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Tue 5th Nov 2013 - BrewDog, Brunning & Price, JDW, personal licences, Starbucks

Story of the Day:

Tim Martin – scrapping personal licence system would be a mistake: JD Wetherspoon founder Tim Martin has voiced his opposition to the scrapping of a national system of personal licences as is proposed. Martin told Propel: “It does not make sense for the government to propose changes to the current national personal license system, which seems to work very well. There were great problems in the 1980s when each licensing division/magistrates’ court operated its own individual sets of rules and regulations, since lawyers were invariably needed to interpret the meaning and application for each area. The trade and all political parties were united in recommending and supporting a national set of rules during the 1990s and these rules were subsequently created and adopted by most licensing authorities/magistrates’ courts. A single set of rules for the entire country proved to be very successful and reduced costs for licensees and the courts. Pubs have had to contend with large amounts of changes to licensing and other laws in recent years and many have been unable to cope. It would be a retrograde step to revert to the approach of different rules for different areas, since this has already been shown to be expensive and inefficient.” A consultation on the subject closes this Thursday – and companies can click through a skyscraper advert on the right of the Propel Newsletter to have their say.

Industry News:

China to replace Canada as second largest Starbucks market next year: China will replace Canada as the second largest Starbucks market in 2014. It plans to open 1,500 stores next year – half of them in Asia. There are currently 1,017 Starbucks in more than 60 Chinese cities, an increase of 317 from a year ago. “The stores that we opened in 2012 are currently averaging sales in excess of $700,000, while our 2013 class of stores are on track to annualise with a very similar result,” said John Culver, Starbucks group president for China and Asia Pacific. China will be “the largest driver of the approximately 750 new stores we plan to open across the region in 2014,” according to Culver. Starbucks’ operating margin in Asia last quarter was 37.5% versus 21.8% in the Americas.

Technomic founder – Potbelly stock doubled because investors are looking for the next Chipotle: Founder of research and insights firm Technomic, Ron Paul, has argued that the doubling of US restaurant firm Potbelly’s stock on the first day of its initial public offering is a sign that investors are looking for the next Chipotle, whose stock has risen 20-fold since its flotation in 2006. He said: “Another fast-casual chain, Noodles & Company, also saw its stock price double on its first day as a public company last June, and the company’s shares have continued to rise since then. These highly successful debuts follow on a similar record in 2012, when full-service restaurant operators Chuy’s, Bloomin’ Brands and Del Frisco’s Restaurant Group went public and quickly saw stock prices soar. The foodservice industry as a whole is growing only slowly, but as consumer needs and lifestyles change, some sectors – notably fast casual – are expanding at a rate far above the average. Investors are not likely to forget Chipotle Mexican Grill, which went public in 2006; its stock now trades at 20 times the opening-day valuation. In the search for “the next Chipotle,” quickly rising fast casuals like Potbelly and Noodles & Company look particularly attractive. (Those who invested in fast-casual sandwich chain Potbelly may also have in mind the astonishing—and ongoing—rise of Subway, the quick-service sandwich chain that remains privately held and thus unavailable to the average investor.)”

Johnson – London businesses are crazy not to pay the Minimum Living Wage: London businesses would be “crazy” not to sign up to the London Living Wage, Mayor Boris Johnson has argued as he announced a 25p increase in the hourly rate. He admitted some firms would be reluctant to pay the LLW, which goes up from £8.55 to £8.80 an hour, but insisted it made “pure economic common sense” to do so. However, the Mayor backed away from calling for the payment, which is £2.49 more an hour than the minimum wage, to be made compulsory as it could cost jobs. There has been a 450% increase in new firms signing up over the last year, up from 78 to 432.

Salisbury Pubs’ site named in The Times as UK’s best gastro-pub: The Alford Arms in Frithsden, Hertfordshire, operated by four strong Salisbury Pubs, has been named by The Times, in conjunction with Harden’s, as the UK’s best gastro-pub. Salisbury Pubs is run by husband-and-wife team David and Becky Salisbury. In August, Salisbury Pubs also won the coveted Pub Group of the Year award from the Good Pub Guide 2014.

Bar guide app launches today: Bar and club guide app Drink Advisor, the world’s largest database of user generated reviews of bars and clubs, launches for free on iOS and Android for mobile and tablet today. It covers 120 cities including London, Paris, New York, Cape Town and Moscow – and 3,000 venues. Users can rate and review all venues, add photos, as well as find the best places in their vicinity. 

Company News:

New BrewDog site in Shepherd’s Bush to feature 40 taps: The new BrewDog site due to open on Goldhawk Road, Shepherd’s Bush will feature a “mega motherload” of 40 taps. A spokesman stated: “Shepherd’s Bush is crying out for somewhere to go to for amazing beer. Hopefully, when the bar launches, we’ll be paving the way for a new era for the beer scene in this part of London. The area rocks as it’s got bags of character and is pretty edgy, and the bar is right next to one of London’s best music venues, too.” Dean Pugh, who used to manage BrewDog Manchester, is moving to take the helm at BrewDog Shepherd’s Bush, said: “The live music around here is awesome with the Empire on our doorstep, but it’s a craft beer desert! West London needs some awesome beer and we’re here to provide it.”

Crowd-funding brewery raises more than original target: Little Brew, the new-start brewery headed by Stuart Small that plans to set up in York after a proof-of-concept year in London, has raised more than its original target of £100,000 in return for 25% of its equity through crowd-funding website Crowdcube. The company has so far raised £114,750, nearly £15,000 more than its original target.

Brunning & Price to open new site next week: Brunning & Price, The Restaurant Group’s gastro-pub arm, will re-open the former Tree Tops hotel, just off Formby Bypass, as Sparrowhawk next Tuesday (12 November). Over the past four months, the building has been extended to cater for some 150 covers inside, with a further 200 able to eat and drink outside, where customers can enjoy five acres of surrounding woods and parkland. The pub will be serving six cask ales and offer a list of 50 wines. General manager Iain Hendry said: “I’m really excited about what has been created – a place where people can relax in true country pub surroundings and enjoy fine beers, wines and food. We have good, honest old furniture, reclaimed woodwork and open fires. Tree Tops was a fine old building. A new conservatory has been built and the building itself extended to take double the numbers it could previously accommodate, but the central bar is the heart of the pub.”

McDonald’s UK boss Jill McDonald is promoted: McDonald’s has promoted UK chief executive Jill McDonald to lead its new North West European division as part of a wider operational shake-up to boost sales. McDonald will take over the new region, which consists of Denmark, Finland, Germany, Ireland, Luxembourg, Norway, Sweden and the UK, from January 2014. It sees her take on additional responsibility for Germany, the company’s biggest market in Europe. She was previously UK chief marketing officer before taking over as chief executive of McDonald’s UK in 2011. Running of the UK business will be handed to Mark Hawthorne, currently regional vice president of McDonald’s Asia Pacific, Middle East and Africa markets. He will report to McDonald. The changes come as McDonald’s consolidates its European footprint from the current four divisions into three – North West, Central and Southern. Doug Goare, president of McDonald’s Europe, said: “The management changes and promotions announced today position the company for future growth and will more effectively leverage the talents of our leadership team in Europe. They will also ensure that we can scale successful initiatives across the region even more seamlessly.”

American East Coast to open in Covent Garden: A pizza restaurant and cocktail bar inspired by beach clubs on the American East Coast is to open in Seven Dials, Covent Garden, restaurant consultant Adam Hyman has reported. Earlham Street Clubhouse will serve 160 covers from a basement site.

Spirit executives buy shares: Spirit executives bought shares in the company last Friday at a price of 73.25p using a proportion of their after-tax annual bonus. Chief executive Mike Tye bought 42,961 shares, finance director Paddy Gallagher acquired 15,676 shares and marketing director Clive Briscoe bought 7,399 shares.

Lola’s Cupcakes to take Heathrow Terminal Five pop-up: Lola’s Cupcakes has been chosen by Restaurant Group Concessions to open in the pop-up shop in Terminal 5 on Monday 29 November. Lola’s Cupcake is bakery concept that mixes, bakes and decorates every cupcake using only Belgian chocolate, pure vanilla and fresh fruit to produce high quality. 

Marston’s to open Andover new-build: Marston’s will open a new-build pub restaurant in Andover, Hampshire on 25 November – it is sited on Andover Commercial Park near the entrance to the Co-op warehouse. The Chalkhill Blue will create more than 55 jobs in the town once completed and will be able to accommodate 180 diners.

Richoux Group to open fifth Dean’s Diner: Richoux Group is to open its fifth Dean’s Diner restaurant tomorrow (Wednesday, November 6). The new restaurant will open at the Pioneer Centre in Bicester, Oxfordshire. It will join the existing Dean’s Diners at Port Solent, Fareham, Chatham and Braintree. Richoux Group managing director Ed Standring said: “2014 has been an excellent year for Dean’s Diner. The restaurants continue to prove popular with diners and the new opening at Bicester highlights our confidence in the brand and its future expansion.” Dean’s Diner specialises in burgers, ribs, rotisserie chicken, wraps, fries and sides. It also serves 13 different milkshakes, a selection of American beers and wines, authentic American pancakes, sundaes and desserts. The restaurants serve breakfast, lunch and dinner seven days a week and also offer takeaway.

Costa Coffee moves into McDonald’s site in Tamworth: Costa Coffee has moved premises in Tamworth, crossing George Street into the former McDonald’s premises, which is a much larger unit and part of Tamworth Ankerside shopping centre – its trading space has tripled in size and recruited an extra four new full-time baristas. Manager Jacqueline Brodie said: “The new Costa Coffee at 14 George Street now has room for more than 100 people – in the old shop there was only seating for 43.”

PizzaExpress franchisee – we will aim to open two sites a year in UAE: United Arab Emirites PizzaExpress franchisee Anand Radia, who opened his first PizzaExpress franchise in 2000, is aiming to open two new sites a year. This year, he introduced a licensed Jazz@PizzaExpress in Jumeirah Lakes Towers, a first for the UAE. He said: “We were the first PizzaExpress in the world to do deliveries. We will have a minimum of two new restaurants per annum. The notion is there to go to Abu Dhabi. I see PizzaExpress fitting in with the new Abu Dhabi but I still need to see a bit of population there. Our aim would be that we have another jazz place in Abu Dhabi.”

McDonald’s quits Hampstead site after 21 years of trading: McDonald’s has sold its site in Hampstead High Street where it has traded for 21 years. The fast-food restaurant, which opened to strong opposition from residents in 1992, said it had decided to sell its lease after receiving a “good” offer from an as-yet unknown buyer. The company announced it will be closing the branch on Sunday, November 17. A spokesperson said: “This was not an easy decision but although we are sad to leave Hampstead, after so many years of successful trading, we decided that this was the right opportunity as we received a good commercial offer to purchase the remainder of our lease, which would have expired in 2016.”

New cafe and deli concept opens in Billericay: A new cafe and deli concept, La Bottega Caffé and Deli, has opened at Barleylands Craft Village in Billericay. The concept has been launched by Nicole Beggi from Milan, Northern Italy. Beggi said: “It is something a bit different for the area – we have exclusive products which are shipped from Italy.” Her cafe serves freshly made pizzas, homemade lasagne and meatballs as well as sandwiches and children-friendly snacks served up by Italian chefs Marco Bonacina and Giacomo Bilanceri.

Jamie’s Italian opens third site in Australia: Jamie’s Italian is opening its third site in Australia this week, with an opening in the capital city of Canberra. The brand also has sites open in Dubai, Russia, Turkey and Singapore.

Macdonald Hotels adds free Wi-Fi: Macdonald Hotels & Resorts has signed a deal with The Cloud to offer free Wi-Fi in its 45 hotels in the UK. It will see the Wi-Fi provider make internet available for an unlimited time across public hotel areas, meeting rooms and all bedrooms. It also adds to The Cloud’s existing portfolio of 18,000 venues in the UK using its Wi-Fi service, including PizzaExpress, Pret, Caffe Nero and Eat.

Domino’s head of franchising to re-join Fuller’s in the New Year: Highly regarded Domino’s UK head of franchising Georgina Wald is to re-join London brewer and retailer Fuller’s to head up its public relations team in the New Year. Wald worked at Fuller’s for several years before leaving to join the pizza firm, based in Milton Keynes. Wald will start at Fuller’s on 6 January. 

Nando’s wins alcohol licence for Falkirk opening: Nando’s first Falkirk restaurant has won a licence to serve alcohol. It’s due to open in the town’s Central Retail Park on 11 November, with permission to serve alcohol on the premises from 10am to midnight seven days a week. The new premises comes 21 years after Nando’s opened its first restaurant in Ealing, London, and seven years since the first Scottish branch opened at The Fort, Glasgow.

Eclectic adds Manchester site: Eclectic Bar Group, the operator of premium bars, has acquired the lease of the former Pitcher & Piano on Manchester’s Deansgate Locks, bringing the company’s venue count up to 20. The bar will be converted to Lola Lo, Eclectic’s Polynesian tiki-themed brand, and is scheduled to open on 12 December. The 560-capacity bar will open seven days a week from mid-morning until the early hours. Last week, Eclectic announced its intention to float on the AIM market of the London Stock Exchange. “This acquisition reinforces the company’s stated policy to expand at the rate of around two to three sites a year,” said Lee Nicolson, Eclectic’s operations director. “Manchester is a great city. Our nearby Sakura venue is a big success and we are certain that the quality and style associated with the Lola Lo brand will also make a significant contribution to Manchester’s bar scene.”

Simon Rogan take Claridge’s pitch formerly occupied by Gordon Ramsay: Simon Rogan is to take over the former Gordon Ramsay site at London’s Claridge’s. Rogan, who holds two Michelin stars and this year also topped the Good Food Guide with his Cartmel restaurant L’Enclume is set to open in spring 2014.

Irish KFC franchisee reports profits up: Pre-tax profits at the company that operates the Kentucky Fried Chicken (KFC) franchise across Ireland increased 93%, almost doubling to €1.53m last year, according to documents just filed with the Companies Office. The new figures also show that revenues at Herbel Restaurants (Ireland) dipped by 8% from €20.8m to €19m in 2012. The decline in revenues arises as the number of franchised restaurants last year reduced from 18 to 16. “Despite the economic conditions, the KFC franchise business continues to trade well,” the company’s report says.

Court adjourns attempt to evict M&B pub squatters: Squatters occupying Mitchells & Butlers’ The Bohemia pub in Finchley have claimed a victory as eviction proceedings against them were adjourned at court. The Occupy protesters, who took over the closed pub in September, persuaded the judge to postpone any ruling on their occupation until further representations had been made. The group was issued a court summons last week after administrators for Antic Ltd, the current leaseholders of the building, began eviction proceedings. But the group argued they were licensees, not trespassers, pointing to the fact the owners of the building have been in discussions with them for several weeks.

Futuristic JD Wetherspoon pub in Devon is named: A new Wetherspoon pub in Ilfracombe, arguably the most futuristic design the company had ever chosen, will be called The Admiral Collingwood when it is opened in April 2014. Builders are currently on site at the former Collingwood Hotel site in Wilder Road. Three names were chosen by developers for readers of the local newspaper to choose between: They were The Winter Garden, Capstone Point and The Admiral Collingwood. The Admiral Collingwood was the winner with 57% of the vote. Runner up was Capstone Point with 28% and third was The Winter Garden with 15%.

Stonegate’s Missoula brand launches new menu: Missoula, the high street offer owned by Stonegate Pub Company has launched a new food menu, which draws on the current trend for American-influenced dishes and an emphasis on bolder flavours. New dishes have been added to the various sections of the menu including sandwiches, sharers, small plates, home comforts and desserts. The menu has been designed to appeal to customers who are looking for either a light bite, a comforting, warming dish, a gourmet burger or a sharer over a drink or two with friends. On the ‘Home Comforts’ section, two new choices of hot dogs feature including the New Yorker hot dog with cheese and fried onion strings served with shoestring fries and the chilli dog – a hot blend of chilli con carne and melted cheese. Also on the menu is bubble battered chicken fillets served with chilli slaw or a warming dish of chilli con carne served with rice, tortillas and sour cream. BBQ pulled pork, steak melt and ham and cheese toastie are among the sandwich options whilst warm cherry pie and a Key Lime cheesecake are new on the dessert menu.

Community Economic Development trust buys Plymouth pub: Plymouth pub The Lord High Admiral has been sold on behalf of PWC by agent Christie + Co off a guide price of £175,000 plus VAT. The site was bought by The Millfields Trust, a locally based Community Economic Development trust whose aim is to manage the regeneration of the Stonehouse area of Plymouth. General manager of The Millfields Trust Roger Pipe said: “The Millfields Trust is really excited about being the new owners of such a great local pub as the Lord High Admiral.”

Rochester restaurant opportunity offered: Property agent Christie + Co has been instructed to source a restaurant or cafe operator for a new opportunity located in the heart of Rochester’s Cultural Quarter in Kent. The existing building shell was previously used as a toilet block covering a floor space of approximately 1,300 sq ft (121 sq m). A number of layouts have been devised, indicating that with the inclusion of the garden terrace, the unit could provide between 74 and 91 covers, together with bar/servery, kitchen, toilet facilities and storage. The property is set within the grounds of Eastgate House, a Grade I Listed building in the High Street. Robert Cockayne, Christie + Co’s restaurant specialist based in Maidstone, said: “The opportunity has arisen for a purchaser to take over this unit, and convert it into a successful food and beverage business. The property would be ideal for an operation serving high quality freshly produced food and beverages to the 570,000 people that stay in the area each year, as well as the three million day trips the area receives per annum.” A new lease is to be created, with a range of design, build and funding options available.

Geof Collyer – there’s not much room for Wetherspoon to disappoint tomorrow: Deutsche Bank leisure analyst Geof Collyer has argued that there’s not much room for Wetherspoon to disappoint on First Quarter results tomorrow given its 34% share price so far this year. He said: “In each of the last three years, EBITA margins have dropped in H1 vs. the prior year. For FY’14, margin guidance is for flat due to increased government related taxes (excise duties, business rates, machine gaming duty) as well as increased pension contributions for FY’14E. So all of the sales growth this year – assuming the margin targets are met – is likely to come from the rollout programme where average pubs are forecast to rise by circa 3.5%. We continue to believe the key for JDW is to deliver margin improvements and growth the FCF and dividends. In 2014, we forecast a flat margin, flat dividend and a net cash outflow of circa £20m. Given the volatility of the group’s margin performance over recent quarters, we don’t see the tone of outlook statement changing from ‘cautiously optimistic’. JDW’s share price is up circa +34% year-to-date. There is a lot of good news already factored into the stock at this level. Not much room for disappointment.” 

Spirit refinance is a success: Numis Securities leisure analyst Douglas Jack has hailed a move by Spirit to refinance as a success. He said: “Spirit has achieved its desired result with its refinancing: 70% of A1 and 50% of the A3 bond notes will now convert to A6 and A7 bond notes, thereby removing cash trap risk. With no change in the overall interest rate for the two notes (after swaps amortisation), the refinancing should also free £53.2m of cash for expansion. Interest costs have increased relative to what they would have been, but this is almost all due to less amortisation (rather than higher interest costs): 86% of the A1’s interest cost is in its swap and 79% of the A3’s cost is in its swap after January 2015. Thus, the higher interest coupon from the refinancing is offset by the more-expensive swaps continuing to amortise at the original (faster) rate, whereas as the (cheaper) bonds amortise at a slower rate. The 25% increase in interest costs in 2016E (£14.5m versus £11.6m) is fully matched by the 31% increase in outstanding A1/A3/A6/A7 bond debt in 2016E (£226.7m vs. £173.6m). The £53.2m reduction in bond amortisation over 2004-16E should be used for expansion. To cover the £3.0m of incremental interest cost (already in our forecasts) in 2016E, acquisitions need to generate a 5% EBIT return. In comparison, management is targeting a 20% cash return on freehold expansion. Our forecasts assume that Spirit invests £40m of this £53.2m and achieves a 12% EBIT return.”

Matthew Clark joins Jacques Borel’s VAT campaign: Matthew Clark has joined the VAT Club Jacques Borel. Matthew Clark is the leading drinks supplier to the on-trade, providing a comprehensive retail solution for wines, spirits, beers and soft drinks to over 16,000 restaurants, hotels, pub, bars and clubs across the UK. Chief executive Steve Thomson said: “We are pleased to support the campaign to reduce the level of VAT in the hospitality sector. The recent tax parity day showed how much support there is for a reduction in the level of VAT amongst publicans and their customers.” VAT Club JB chairman Jacques Borel added: “We are delighted to welcome Matthew Clark to the campaign to reduce VAT. The company is at the heart of the leisure and hospitality sector, serving thousands of customers daily. It fully understands how a reduction in VAT would boost all of those working in this important sector of industry.”

Punch to reveal restructuring proposals in December: Punch Taverns has reported that it will unveil a revised restructuring proposal in early December “with the broadest level of support achieveable at that time”. The company will then formally launch the implementation proposal shortly thereafter. In a statement issued today, the company made clear the problems it is facing in squaring the competing interests of different stakeholders. The company stated: “Since the announcement of Punch’s preliminary results on 25 September 2013, Punch has continued to engage in extensive discussions with stakeholders and their advisers from across the Punch A and Punch B securitisations (including the advisers to the ABI Special Committee of noteholders), with the objective of reaching agreement on the terms of a consensual restructuring for both securitisation structures. Given the nature of the securitisation structures and the differing interests across many of the stakeholder classes, a number of conflicting stakeholder views have been received across a broad range of topics during the engagement process from both noteholders and other securitisation creditors. In response to the proposals announced by Punch on 10 June 2013, certain senior creditors have requested that a greater proportion of the available cash resources is allocated to senior creditors (in the case of senior noteholders based on fixed note amortisation schedules) with junior creditors receiving a mixture of reinstated PIK notes, cash and equity. These proposals from certain senior creditors are inconsistent with the request from certain junior creditors that value is allocated to the junior notes in recognition of their ability to benefit from the ongoing cashflows and liquidity facilities within the securitisation structures notwithstanding default and are inconsistent with the position of shareholders who are unwilling to contemplate dilution. While these requests conflict with each other, Punch is continuing to work with stakeholders with the objective of helping all parties move towards a restructuring proposal that can be supported by stakeholders. Punch will announce a revised restructuring proposal during the first week of December 2013 with the broadest level of support achievable at that time and will then formally launch the implementation of that restructuring proposal shortly thereafter.”

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