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Morning Briefing for pub, restaurant and food wervice operators

Mon 28th Oct 2013 - Burger King, McDonald's, Shake Shack, Young's

Story of the Day:

McDonald’s and KFC score highest in the sector on simplicity index: McDonald’s and KFC have been placed fourth and fifth in a list of the 92 ‘simplest’ global brands, according to the “2013 Global Brand Simplicity Index” from Siegel + Gale. The New York-based global branding firm has found that when consumers view businesses as simple, they’ll be more likely to return or spend more money there. “Depending on the industry, up to 29% of people are willing to pay more for simpler experiences and interactions,” its report stated. Siegel + Gale’s report also found that 75% of consumers are more likely to recommend a brand because it provides simpler experiences and communications. “Simplicity brings clarity instead of confusion, decision instead of doubt, and the rewards are real,” the report said. “Simplicity inspires deeper trust and greater loyalty in customers.” Pizza Hut, Burger King, Subway and Starbucks Coffee placed 10th, 11th, 15th and 17th respectively in the list. Siegel + Gale measured brands’ perceived simplicity by surveying more than 10,000 consumers in seven countries and asking them to rate those companies’ levels of simplicity or complexity in their products, services, interactions and communications. “Not surprisingly, McDonald’s gets high marks for speed and convenience,” the report said. “But McDonald’s also wins points for its accessible menu, transparent pricing and clear, concise messaging.”

Industry News:

Carnaby Street becomes hot restaurant quarter: The Carnaby Street area is reinventing itself one of London’s hottest restaurant quarters. The landlords of Kingly Court, immediately west of Carnaby Street, want to transform it into a gastronomic hub to rival other West End restaurant clusters such as Charlotte Street. Upcoming launches include Rum Kitchen, a 70-seat restaurant serving West Indian dishes and rum due to open on 14 November. Recent openings at Kingly Court include diner Whyte & Brown and the Moosh juice bar, while Rosa’s Thai Café launched in Ganton Street, close to the junction with Carnaby Street. Landlords Shaftesbury said they are also talking to a potential new vegetarian restaurant, a bakery and a wine shop.

Shake Shack to open in Moscow in December: Shake Shack, which opened in Covent Garden earlier this year, is to open a site in Moscow’s Arbat Street, near the city centre, in December. The Moscow Times reports the location will be operated by a “newly established” company called Delicus – the Moscow location’s website is already live.

French parliament votes to impose new tax on energy drinks: French parliamentarians have voted for a new tax on energy drinks containing caffeine and the amino acid taurine, a second attempt to impose a charge on the products after the first was overturned in court. Dubbed the Red Bull amendment in local media, members of parliament voted to approve a tax of one euro per litre from next year on drinks that contain at least 0.22 grams of caffeine per litre, or 0.3 grams of taurine. The new tax, which is aimed at promoting health by limiting the consumption of such drinks, does not affect ordinary coffee. A similar vote was overturned by the constitutional court last year and the new tax could also be challenged in court by the center-right opposition, which was against the measure.

UK hotel bedroom supply is accelerating: Research shows that UK net hotel supply has been accelerating. Melvin Gold Consulting (MGC) published research showing that circa 40,000 independent hotel rooms have closed in the UK in the past decade, which on a base of circa 700,000 rooms is a circa 0.6% annual exit rate. Offsetting this, the last decade has seen 104,000 new rooms open, giving a net supply growth of +0.9%. The rate of new hotels has been accelerating through this period, peaking at 16,000 new rooms in 2012 (+2.2% gross supply growth). MGC expects the UK hotel market to grow to 850,000 rooms by 2030, 1% annual growth. This is at odds with some opinion that UK hotel supply is static, with new branded hotels being offset by closing independents.

McDonald’s ends relationship with Heinz – because it’s led by former Burger King boss: McDonald’s has announced it will end a 40-year relationship with Heinz as the sauce company is now led by the former chief of rival Burger King. “As a result of recent management changes at Heinz, we have decided to transition our business to other suppliers over time,” McDonald’s said in a statement. “We have spoken to Heinz and plan to work together to ensure a smooth and orderly transition.” The switch will be more apparent outside the United States, as McDonald’s only serves Heinz sauce in Pittsburgh and Minneapolis.

New restaurant search app to launch: A new restaurant app, Ruffl, is to launch and will allow diners to search and reserve tables at restaurants. More than 450 London venues have signed up for the app – it will be rolled out regionally after its London launch. Toptable founder Karen Hanton is among a group of investors who have contributed £1m to the launch of Ruffl, which has been created by Aaron Ross and Laurence Carver.

High streets minister defends fast food chains position on high streets: High streets minister Brandon Lewis MP has defended the role of fast food chains on UK high streets, arguing they are “massively important” to town centres. He said it would be a “mistake” to dictate to people about their diets. “I’ve got to take responsibility for me and my family and, actually, McDonald’s or Burger King is fine now and again, but we shouldn’t be eating it three times a day. It’s wholly wrong for us at the top to sit and dictate. They are employers. They are valuable businesses.” Lewis called on councils bosses to end punitive parking charges putting motorists off visiting town centres – and suggested free short-term parking.

Company News:

Yummy Pub Company receives 214 applications for GM fast-track to ownership positions: Yummy Pub Company has received 214 applications for its new ground-breaking scheme for trainee general managers who will be developed into co-owners of future Yummy pubs. The deadline for applications is New Year’s Day. The company’s website states: “At the end of 24 months training we’ll put you onto a fast track where you’ll work towards owning your own site with us quickly. So, who are we looking for? If you’re chirpy, well-educated in the education of life or school, hard working, youthful in looks or spirit, entertaining, curious, imaginative, you’ll fit the bill. If you’re boring, grumpy, lazy and a little bit of a moaner, you need not apply.”

Gay Hussar goes on the market for £500,000: One of the most iconic restaurants in London, especially favoured by the political left, is being marketed for sale by agent Christie + Co. The Gay Hussar, in Greek Street, Soho has provided the finest in Hungarian cuisine and wines since being opened by the esteemed restaurateur Victor Sassie in 1953. The leasehold of The Gay Hussar is being marketed for sale by Christie + Co off a guide price of £500,000. Christie + Co’s director and head of restaurants Simon Chaplin said: “The Gay Hussar has a special place in the heart and political history of London. Whilst its infamous days as the venue where various political machinations took place may be behind it, it is still today one of London’s most unusual and popular restaurants. With this, and its unique history, we anticipate a great deal of interest.”

Gondola finalises plans for £1bn sale or float: Cinven, the private equity owner of PizzaExpress operator Gondola Holdings is finalising plans for a £1bn sale or float of the business, according to The Sunday Times. The private equity firm is expected to appoint an investment bank in the coming weeks to draw up exit plans. The move follows the £100m sale of better burger brand Byron to Hutton Collins. The Sunday Times reported that Cinven favours a sale or break-up of the company, which also owns Zizzi and Ask, over a stock market listing. Goldman Sachs is favoured to win the mandate to advise Cinven.

Leeds approves 18,500 sq ft of restaurant and cafe space: Leeds City Council has granted outline planning consent for a mixed-use development at Whitehall Riverside in the heart of the city’s West End that will encompass 18,500 sq ft of restaurant and cafe space, which includes a stand-alone pavilion unit. The bulk of the development will be 375,000 of office space in three eight-storey buildings. Edward Ziff, chief executive of Town Centre Securities, the developer, said: “We are delighted to have received outline planning consent for this phase of development which is so crucial to the long-term regeneration and vibrancy of the West End of Leeds.”

Antic London to re-open Baring Hall Hotel; applies to open farmer’s market: Pub company Antic London will re-open The Baring Hall Hotel on 21 November – four years after it was closed by a firebomb attack. The company is seeking planning permission for a £400,000 plan to build shops and accommodation on the car park of the pub in Grove Park, Lewisham, south London – and use the external space for enterprises such as farmers’ markets. The Baring Hall Hotel was set to be turned into flats after an agreement between developers and Lewisham Council. However, the agreement was overturned by the appeal court after a campaign by a local community group. The pub was subsequently acquired by Antic London, where the company’s head of events and promotions, Fiona Collett, said: “We hope to push the concept of the pub as a great, ale heavy traditional pub; serving fresh, home cooked produce,” which would be “very much modelled” on another Antic London pub nearby, The Catford Bridge Tavern. Antic London currently runs 28 pubs in south and east London, with one more due to open soon, the Eltham GPO, a conversion of a Royal Mail sorting office in south east London.

UK Burger King boss set to lead India push: UK Burger King boss Rajeev Varman is set to lead a push by Burger King into the Indian market with private equity firm Everstone Capital, according to The Economic Times. Everstone Capital will own a majority stake in the venture and it will also have an unnamed Mumbai-based property developer as a shareholder. The report added that the venture plans to invest $100 million to set up 500 outlets in the country over the next seven to ten years as a franchisee of Burger King, who will also own a minority stake.

New restaurant concept to launch in Coventry: Coventry city centre will be home to the first restaurant of a new chain. Frango’s is opening its doors to its first branch in Corporation Street next month – offering a selection of Portuguese cuisine. About 30 jobs, ranging from chefs to waiters, will be created at the 180-seater restaurant which is named after the Portuguese word for chicken. As well as welcoming customers to wine and dine, Frango’s will also offer takeaway and also serve Halal meat. Kirsty Wilcock, spokesman for Frango’s, said: “The director Steve King lives in Portugal half the time and half the time here, and wanted to bring the flavour of Portugal to the UK. And as he is from Coventry, that is why we chosen here. We are opening at the back end of November and will serve a Portuguese menu of chicken, fish and steak, as well as having a cocktail lounge.”

D&D Restaurants set to hit £100m annual turnover next year: Quaglino’s operator D&D Restaurants is set to hit £100m turnover this financial year ending in March 2014, according to The Sunday Times. Turnover was up 5% to £79m in its most recent year with Ebitda of £7.1m. The company’s New York restaurant Guastavino’s has the strongest growth, with sales up 14% and Kensington Place is the next best performer with sales up 9%. LDC, the private equity arm of Lloyds Banking Group, led a £50m buy-out of D&D in April, ending Sir Terence Conran’s involvement with the company. 

ETM Group wins London Hospitality Group of the Year: London restaurant, bar and gastro pub operator, ETM Group, won the ‘London Hospitality Group of the Year’ award at the fourth annual London Lifestyle Awards. ETM Group owns and operates ten venues across central London with an eleventh opening at the beginning of November. The awards, which are judged by an online survey of over 250,000 people, honour those whose work makes an outstanding contribution to London and its lifestyle. Tom Martin, co-founder of ETM Group, said: “I am thrilled to have won this award and am delighted that so many people feel that my venues make a difference to their London lifestyle. I hope that we will continue to do so with the opening of our latest venue, One Canada Square in Canary Wharf.” The much-anticipated new site One Canada Square, in Canary Wharf will be taking bookings from 4 November.

Young’s pub in Bristol launches 26-seat cinema: A Young’s pub in Bristol, Horts on Broad Street, has launched a 26-seat cinema in an unused room above its new dining area and lounge bar. Richard Fairchild, Horts’ general manager, said: “Bristol is one of those places where everything is going on. But with that comes a feeling that people always want something different. We say why should people not be allowed to enjoy a meal, have a nice drink and pop upstairs for a new film?” Horts will be showing films four weeks after their cinema general release.

Work starts on next stage of Vangarde development: Work has begun on the next stage of the £90m Vangarde retail park development at Monks Cross in York, which will be home to new Costa Coffee and Frankie & Benny’s outlets, as well as a flagship Marks & Spencer and the city’s first John Lewis store. Costa has agreed a deal on a 1,600 sq ft unit and Frankie & Benny’s will move into a 4,000 sq ft space in the kiosk and restaurant space. Further announcements on additional new occupiers are due to be made shortly. Richard France, managing director of Oakgate Group, the developer for the centre, which includes a new 6,000 seat “community stadium” that will be home to York City FC and the York City Knights, said: “It’s great to see the Vangarde Retail Park taking shape.”

Entrepreneurs plan £400,000 nightclub: Millom businessmen Larry and Daniel Mackie are to invest £400,000 to open a nightclub in Millom. A club called Clocktower will open in the town’s disused Clocktower building in Market Square on 22 November and is part of a project that will create 12 to 15 jobs. The Mackies own The Bear on the Square pub, The Workies and Beggar’s Theatre among other businesses in Millom. Larry Mackie said: “We have owned nightclubs for 20 years and I think ones we have had before have been too big for the town. But this one is just the right size for the area and the crowd we can expect.”

Marston’s wins planning officer backing for new site in Haverfordwest: Plans for a Marston’s hotel, pub and restaurant on the outskirts of Haverfordwest in Wales have won the backing of planning officers. The application for the 59-bedroom hotel will go before the county planning committee tomorrow, with a recommendation of approval. The original hotel building had been due to be three-storey, but the plans have been changed to a two-storey building. The restaurant will cater for 180 people, with space outside for 115 cars, plus 16 cycle rack spaces.

Fratello’s doubles up: Italian restaurant Fratello’s is to open its second site in Cirencester in November, taking over the Mayflower Chinese restaurant. Fratello’s already has one restaurant in Swindon but the new Cirencester site will be run by Italo and Mario Assogna. ”Cirencester only has one Italian restaurant and it is very small,” said Italo. “We want to bring something new to the town.”

Oakman Inns and Restaurant to open flagship Abingdon site next month: Oakman Inns and Restaurants will open its flagship Crown site in Abingdon, Oxfordshire next month after a £1.8m refurbishment. Peter Borg-Neal, Oakman Inns chief executive, described the challenge of restoring the inn as “frightening” with the estimated cost having risen from an initial £1.3m. He told a local newspaper: “This is the largest investment the group has made to date. The building is so old, with substantial alterations made down the years, that a lot of effort will be needed to do it the right way. It will be affordable, not exclusive. We are not looking to win a Michelin star but it will offer high-quality food.” When it reopens it will provide 40 jobs, 20 rooms each with a unique design style, an 80-seat restaurant and a function room for up to 60 guests. Meanwhile, Oakman Inns and Restaurants have been recognised by the SRA star scheme. The SRA Sustainability Rating recognises restaurants as Sustainability Champions and each rating is based on a rigorous audit against a wide range of criteria. The criteria cover 14 areas within in The SRA’s three pillars of sustainability: Society, Sourcing, and Environment.

Wildwood opens in Peterborough: A new Wildwood has opened in Peterborough city centre’s Cathedral Square. Jonny Plant, chief executive, said: “We are really pleased to be coming to Peterborough. Cathedral Square is a great location for us and we look forward to providing a high quality, affordable and friendly experience to the people of Peterborough.”

Spirit partners Milton Keynes College: Students at Milton Keynes College are to benefit from a partnership with Spirit Pub Company. The company will have input into classroom training and around seventy-five students will each receive a week’s work experience at one of the company’s local outlets.

Las Iguanas reports 8.5% rise in like-for-likes: Las Iguanas has reported its like-for-like sales rose 8.5% in the six months to the end of September, with overall sales up 18%. The 31-strong group has openings lined up in Queen Street, Exeter, Cribbs Causeway, Bristol and Glasgow in the New Year – it opened at Wemblety’s Designer Outlet last week. Co-founder Eren Ali will step down at the start of next year to be replaced by former Wagamama chief executive Steve Hill.

Eclectic eyes flotation; first bar company float since 2007: Late-night operator Eclectic, led by Reuben Harley, is looking at an Alternative Investment Market (AIM) float, the first bar business to float since 2007. The company wants to raise £10m to pay off debt and plans to buy two or three sites a year to add to its 19-strong portfolio. The company is 60% owned by Avanti Capital, which would sell down its holding in the float. Eclectic reported sales up 7% to £21.197m in the 12- month period ended June 2013. Ebitda before head office costs was up 15% at £5.81 million (2012: £5.06 million) and company Ebitda was up 2% at £2.92 million (2012: £2.85 million). Richard Kleiner, director of Avanti, said “Over the last five years, Avanti have been delighted to be closely involved with the development of (Eclectic) and working with the management team to see it make the transition to a public company. Avanti believes that (Eclectic) has substantial growth opportunities and this transition to the public markets should provide the capital to accelerate its growth whilst deepening and broadening its infrastructure to ensure that such growth will continue to be built on firm foundations. We also hope the IPO crystallises a return for our loyal shareholders.” The company trades across its estate under a variety of brands, including Embargo 59, Lola Lo, Sakura, Po Na Na and Fez Club. These brands have proven themselves to be consistently cash-generative, continuing to trade well even since the start of the global financial crisis of 2008. The group has established a stable financial track record over the past five years with the turnover in the year ended 30 June 2013 of £21.2 million, representing a two-year CAGR of 16.9%, and Group EBITDA of £3.0 million, representing a two-year CAGR of 16.7%. Eclectic chief executive Reuben Harley said: “I see a great opportunity to grow this business both organically and via selective new site acquisitions. The bar market remains highly fragmented and with our total focus on attracting a premium customer to the highest quality bar in the locations in which we operate we are well positioned to take advantage of the market. The potential of our brands allows for growth both from utilising different brands in areas in which we currently operate as well as new sites in our target towns and cities. The IPO will help accelerate this growth strategy.” The group’s most recent acquisitions, Madame Geisha, Coalition and Coyote Wild, currently continue to trade under their existing brand names. The Madame Geisha site in Brighton was acquired in March 2013 and is also Japanese themed. It is planned for refurbishment in 2014. In October 2013, Eclectic acquired the Coalition bar in Brighton. Coalition is located in the Kings Road Arches on the seafront and has a large outdoor terrace. The bar regularly hosts live music events and headline DJ acts. Coalition will continue to trade under its existing name for at least the next 12 months, over which time the opportunities for further development will be reviewed. Also in October 2013, Eclectic acquired the freehold of the Coyote Wild bar in Derby. The company intends to convert this site to the Lola Lo brand in early 2014. Eclectic sites trade at a gross margin of 80% and capacity averages 400.

Krispy Kreme plunges into red; renegotiates covenants: Krispy Kreme has reported it’s made a pre-tax loss of £2,797,000 in the year to 31 January 2013 despite increasing sales by 6% to £45,073,435. The company made a profit of £1,296,145 the year before. The company opened nine sites in the year to take its total to 54 by the end of the financial year. The company has suspended openings of new sites while it focuses on profitability – and has reported a “strong trading performance during the first seven months of 2013”. A further factory store was opened in February in Edinburgh this year to increase its presence in Scotland. A Companies House filing stated: “Following the opening of several new stores in the year, the company is now focused on improving the profitability of its existing operations and expects to return to new store openings in due course. The directors are pleased with the trading performance of the group since February 2013 and in particular the performance of the new Edinburgh store. Company loans and covenants were renegotiated in July this year.” The company said it would now “trade comfortably within the new covenants agreed, reflecting the directors view that the wider Krispy Kreme group will report improved performance over the coming period”. Former Costa Coffee and Pitcher & Piano executive Mike Dowell joined the company as a director in July. The company’s net liabilities are £13,260,009. The company added: “Agreement was reached on 19 July with both Santander and Indigo for the waiver of covenant breaches and revision of the rolling quarterly covenants for the current year, which was adjusted for the underperformance in the year. Indigo also agreed to the deferral of all interest due under the loan facility by the company’s immediate parent undertaking, Frimley Bidco.” Gross profit margin in the 2013 year dropped to 47% from 49.7% the year before. The company reported an adjusted Ebitda of £1,476,000, down from £4,191,000 the year before but gave no explanation of how the figure is arrived at.

Pizza Hut provides detail on 2012 performance in Companies House filing: Pizza Hut reported turnover of £251,065 in the year to 2 December 2012. Ebitda for the year was £8.7m with underlying operating performance improving by £12.4m. Pizza Hut said it had focused on improving customer experience rather than competing on discount levels. The company runs 328 restaurants, closing three during the year. 

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