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Morning Briefing for pub, restaurant and food wervice operators

Mon 2nd Dec 2013 - Propel Monday News Briefing

Story of the Day:

Alistair Darby – “we won’t sell our Heartland estate”: Mitchells & Butlers chief executive Alistair Darby has insisted that the company will not sell its “Heartland” estate. The pubs are positioned in the value end of the market, with negative like-for-like sales cancelling out the 7% to 8% like-for-like growth the company has enjoyed in the south east. Darby told analysts: “(The) Heartland estate has been reviewed and the consequence of that was the sale of 333 pubs to Stonegate Pub Company. The Heartland estate that was left behind was left behind for a jolly good reason – it is a very well-established, strong, freehold estate with some exceptional prime sites in communities. The issue, of course, in this market is that the two to three lowest income deciles in the UK, that are big users of these pubs, have suffered disproportionately in this period of austerity. And so at this moment in time that market has been very difficult. Do we think that market will recover? Yes we do in the fullness of time. And we think it will be absolutely the wrong thing to do, to consider getting rid of such high quality freehold sites at this point of the cycle, or any point of the cycle. I think the key for us is that we have got to make the value messages stronger, recognise that cash is tight for those consumers. That will improve our competitive position and then we have the option as and when things pick up, which I am sure it will do: Will we still own these pubs and can we drive them further forward? So I think that is the right and proper thing to do. And you know the truth is, it is not that we have even considered selling that Heartland estate – we haven’t considered it. Every estate has a tail and as I often remind people, our tail – or what is perceived as our tail – is probably the upper quartile or at least second quartile of other people’s estates.”

Industry News:

Late-night pubs did not increase crime and disorder: A study by the University of Cambridge has found that later opening by pubs in Manchester did not lead to an increase in violent crime and disorder. The study looked at alcohol-related street violence in the two years before and after the introduction of later opening in 2005 and found no evidence of a rise. The Licensing Act 2005 led to average later opening hours of 30 to 45 minutes during the week in Manchester and by one hour and 20 minutes at the weekend.

Chancellor considers changes to Enterprise Investment Schemes: The Daily Telegraph has claimed that the Chancellor is considering changing the rules on Enterprise Investment Schemes to allow investors to claim tax relief immediately. Under current rules, investors have to wait until an EIS vehicle has made all of its investments before income tax relief is claimed. The change could be announced as early as Thursday’s Autumn Statement. In 2012, the Chancellor increased the amount that could be raised by an individual company in 12 months from £2m to £5m.

Crowdfunding rules are criticised: MPs and industry experts have criticised proposed new rules to govern crowdfunding. New protections proposed by the Financial Conduct Authority include preventing “unsophisticated” investors from putting more than 10% of their portfolio in any one crowdfunded venture. Private equity veteran Jon Moulton said: “Why on earth should (investors) be told how much of their own money they’re allowed to invest in anything? No one tries to tell them what proportion of their income they’re allowed to spend on a car.”

Downing Street – no plans to revive minimum pricing: Downing Street has said it has no plans to revive alcohol minimum pricing despite its surprise decision to press ahead with plain cigarette packet packaging. The prime minister’s spokesman said there would be no similar reversal on minimum alcohol pricing, another public health policy that was abandoned earlier in the year. “We have set out our approach on alcohol pricing earlier in the year and there is no change there,” he told The Financial Times.

Liberis offers £10,000 to Britain’s friendliest business: Liberis, the cash advance business chaired by former Punch chief operating officer Adrian Fawcett, is offering £10,000 to “Britain’s Friendliest Business”. Companies should go to to enter the competition. The deadline for entry is midday on 20 December. A total of 20 shortlisted businesses will be announced soon after, and that list will be narrowed down to three finalists in January 2014. Those three finalists will be profiled across social media, and the winner will be announced in February 2014 and will receive a cash award of £10,000.

Chinese businessman opens restaurant with no-pay option: A Chinese businessman has begun a crusade to remedy his country’s “moral crisis” by opening a restaurant where customers only pay if they want to. Liu Pengfei, a 51 year-old from Fuzhou in south-east China, opened his “Good One” buffet in August in what he said was an attempt to rescue a long-lost sense of trust in Chinese society. Customers at “Good One” can pay as much or as little as they want – and can choose not to pay at all. Liu, a Christian, said his idea was to build trust by offering diners the choice of doing the right thing – paying – or taking the dishonest path of leaving without settling the bill. “I don’t run a business, I run a trust,” he said. “When I trust them [the customers], they will trust me and they will begin to love others.”

Company News:

Starbucks grows to 45 UK franchised sites with ten months; to focus on franchised sites across Europe: Starbucks has grown the number of franchised sites in the UK to 45, owned by nine franchisees, after opening its first franchise-owned store in the world, in Liphook, Hampshire in February this year. It plans to soon open its first such outlet in France, and roll the strategy out elsewhere in the region. Of the more than 200 Starbucks stores the company will open in the Europe, Middle East and Africa region in its current fiscal year, approximately 75% will be with licensees or franchisees. Kris Engskov, who heads the European region, told The Wall Street Journal: “The way you mitigate those risks is you take a lot of time to pick the right partners,” he said. Starbucks has gotten to know prospective franchisees and their families over dinner and has taken some to its Seattle headquarters to learn its ways, Mr. Engskov said. “It’s very personal,” he said. “We have to make sure they understand the culture of Starbucks.” Former 20-site Domino’s franchisee and operator of the Liphook site Anil Patil currently owns five Starbucks stores and will build another seven by the end of the fiscal year and hopes to build another 15 over the next two years. Starbucks plans to limit its number of franchise partners to fewer than 25 in the UK. The franchisees, who sign ten-year contracts with Starbucks, are expected to open ten or more stores and must have experience in property development or with operating branded retailers – and liquid assets of at least £500,000.

Garrity opens Est Est in Liverpool: Stephen Garrity, former managing director of the Est Est Est chain of Italian restaurants, which was acquired by The Restaurant Group in 1997, has opened a restaurant called Est Est in Aigburth, Liverpool. Garrity is managing director of the operation, which raised £500,000 via a consortium of local investors. The 1,800 sq ft development is described as a “spacious, authentic, neighbourhood Italian ristorante and bar”. The executive chef at the restaurant is Ian Crosby, who has worked for Bibis in Leeds, Piccolino’s nationwide and San Carlo in Manchester and Liverpool. Garrity said: “In creating an authentic Italian neighbourhood restaurant, we wanted to draw on the qualities of community and energy that’s often found in suburban Italy. Replicating an all-round Italian experience was very important to us and Aigburth is the perfect place to showcase our blend of traditional Italian flavours fusioned with stylish surroundings.” Until he resigned in the spring, Garrity was a director of the six-strong Marco Marco chain of Italian restaurants in the north west of England. Marco Marco went into liquidation in the summer, and most of its outlets have been taken over by another Italian restaurant chain, Cibo Group. The original Est Est Est chain was sold by The Restaurant Group to Living Ventures in 2005, which rebranded them as Gusto in 2007. There are still nine Gusto sites in the north of England.

Fat Cat Café Bars leasehold sales figures disclosed by administrator: Fat Cat Café Bars administrator Cooper Parry has revealed the sums realised from the sale of the company’s leasehold sites. The Queen’s Head, Frodsham was sold to Stonegate Pub Company for £90,000, with administrators paying £16,000 to settle arrears of pay and lease rental. The Fat Cat in Derby was sold for £50,000, with the administrator settling arrears of £11,000. Nottingham’s Fat Cat site was sold for £95,000, with the administrator settling £16,000 of arrears. Total realisations from the sale of fixtures and fittings of sites in Stoke, Llandudno, London Bow and The Crown Inn, Anstey amount to £35,083. Trading is continuing at The Fat Cat in Leicester, which is a freehold. It has produced turnover of £1.37m since appointment and a trading surplus of £243,000. The administrator’s work has cost £360,890.

First former Bramwell Pub Company site pub sold to an independent: A Woodford Green pub is thought to be the first former Bramwell Pub Company site sold by agent Christie + Co. The Travellers Friend, in High Road, has been taken over by businessmen Scott Randall and Andrew Zacharia, who confirmed the deal last Friday. Randall said: “The idea of buying this was conceived more than ten years ago. Now we have it, it won’t take us ten years to get right. There will be subtle changes, but we shall endeavour to maintain its wonderful character.”

Caracoli opens fourth site: Caracoli, the award-winning deli/cafe, has opened a fourth store, this time in Farnham, Hampshire. The store stocks speciality food items and their own Caracoli Kitchen range of products. James Nichols, managing director of the family-run business, said: “We are very excited about bringing Caracoli to Farnham. The town centre is a great place to shop and socialise, and we hope we can add something special to that experience.” Caracoli won the food category of The Telegraph’s Best Small Shops in Britain Awards 2012. It currently has branches in Alresford, Winchester and Guildford and a headquarters in Twyford.

Antic London re-opens Balham pub: Antic London, the company backed by investment fund Downing, has re-opened the former Blythe Spirit pub in Balham as Hagen & Hyde. A Time Out review stated: “Its incoming owners (Antic, the same people behind the lovably quirky Balham Bowls Club) have given it their trademark ‘vintage chic’ styling, and created a relaxed space for the area’s young professionals to kick back over a pint or a casual bite.”

3,500 sign up for Carlsberg sports club: Over 3,500 premises, including Greene King, Spirit, Stonegate and Orchid sites have joined Carlsberg’s UK’s Premier Sports Club since it launched in August. Membership of Premier Sports Club gives on-trade customers exclusive access to a range of support tools and branded promotional content for key sports events across the 2013/14 Premier League season and World Cup, which drives footfall and rate of sale. Recent research from Carlsberg UK illustrates that football represents a bigger trading opportunity than Christmas, generating an additional 97 pints per outlet per Super Sunday.

Fuller’s re-opens pub at London underground station: Fuller’s has completed one of its latest major refurbishments with the opening of The Tap on the Line – the only pub that sits on a London underground station, at Kew Gardens. The Tap on the Line, formerly The Railway, has seen a six-figure refurbishment project that has given the pub a fresh new look inspired by its local surroundings. Fuller’s worked closely with Richmond Council to sympathetically restore the Victorian building and traditional bar, giving the pub a vintage feel with a modern edge. Décor in the main bar area gives a nod to the railway with a modern, industrial feel and tiles marked with famous rail engineer Brunel, while a large glass atrium that backs on to the station is inspired by the celebrated Kew Gardens and has a botanical theme. Managing director of Fuller’s Inns Jonathon Swaine said: “The pub needed a lot of work, so we have a new roof and a creatively decorated interior that will attract many types of pub-goers from local mums, through to those who want a lively place for a Friday night drink.”

Derwent Manor Hotel sold: The 48-bedroom three-star Derwent Manor Hotel, near Consett in County Durham, has been sold by agent Christie + Co on behalf of administrators Deloitte. Christie + Co associate director Mark Worley said: “It is extremely pleasing to be able to announce that this highly complex transaction has completed. It involved Christie + Co, the buyers, the administrators, the bank, the operating company and three sets of lawyers and included numerous site visits and meetings, countless conference calls and reports and the completion is a triumph of teamwork from all concerned.” The buyers are Linda Wrout, whose background is in residential care, and Keith Donkin who has many years experience in hotel management.

Numis reiterates ‘Add’ on Greene King ahead of results: Analysts at Numis Securities reiterated an ‘Add’ rating on shares of Greene King, which will release its first-half results tomorrow (Tuesday), in a research note to investors on Friday. They now have a 925p target on the stock. At the same time analysts at Panmure Gordon, in a research report also issued to clients and investors on Friday, reiterated their ‘Hold’ target on the company’s shares, putting a price target on them of 750p, well down on their current 50-day moving average of 827.9p. Earlier in the week, Geof Collyer at Deutsche Bank reiterated a ‘Buy’ rating on Greene King with a 890p price target on the stock, while analysts at JPMorgan Chase repeated a ‘neutral’ rating on the shares, putting an 880p price target on the stock. Six analysts have given Greene King a ‘Hold’ rating and 15 have assigned it a ‘Buy’ rating. Greene King currently has an average rating of ‘Buy’ and an average target price of 764.28p

JW Lees reports turnover and profit up: North west brewer and retailer JW Lees has reported turnover rose to £59,211,000 in the year to 31 March, up from £56,306,000 the year before. Profit before tax was £5,947,000 compared to £4,832,000 the year before. The company bought four pubs in the year, spending £10.4m on the acquisitions and improvements and repairs to existing pubs. JW Lees sold eight sites that were considered not capable of development in the future. It also sold its French restaurant, The Perdix Noire, ending 38 years of successful trading in Flaine. A new kegging line was acquired which has enhanced the quality of the company’s keg beers.

Douglas Jack – We would buy Marston’s after share price drop: Numis Securities analyst Douglas Jack has argued that Marston’s shares offered a buying opportunity after they dropped in the wake of results last Thursday. He said: “In 2013, profit before tax rose 15.4% prior to the impact of disposals and higher interest charges (including a £7m securitisation/swap step up). Admittedly, net debt rose 6% in the year, but this was partly due to refinancing charges, higher WIP on new builds (seven new builds opened in the first seven weeks of the new financial year) and the one-off investment in the new bottling plant. However, medium-long term growth prospects have been significantly enhanced. Management is absolutely right, in our view, to accelerate wet-led pub disposals (7.6x EBITDA to NewRiver; 15x EBITDA on single site transactions), from which proceeds will be recycled into new build pub restaurants (6x EBITDA cost for strongly-positioned freehold assets). Hence, our forecasts are little changed for 2015E and 2016E, by which point Marston’s earnings and returns growth should be much stronger. Following, (the) share price weakness, the dividend yield is now 4.7%, rising to 5.2% in 2016E, at which point the dividend should be increasing in line with earnings growth.”

Bespoke Hotels plans “sexiest hotel in Europe” above Jamie’s Italian: The former Midland Bank headquarters on King Street, Manchester is to be transformed into the ‘sexiest hotel in Europe’ under plans by Bespoke Hotels. The ground and basement floors of 100 King Street are currently home to a Jamie’s Italian restaurant. But the upper six floors of the building – designed by Victorian architect Sir Edwin Lutyens – will be transformed into a boutique hotel with 60 rooms. The plans also include a restaurant, roof garden, and private members’ bar. A key feature will be four £300-a-night suites with private ‘indoor gardens’ that are based on a separate, exotic theme. Robin Sheppard, the hotel group’s chairman, told The Manchester Evening News: “We want these to be truly unique spaces. We have a sitting area that leads to a Geisha-style sliding door or Tuscan veranda and you have a playful fountain and holograms and artwork.”

Bristol pub company bought out of administration by co-founder: The Bristol-based pub company Major Bars, which leases pubs from Young’s and Wadworth, has been brought out of administration by its co-founder and majority shareholder after it collapsed early in November following errors in its accounts over VAT and PAYE payments. However, trade and other creditors owed almost £400,000 have been warned they are unlikely to see most of the cash they are due. The company was formed by Daniel Holmes, who owned 70% of the company, and Alexander Major, who owned the rest, in November 2008 to manage The Bristol Ram pub at 32 Park Street, Bristol under a tenancy agreement with Young’s. In 2010, it also acquired the grade II-listed Robin Hood pub on St Michael’s Street, Bristol on a 15-year lease. The following year, it took on The Hop House on Kings Road, Bristol on a 20-year lease from Wadworth. Major Bars took on a fourth pub, The Richmond, in Clifton, Bristol, under an agreement with Scottish & Newcastle in 2009. The Richmond was later renamed The Clifton Cow but was unsuccessful and Major Bars decided to return it to the landlord in July 2010, incurring costs of approximately £60,000 in capital investment and trading losses. In October/November 2012, Major Bars brought in a new financial controller, and it emerged that the 2010 and 2011 management accounts were incorrect, and, unknown to the company’s management, VAT and PAYE/NIC had been understated and only partially paid. Alexander Major had resigned as a director in August 2013, and Holmes, the only remaining director, decided in consultation with the accountancy firm BBK Partnership that as the company could not pay its debts, it should be placed into administration, which happened on 6 November. Major Bars was then put on the market by the administrator, Joylan Sunnassee of BBK. Major Clubs, of which Holmes is the majority owner, was the only business to place an offer, bidding £55,000 to buy Major Bars’ assets and businesses, including The Bristol Ram and The Hop House pubs, as going concerns.

Five new restaurants proposed for prestigious Bristol square: A square in the centre of Bristol that is already home to branches of Carluccio’s, Brasserie Blanc and Piccolino’s could have five more restaurants arriving soon. A planning application has gone in to Bristol City Council to convert five of the units that face Quakers Friar Square into restaurants. The square was given a major makeover as part of the £400m Cabot Circus development and transformed from a car park and occasional market into a home for the city’s most upmarket shops. The former friary at the centre of the square is now a Brasserie Blanc restaurant. The new restaurants will take up five shop units on two sides of the square, including one that was the former Chandos Deli cafe.

‘Floating’ restaurant proposed for Southend: A developer is looking to turn a dilapidated, single-storey cafe on the Southend seafront in Essex into a two-storey restaurant that projects out over the foreshore, giving the impression that it is floating when the tide is in. Diners would be able to sit on the dual-level upper deck and the ground-floor decking area at the back during the summer. Southend Council turned down plans for an “iconic” two-storey yellow coffee shop on the seafront in July as it would block views of the estuary. But the proposed new restaurant’s upper deck has no walls or roof and the side extension is glazed, so there would be little change in sea views. A spokesman for the developer said: “The location is ideal for a modern, contemporary, and exciting new seafront restaurant or cafe. This side of [Southend] pier is gradually being regenerated, and when asking to look at this project, our brief was to provide a facility which would make use of the fantastic estuary views, with its sun deck and cantilevered lower split-level restaurant cafe.”

Real ale bar opens as joint venture between microbrewery and pub: A specialist cask ale bar is opening in Worksop, Nottinghamshire as a joint venture between a local microbrewery and one of the town’s pubs. The Duck and Dive Real Ale Bar, in what was previously an overspill dining area at The Anchor Inn in Eastgate, will feature a selection of regularly changing cask ales from local, regional and national microbreweries. The bar is a joint venture between Phil Owen and Phil Longley of Dukeries Brewery and Mark and Angela Rawlins of The Anchor Inn. Owen said: “We set up the Dukeries Brewery in October last year and we’ve been looking for a local venue to not only showcase our own range of ales, but also the fantastic variety of beers that are now being brewed by over 1,000 microbreweries.”

Paul Heathcote attacks prosecution for VAT offences: The celebrity chef Paul Heathcote has attacked the decision to take him to court for VAT offences. In a statement after he was fined £3,000 a at Preston Magistrates’ Court and ordered to pay more than £7,000 compensation to HM Revenue and Customs, Heathcote said: “I still believe that there was no necessity to take this to court. Our compensation offer to HMRC prior to the hearing was substantially higher than the amount actually awarded. I am pleased that we have a conclusion to the matter. It has been an unwanted distraction in a challenging economic environment.” Heathcote, who was awarded the MBE in 2009 for services to catering, was prosecuted after he ignored a trading ban imposed on his restaurants in Preston, Lancashire and Longridge, Cumbria. The court was told he de-registered his previous company, The Longridge Restaurant, for VAT in 2011 owing almost £100,000 in unpaid taxes. On the same day he registered two new companies, PH Restaurants (Longridge) Ltd and PH Restaurants (Preston) Ltd. HMRC ordered him to pay £72,190 VAT before they were allowed to trade.

Pubs ‘can save £8,000 a year by cutting food waste’: Each pub could be saving more than £150 a week by properly managing its food waste, according to figures just published by WRAP, the Waste and Resources Action Programme. WRAP and the BBPA have now produced a fact sheet designed to help pubs cut waste, which can be downloaded at The report, ‘Overview of waste in the UK Hospitality and Food Service sector’, says the cost of food waste for the average pub is £8,000 a year, or £0.41 per meal. It estimates that pubs serve 11% of all meals eaten out each year, equivalent to 871 million meals; produce 873,800 tonnes of waste each year, which includes 173,000 tonnes of food waste; and produce 19% of the total food waste across the hospitality and food service sector. Overall, it says, more than 1.3 billion meals are wasted annually in the hospitality and food service sector, with an annual bill of £2.5bn, which could rise beyond £3bn by 2016 unless steps are taken to prevent food being wasted. The BBPA/WRAP fact sheet suggests pubs measure and monitor food that goes in the bin for a trial period, eg a week, to understand where and why waste arises, and how much. Pubs can then calculate the amount of food waste produced each year and multiply that figure by the cost per tonne (£2,100) to find out how much waste is costing their business each year. After that, pubs can develop an action plan, with targets, timescales and responsibilities, to cut waste by, for example, training staff to know how to eliminate waste, improving menu planning and reviewing stock management and food delivery processes. Brigid Simmonds, chief executive of the BBPA, said: “This work we have done with WRAP shows that there are big potential savings to be made when it comes to managing food waste – an average of £8,000 per pub. If pubs identify where food waste occurs and put together an action plan, it could help their bottom line as well as the environment.”

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