Menu on 27 November with two courses for £11.99 or three courses for £14.99, running through until 24 December. The Christmas Day menu is three courses for £38.99, and the Boxing Day, New Year’s Eve and New Year’s Day menu is three courses for £17.99.

McDonald’s franchisee trials new waffles and chicken combo: A McDonald’s franchisee is testing a McDonald’s style chicken and waffles combination at a location in Fullerton, California. The combo meal, priced at $3.99, is a new application of the chain’s Mighty Wings limited-time offer, which rolled out earlier this month. However, the “waffle” in the combo is actually the brand’s pancakes, and the meal comes with a cup of syrup.

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