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Morning Briefing for pub, restaurant and food wervice operators

Tue 10th Dec 2013 - Propel Tuesday News Briefing

Story of the Day:

McDonald’s reports 1.9% like-for-like sales rise in Europe: McDonald’s has posted a 1.9% like-for-like sales rise in Europe in November, with strong sales in the UK, France and Russia offsetting weaker sales in Germany – total sales in Europe are slightly higher than combined US sales. “Amid a tepid informal eating out market, Europe delivered positive results by elevating the customer experience with appealing premium, core and value menu options, compelling promotional food events and continued focus on key day-parts,” McDonald’s said. But the company has struggled for a year in the US to grow sales significantly with intense competition in the value market – November was, again, a disappointment in the US with like-for-like sales falling 0.8%. “McDonald’s US trends imply a rare period of (market) share losses,” RBC Capital Markets analyst David Palmer said. Analysts report that McDonald’s appears to be losing out in the US to rivals at all meal times except breakfast – where it has long been a leader. Some analysts argue that the company’s problems in the US are the result of poor execution, with new menu items such as lattes, smoothies, salads and wraps slowing McDonald’s service. McDonald’s latest move is to switch its value-oriented “Dollar Menu” to the “Dollar Menu & More” with slightly higher price points. US diners’ response to will reflect in the December sales results. But declines in Japan hit like-for-like sales in the Asia Pacific, the Middle East and Africa region, which fell 2.3%. “As consumer expectations and the marketplace continue to evolve, we are making investments in our menu, restaurants and service to strengthen our connection with customers and build our business for long-term profitable growth,” said Don Thompson, McDonald’s chief executive.

Industry News:

NPD Group reports return to out-of-home foodservice growth: Foodservice industry analysts NPD Group has reported this year’s good summer helped the total out-of-home foodservice industry achieve a return to traffic growth in the Third Quarter of 2013 of 2% versus the same period last year. Branded pubs and restaurants are largely in growth, benefitting from the ability to respond to changing consumer demands, NPD reported. The breakfast day-part enjoyed a +2.2% growth to September 2013. NPD reported that consumers are making more informed and considered meal and snack choices, in some cases swapping routine weekday visits in favour of shared family and friend-oriented weekend ‘experiences’. Snacking is the major victim, dropping -1.5% in the year to September 2013. A pub recovery is led by brands, both small and major, through visit growth driven by key occasions and consumer groups – parties with kids, parties with adults only, weekends, and older adults aged 50-64. Meal occasions driven by deals grew 4.3% in the year to September, and overall pub deal usage rates of 29.6% are above the industry average (26%). A larger number of orders than ever in pubs are now non-alcoholic, with beer sales the biggest loser. Incident rates are now at 39%, with four fewer drinks consumed per 100 visitors. Cyril Lavenant, director of foodservice UK for The NPD Group, said: “An increase in average individual spend is a positive sign and operators need to give people the chance to trade-up, while not forgetting to maintain value on routine visits. Breakfast continues to be a bright spot with real opportunities, particularly for the QSR channel, to maximise it next year. However, the industry really needs to focus on reinvigorating core lunch and dinner day parts if there is to be sustained growth.” 

Domino’s – India is set to replace the UK as our largest international market: India will soon replace the UK as the largest international market for Domino’s outside the US, chief executive J Patrick Doyle has reported. As of 31 October, Domino’s India had 650 restaurants across 137 cities, “just 100 shy of the UK”, he said. Pizzas with Indian flavours are also finding shelf space internationally. “There are pizzas from India that are now being sold in the UK, like paneer pizza, chicken tikka masala pizza and kheema do pyaza pizza,” he said.

Restaurant consultant to launch app in the New Year: Restaurant consultant Adam Hyman, who produces a weekly restaurant openings update, is to launch an app in the New Year. He said: “The Code app will launch on 13 January, offering restaurant discounts and lifestyle offers to people working in hospitality, as well as a full archive of Code Bulletins. We’ve worked hard to make sure it has form as well as function.”

Beer duty income forecast to be flat for six years: The Office for Budget Responsibility has forecast flat beer duty receipts until 2018. Duty receipts for wine is forecast to rise by 54% and spirits duty is expected to rise by 31%. Over the same period, the OBR expects wine volumes to increase 19%, spirits volumes to increase by 1% but beer volumes to fall back a further 15%. Tim Wilson, managing director of Wilson Drinks Report, said: “We expect that the Chancellor will continue to implement the duty escalator on wines and spirits over the remainder of this parliament, and beyond. The level of increase in the predicted total duty receipts is proof of this. Wine duty would need to increase by 4.4% each year on average to achieve the estimated level of duty receipts by 2018/19. Despite volumes of still wine being in steady decline at the moment, wine duty receipts are expected to increase by 54% between 2012/13 and 2018/19. This is because HM Treasury believes that economic growth will be accompanied by large increases in the sales of wine.”

MatchPint to launch Rewards this weekend: MatchPint launches a major new product on Saturday called Rewards. The new feature – which was tested in The Regent Pub, Islington – enables licensees to offer rewards to customers in return for checking in, rating, and reviewing their venue. Offers will be promoted via the MatchPint app, which is used by more than 1,200 pubs and bars to promote sport in the on-trade, hit 100,000 unique active users in November. As part of the launch, MatchPint is offering a limited number of free drinks to users that check in to one of 20 pubs to watch sport on Saturday, including BT’s top-of-the-table clash between Manchester City and Arsenal. A spokesman said: “Pubs face increasingly tough competition in the fight for sports fans, with cheap beer in the supermarket and surround sound readily available in the living room. This new feature gives publicans the necessary tools to drive customers into their venue through general, or time specific offers, all redeemable and tracked in one touch of a mobile screen.”

Company News:

JD Wetherspoon to open 900th pub next week; returns to roots in Muswell Hill: JD Wetherspoon will open its 900th pub next week. The Poulton Elk will replace the former Edge bar on Hardhorn Road, Poulton when it opens on Tuesday 17 December, after £1.37m was spent re-developing the site. Meanwhile, Wetherspoon has purchased The Village pub in Muswell Hill Broadway. Wetherspoon founder and chairman Tim Martin opened his first Wetherspoon pub in Colney Hatch Lane, Muswell Hill, in 1979. Wetherspoon will spend £1.5 million redeveloping The Village. At present there are no on site or opening dates – however, the company aims to have the pub open by July 2014. A total of 50 jobs will be created. Tim Martin said: “I am delighted that we have purchased The Village. I opened my first ever pub in Muswell Hill and have very happy memories of the area. It was the launch pad for Wetherspoon’s success across the UK in the following years. I’m looking forward to seeing a Wetherspoon pub in Muswell Hill once again.”

Cotswolds site sold – after a large cut in the asking price: Cotswolds venue, the landmark Hundred House Hotel near Great Witley, has been sold after the price was reduced drastically. Peter Brunt, hotels director with Colliers International, said: “The Hundred House Hotel is at the crossroads of a historic road network linking Stourport, Kidderminster, Droitwich, Worcester, Tenbury Wells and Bromyard – so there is no shortage of passing trade. But it was being offered at a hugely ambitious price by local agents and I had to inject some realism after a very frank conversation with the owner John Ratcliffe. As luck would have it John and I went to the same school – St Mary’s College in Blackburn, Lancashire – and old boy trust enabled me to be fairly blunt about what the place was really worth! It had been on the market for a seven-figure sum and even the first price I was instructed to offer it at, having taken on the job, was over ambitious. After our chat the price was lowered from £699,000 to offers over £550,000.” Peter said: “John was very motivated to sell the business before the end of the year and with (an additional) 20% knocked off the asking price we saw an immediate upswing in interest.”

Antic London to open third pub within a month: Antic London, the London pub operator led by Anthony Thomas and backed by Downing, will open its third pub within a month next week – the Baring Hall Hotel will open on Wednesday, 18 December. Antic London was successful in its bid to buy Baring Hall hotel, which otherwise faced demolition. The company is investing £400,000 in redevelopment of the building and the area surrounding it. Antic London plan to convert the building’s car park into a space for shops and accommodation, while the external space would be used for enterprises such as farmers’ markets. Closed after a firebomb attack in 2009, The Baring Hall Hotel was set to be turned into flats after an agreement between developers and Lewisham Council. However, the decision was overturned when The Grove Park Community Group (GPCG) appealed the decision at London’s Royal Courts of Justice. Initially gaining an injunction for seven days, over the next three years councillors and the GPCG were able to enlist the help of high profile names such as Stephen Fry and restaurant owner Mike Belben, to secure the future of the building, and return it to its purpose as a pub. The Baring Hall Hotel is the 20th Downing-backed Antic London freehold site – and there is an additional five under development. Antic opened Farr’s School of Dancing, on Dalston Lane, north east London last week. The company re-opened the former Blythe Spirit pub in Balham as Hagen & Hyde two weeks ago.

Simon French – we’ve switched from ‘Sell’ to ‘Buy’ on Domino’s shares: Panmure Gordon leisure analyst Simon French has reversed his recommendation on Domino’s share from ‘Sell’ to ‘Buy’. He said: “Following Friday’s surprise resignation of Lance Batchelor as chief executive, Domino’s is trading at an 18-month low and a forward P/E of 17.8x, not seen since 2009. We change our long-standing ‘Sell’ recommendation to ‘Buy’ believing that the stock’s valuation does not reflect the circa 20% EPS growth forecast next year. A hiatus in management presents an opportunity for a possible private equity approach given that net debt to EBITDA of under 1.0x compares to DPZ (US parent), which has c5x. The market has been unsettled by the timing of his departure following on from CFO Lee Ginsberg (not officially stepping down until the AGM) and head of franchising Georgina Wald. Crucially we don’t think the prospects for the group have changed at all. Domino’s has always been an excellent business – it was just too expensive in our view. That has now corrected and we think this is a compelling entry point.”

New concept La Polenteria to open in Soho: Polenta, the store cupboard staple most commonly associated with the peasant cuisine of Northern Italy, takes centre stage in the development of a new, healthier, modern restaurant concept, La Polenteria. Opening in Soho’s Old Compton Street in mid-December (no firm date has been set), La Polenteria is the brainchild of London-based European entrepreneur Cristina Sparcaci. She said: “La Polenteria aims to be a modern and different venue renown for rejuvenating polenta, a dish made popular by northern Italian cuisine, by giving it a cosmopolitan and modern feel. We are promoting and recreating polenta as an exciting, healthy, tasty, high quality dish loved by all, and presented in a modern and contemporary style. We are a mainstream restaurant, but because polenta is naturally gluten free, it offers a great dining out option for those who are gluten intolerant.”

Tragus signs franchise agreement in Dubai: Tragus has signed a franchise agreement with Diamond Hospitality, a Dubai-based foodservice company managed by Al Masah Capital that will see the development of Café Rouge sites in the UAE. The first site will open in Dubai. Café Rouge and Belgo managing director Peter Blake said: “We’re confident that our first restaurant in Dubai will be the start of an exciting new chapter in the Café Rouge story.”

Loungers reports 6% like-for-likes: Cafe bar operator Loungers has reported 6% like-for-like sales growth in the first 26 weeks of its financial year, with sales up 58.9% to £15.2m. The company will open its 12th site of 2013 – and 41st overall – next week in Truro. The Truro site is the group’s first site in Cornwall and occupies a 4,800 sq ft former building society on Princes Street. Loungers have invested £525,000 in converting the two-storey property to provide 130 covers internally and a further 60 covers to a first floor roof terrace. The Truro opening sees Loungers achieve its target of opening 12 sites in 2013 and the business is on track to have doubled in size in less than two years. The group plans to open up to 15 sites next year and has deals agreed on the majority of these sites already. Anticipated 2014 openings include Glossop, two in Brighton, Torquay, Shirley (Birmingham), Letchworth, Chippenham, Witney, and Kettering, all of which will be opened as ‘Lounge’ cafe bars. In addition it is understood the group is negotiating on two further sites in the Manchester area and is looking to agree deals on Cosy Club sites in Manchester, Bristol and Southampton. Alex Reilley, Loungers managing director, said: “Truro is a great city and we’re extremely excited to be opening such a cracking site there. This year has seen us successfully deal with another step change in growth and 2013 has proved to be another exceptional year of openings for us. We’re looking to up the ante again in 2014 with 15 openings targeted and we remain very much on track to hit 90 sites by 2017.”

Community will need to raise £400,000 to buy Bath pub: Property agents have confirmed that residents campaigning to buy their local pub in Bath will have to find nearly £400,000 to buy it. A public meeting has taken place to rally support behind a community buy-out of The Richmond Arms at Lansdown. Residents have managed to get the Punch Taverns pub listed on Bath and North East Somerset Council’s list of assets of community value, and have registered their interest as potential buyers. They now have until May to raise the cash to buy the pub, which has been put up for sale after plans to convert it to housing were thrown out by council planners in the face of a campaign by regulars. City agent James A Baker is handling the sale on behalf of Punch, with the sale price of £395,000 freehold. The pub is also available to let for £30,000 a year.

Former Mitchells & Butlers executive plans European-style micro-pub: John Harris, who worked for Mitchells & Butler for 25 years, has applied for planning consent to open a ‘European style micro-pub’ in a former estate agents in Hagley Road West, Halesown. Harris said: “With traditional public houses closing each week this could be the future of the licensing trade, bars with a smaller more intimate atmosphere without the enormous overheads of larger buildings. I have recently purchased the trademark Micro Pub and would like to turn empty shop premises into small bar operations based on European models I have studied. Although I am now an entrepreneur I spent 25 years in the pub and restaurant management with Mitchells and Butlers.”

Prezzo sets opening date for fourth Cleaver: Prezzo will open its fourth Cleaver, specialising in chicken, burgers and ribs, in Oxford next Tuesday (17 December). It is opening in George Street on the site of the former Fire and Stone pizza restaurant. The site cost £500,000 to develop and will be managed by Rene Tovar. It will have seating for 170 guests on the ground and basement floor and also feature a bar. The walls of the restaurant are clad in wood salvaged from various locations across the UK, including Falmouth pier, the Mersey docks and Poole harbour. Cleaver operations director Scott Charlesworth said: “We have placed a heavy emphasis on the provenance of the meat and poultry on offer at Cleaver as well as the design and overall look of the restaurant. We are confident that it will be a great addition to Oxford’s eating out scene.”

Douglas Jack issues ‘Hold’ note on Punch Taverns shares: Numis Securities leisure analyst Douglas Jack has issued a ‘Hold’ note on Punch Taverns shares, with a price target of 11p, after yesterday’s news on restructuring progress. He said: “Punch has achieved general consensus on the restructuring for both the Punch A and Punch B securitisations. For shareholders, the latest changes in the restructuring proposals are slightly positive overall in that they include a large de-leveraging in Punch A. The company intends to launch its restructuring by 15 January, although there are still a number of areas on which consensus is still to be reached. A successful restructuring, based on current proposals, would materially reduce financial risk (management view a 1.2x cash flow DSCR as very manageable). It would create a step change in debt reduction in both Punch A and Punch B, with further debt reduction expected thereafter as almost all spare cashflow is used to pay down debt. However, there are still some finer points to be agreed with bondholders.”

Lincoln Green Brewery opens beer shop: The Hucknall-based Lincoln Green Brewing Company has opened a new brewery shop at its premises off Wigwam Lane. The shop is located in the recently-expanded premises. It offers bottle-conditioned beers from the Lincoln Green core range of ales, together with rare and unusual guest beers from all around the world. There are also ‘Bag in box’ versions of the Lincoln Green beers available to order and collect in five and ten litre (nine and 18 pints respectively) sizes. Lincoln Green owner Anthony Hughes said: “Increasing our space at the brewery to assist with the growing demand for our beers, we’ve taken the opportunity to open a small brewery shop.”

Time called on three century old Hampstead pub: Time has been called on one of Hampstead’s oldest pubs, the 300 year-old The Old White Bear, in Well Road, has been trading as a public house since around 1704. The existing two-storey building, constructed towards the end of the 19th century, has been sold to a property company . A planning application was officially submitted to Camden Council on Monday to change it into a family home. In a letter and email to customers, the bar team at The Old White Bear said they would be calling last orders on 2 February next year and that they were “greatly saddened”. The current owner is developer Braid Ventures.

Byron to hear licensing decision today: Better burger concept Bryon will hear today whether it can move into the centre of York. The brand is looking to open a site in the High Ousegate building currently occupied by the Danish Kitchen, which is planning to sell its lease with the loss of 17 jobs and bring an end to its 35-year stay in the city. A City of York Council hearing will today decide whether to grant Byron a licence to operate from 11am to 1.30am between Monday and Saturday, and from 11am to 11pm on Sundays.

McDonald to open second Fish and Chip shop: Former Caprice Holdings boss Des McDonald is to open a second Fish and Chip Shop on Broadgate, in the City of London. McDonald opened the first branch on Upper Street, Islington, in May. He is also launching a barbecue and grill restaurant named Q on Chalk Farm Road, North London next month.

Admiral Taverns holds training summit: Admiral Taverns, the current pub company of the year, has signalled its commitment to investing in industry-leading training initiatives with an inaugural training and development summit for all of its key training partners. Led by head of licensee recruitment and training Suzanne Smith, Admiral’s congress with a clutch of leading training firms from across the industry comes ahead of what is expected to be a record year in 2014 for Admiral – in terms of the number of licensees receiving training and also in terms of training investment. The best practice summit saw ten training suppliers from across the industry join the Admiral team at their head office in Chester to discuss, debate and shape the further development and delivery of licensee training within Admiral.

Marston’s Two for One site likely to be demolished after fire: A Marston’s Two for One pub, The Bridge in Gamston, Nottingham, is likely to be demolished after a major fire at around 2.45pm on Saturday. Lester White, watch manager at West Bridgford fire station, said: “Nobody has entered the building because it is has been declared unsafe. It’s suffered extensive and serious structural damage so the likelihood is it will have to be pulled down.”

Lance Batchelor – Domino’s needs more migrant workers: Domino’s chief executive Lance Batchelor has called for more immigrants to be allowed into the UK because his business has 1,000 unfilled jobs that Britons won’t apply for. He complained that a lack of availability of labour was preventing the restaurant business from expanding across Britain’s high streets as the company is failing to find enough drivers and cooks. He said: “We’re struggling to get enough employees. Since the immigration laws were tightened up two or three years ago, we are finding it harder and harder to hire staff, especially in London and the south east. People who would have worked here a few years ago now don’t want these jobs. We could fill 1,000 jobs across the UK tomorrow if we could get candidates to apply for them. There are a huge number of jobs at the bottom end of the service industry, and not enough people in the UK who want to work for them. Every branch in London is currently operating at less than full capacity because of the problem securing labour. In London, it’s particularly difficult to get drivers and people to work in production. If we had more staff, we would spend far more on marketing and other boosts to the economy.”

Patisserie Valerie adds Cheltenham town centre site to Next concession: Patisserie Valerie has opened a site in the centre of Cheltenham – a few weeks after it opened a concession inside the Next site at the Gallagher retail park. The city centre offers 76 covers and occupies the iconic shop on the High Street that formerly housed one of Cheltenham’s most well-known shops, The Famous, which shut in January this year after 127 years of trading in the town.

Be At One opens Brighton site: Be At One, the cocktail bar concept that is backed by Piper Private Equity, has opened its second site outside of London. The company opened a site in Castle Square, Brighton yesterday, converting the former Cube Bar – the 20th site. It plans to open another three sites before the end of March.

Thwaites starts roll-out of craft keg beers in the on-trade: Northern brewer and retailer Thwaites has begun rolling out its craft keg range to the on-trade, following a successful programme of consumer trials – the first beer released will be 13 Guns American IPA. Already available in bottles, the 5.5% beer has undergone consumer taste tests across selected bars in Liverpool, Manchester, Sheffield and York. Ian Maxfield, of The Fly in the Loaf, Liverpool, said: “It has an excellent flavour and condition and is also very good compared to other USA craft beers. We want it as a permanent fixture.”

ASK Italian wins recruitment award: ASK Italian, the 110-strong chain owned by Gondola Holdings, has won the award for ‘Best Candidate Experience’ at the In-house Recruitment Awards, coinciding with the launch of the company’s brand new, interactive ‘Join Us’ page at Managing director of ASK Italian, Steve Holmes, said: “One of the real strengths of ASK Italian is our people, so it’s especially heartening to win another award for our recruitment process.” The award recognises the outstanding service and care for candidates offered by the in-house recruitment ‘journey’ at ASK Italian.

Sale of Convivial estate to raise in excess of £16.9m: The seven Convivial London Pub Company sites in London on the market through agent Christie + Co will sell for in excess of their original combined asking price of £16.9m, shareholders have been told. Mitchells & Butlers has already bought four sites – The Lamb Brewery, The Crown and Anchor, The Botanist Brewery and The Mitre Hotel – for in excess of the asking price of £13.3 million. Convivial chairman David Maxwell Scott told shareholders: “The objective of preparing the company for a members’ voluntary liquidation, by selling its entire estate of seven public houses, returning net proceeds to shareholders and winding the company up, is nearly complete. The Pakenham, The Lamb Brewery, The Crown & Anchor, The Botanist Brewery and The Mitre Hotel have all been sold. Furthermore we have exchanged contracts to sell the company’s remaining two pubs - The Hansom Cab and The Clifton. Completions for the sale of these two pubs will take place on 12 and 18 December 2013 respectively. The Convivial Board is pleased with all the sale prices agreed. In aggregate they are in excess of the original guide prices and demonstrate the high quality of the estate. It is expected that once the final accounts of the company are prepared and the members’ voluntary liquidation is achieved the amount that will be returned to shareholders will be approximately 95p per share. The Board accepts that, in isolation, this is a poor return for an investment held for ten years. However, given the parlous state that the business was in at the onset of the economic downturn in 2008, the manner in which (Kris Gumbrell’s company) Eclipse has rebuilt most of the original value is quite remarkable.” The company is expected to appoint Smith and Williamson LLP to carry out a members’ voluntary liquidation in the New Year. The Convivial pubs and their asking prices are: The Mitre Hotel, Greenwich SE10 - offers in excess of £6 million; The Lamb Brewery, Chiswick W4 – freehold – offers in excess of £2.8 million; The Clifton, St John’s Wood NW8 – freehold – offers in excess of £2.9 million; The Botanist Brewery, Richmond TW9 – freehold – offers in excess of £2.5 million; The Crown & Anchor, Chiswick W4 – freehold – offers in excess of £2 million; The Hansom Cab, Kensington W8 – long-leasehold – offers in excess of £700,000. Maxwell Scott added: “In the past five years the company’s performance has been one of solid growth. After steadying the ship in 2008/9 and achieving an encouraging level of profitability in that year it then became possible to restart investing in the estate. A comprehensive programme was carried out, the highlights of which were the complete upgrading of the hotel section in The Mitre, the repositioning of The Crown & Anchor and installations of micro breweries in The Botanist and The Lamb (formerly The Barley Mow). The effect of these and other improvements coupled with the tightly focused and creative management from Eclipse served to put the company onto a virtuous cycle of improving profitability. By the end of 2012 the company’s properties were all in good shape and trading well. Profit before tax for the year 2011/12 had grown to just under £1m.”

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