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Morning Briefing for pub, restaurant and food wervice operators

Tue 17th Dec 2013 - Propel Tuesday News Briefing

Story of the Day:

Wellington Pub Company to grow in-house capacity in 2014: Wellington Pub Company, the UK’s largest operator of free-of-tie pubs with an estate of 789 sites, is expected to increase the number of pubs it manages itself to around 20 by April next year – the company set up Mornington Pub Company in June to run five Wellington sites. Ratings agency Fitch, which has a negative outlook on the company’s securitised notes, stated: “While the ultimate goal remains to find external tenants for Wellington pubs, having ‘in-house’ capacity to take over the management of pubs is viewed as positive as it adds operational flexibility and avoids the respective pubs becoming vacant if a tenant cannot be replaced at short notice.” Last month, Fitch reported that the lease renewal process remains an area of concern as a significant portion of the portfolio is due for renewal in the coming years – about 10% by end of 2014 and 17.5% over the next three years. However, Fitch recognised that the lease expiry profile has improved compared to 2012 with the number of pubs being not on substantive agreements down to 121 (as of September 2013) compared to 159 pubs as of September 2012. 55 pubs are currently vacant (same number as in September 2012) and the number of repossessions has reduced. Nearly 40% of the portfolio by number of pubs is currently, at least in parts, in arrears with its rental payments by more than 180 days. While this is a slight reduction compared to 2012, the total amount of rental arrears (by more than 180 days) has kept growing to approximately £5.2m (as of September 2012) with bad debt provisions also having increased materially. Another area of concern is the state of repair of the portfolio. All substantive agreements are on full repairing and insuring (FRI) leases, placing the obligation to maintain the properties on the tenant. However, with tenants struggling to pay their rent, as indicated by the high delinquencies and bad debt provisions, it is estimated by Fitch that about 60% of the portfolio is suffering from noticeable deferred maintenance (at least £5,000 per pub) with more than 10% experiencing underinvestment of more than £20,000 per pub.

Industry News:

Spirit CEO joins high street taskforce: The chief executive of the Spirit Pub Company, Mike Tye, and Brigid Simmonds, chief executive of the British Beer and Pub Association, have been co-opted to join the government’s Future High Street Forum from February next year. The appointments come after the conclusion that the body had become too retail-focused. Alison Bartlett, head of public affairs at McDonald’s, will also join the forum. The high streets minister, Brandon Lewis, told The Grocer: “The forum has been predominantly retail. Also, I know fast food comes in for a bit of stick, and I have no particular vested interest, despite appearances, but it’s an important part of the high street.”

New York ahead of London in coffee shop numbers: A survey by Tassimo has found that New York has 1,770 coffee shops, which is 110 more than London. However, eight out of ten Londoners drink coffee every day, against six out of ten New Yorkers although New York coffee drinkers consume 3.4 cups a day, against the 2.3 cups a day drunk by Londoners. The average price of a cup of coffee in London is £2.25, against £2.33 in New York. A latte is Londoners’ favourite type of coffee, while espressos take top spot in New York.

Times food critic awards first perfect ten: Times food critic Giles Coren has awarded his first perfect ten for food, to the new restaurant Gymkhana, in Albemarle Street, Mayfair, London. London Evening Standard critic Fay Maschler also placed Gymkhana in her top ten openings of 2013, saying: “Indian food giving a nod to the days of the Raj is not intrinsically novel – Last Days of the Raj, Chutney Mary and the lamentable Colony Bar & Grill were just some to try it – but at the newly opened Gymkhana the notion has coalesced in a manner that can only be described (here anyway) as magnificent.”

Hungryhouse in multi-million pound brand-building campaign: The online takeaway food ordering site has rebuilt its platform to give customers and restaurant partners a better user experience, as part of a multi-million pound brand-building campaign. The site, which allows users to browse local takeaway menus online using reviews from other customers to help them make their choice, also has a new “shooting star” logo and a new brand positioning, “Your hunger. Our Mission.” A new ad campaign by the agency 180 Amsterdam, including TV, print, outdoor and digital, will air for the first time on Boxing Day (Thursday 26 December). Hungryhouse became part of the online food-ordering network Delivery Hero in January. Graeme Horne,’s chief marketing officer, said: “We have been expanding rapidly since partnering with Delivery Hero, adding new restaurants and increasing our marketing presence. This rebrand and campaign is the first phase of a new marketing strategy.”

Company News:

Glasgow Hard Rock likely to be last new site in the UK: The Hard Rock Cafe’s chief executive, Hamish Dodds, has indicated that the chain’s £3.1m Glasgow site, which opened three weeks ago, is likely to be the last new opening in the UK. The new site, in the former Athenaeum Theatre on Buchanan Street, is seeing takings 70 to 80% ahead of forecast. Dodds is particularly pleased that most of this custom is generated locally, rather than from visitors to the city. The site has been forced at weekends to open the live music area upstairs for general dining, roughly doubling capacity. Glasgow is, though, likely be the last British city in which a Hard Rock Cafe opens. It has sites in London, where the Americans Isaac Tigrett and Peter Morton opened the first Hard Rock Cafe in 1971; Manchester, the largest of the UK venues; and Edinburgh, which opened in the New Town in 1998. Five UK sites have closed over the years – Birmingham, Bristol, Leeds, Nottingham, and Cardiff two years ago. Dodds said: “We don’t want to be a McDonald’s or a Starbucks. That is not what we do – it is about doing something special.” He said the UK was doing “very well”, with Manchester and Edinburgh ahead of last year. London is also up on 2012, when the Olympics suppressed “regular” tourist numbers and thus hampered trade. Hard Rock Hotel Ibiza is scheduled to open in May 2014, with 485 rooms and four restaurants.

Greene King to serve 63,000 customers on Christmas Day: Pub retailer and brewer Greene King will be welcoming more than 63,000 customers into its pubs, restaurants and hotels on Christmas Day. Overall, more than 500,000 customers will be having Christmas dinner with Greene King during the festive season. Recent figures revealed that the cost of the average Christmas dinner at home has risen to £106, with turkey and sprout prices up nearly 20%. A four-course Christmas dinner at a Greene King pub on Christmas Day starts at just £26.95. Greene King’s chief executive, Rooney Anand, said: “Christmas dinner is a critical part of the day and more and more people are choosing to spend it in one of our pubs, leaving behind the stress of preparing, cooking and clearing-up. Our teams do all the work, the waiting and the washing-up, leaving our customers free to relax on the big day.”

Stonegate short-listed in two categories at HR awards: Stonegate Pub Company has been shortlisted in the HR Distinction Awards in two categories: Distinction in People Development; and Distinction in Innovative Use of Technology, for its bespoke online intranet system, developed in partnership with CPL Training, which houses a wealth of training and company information, along with all 12,000 employees’ professional development records. The winners of the HR Distinction Awards will be unveiled at a ceremony in Birmingham in February. Tim Painter, human resources director at Stonegate, said: “Our employees are vital to the success of our business, and having happy, motivated people is of the utmost importance. We take great pride in their development and ensure that there is a range of reward and recognition schemes that benefit everyone. Being recognised for the work that we do for and with our people is just fantastic. It’s a real testament to the whole company who contribute towards making our business such a success.”

Wetherspoon buys Edinburgh Picture House: JD Wetherspoon has acquired the 3,000-capacity Picture House in Edinburgh, the iconic live music venue previously owned by Mama and Company. A spokeswoman for Mama and Company said: “We understand that the new owners will close [it] for refurbishment on 31 December and are not expected to re-open [it] as a music venue. We would like to take this opportunity to thank the public, the venue staff, and all the great artists and promoters who have graced the stage over the last five years for their support.” A Wetherspoon spokesman said: “Our aim is to develop it into a Wetherspoon pub, though at present, there are no on-site or opening dates. We are fully aware that the Picture House is well-known as a music venue. Wetherspoon does not have live music in any of its pubs, so it is extremely unlikely that live music will continue once it reopens. However, we are always prepared to listen to the arguments and to discuss it further.”

PizzaExpress one of six international brands to debut in Saudi Arabia: PizzaExpress is one of six international brands to debut in Saudi Arabia. The other brands are the Cheesecake Factory, PF Chang’s, Shake Shack, IHOP and Texas Roadhouse, which have opened in Jeddah’s Le Mall. The sites have been opened by the franchisee Alshaya International Trading, one of the region’s leading retail franchise operators. The newly redeveloped Le Mall complex is aimed at creating a one-stop food destination for the community in Jeddah.

Marston’s plans ‘back to the future’ advert campaign: Marston’s is appealing to people to dig out their old photos in a opportunity to feature in a new advertising campaign for Pedigree. The new theme for Pedigree urges people to “grow up but never change”. Marketing bosses want to use real people in their adverts and are asking them to find old photographs that they can try to recreate now, featuring the same people, in the same poses. Gaynor Green, marketing manager for Marston’s, said: “We’re looking for content for our campaign now for a launch in February 2014 and we think that Christmas is the ideal time to get families and friends together and recreate those special, funny and memorable images. It’s a chance to relive those moments in your life that remind you that you’re still the same person you always were. It certainly beats playing charades and Twister this Christmas.”

BrewDog £150,000 short of £4.25m fund-raising target: Scotland brewer and retailer BrewDog has moved to within £150,000 of reaching the £4.25m target of its current crowd-funding scheme, Equity for Punks. The company is six weeks ahead of schedule. After extending its original target of £4m by £250,000 last month, the company has now raised over £4.1m. The extended target of £4.25m represents the highest amount European companies can currently raise through crowd-funding schemes of this type, with BrewDog being the only business to come close to those limits. The extra funds raised will further boost the expansion of BrewDog’s bar division both domestically and abroad. The company now employs 200 staff, is on track to turnover £19m in 2013 and is forecast to grow by 100% in 2014.

Orchid Pub Company wins IIP gold: Orchid Pub Company has won Investors In People gold accreditation. In his blog for staff, chief executive Rufus Hall said: “Gold is the IIP elite award: less than 7% of companies that apply for IIP assessment achieve gold. Orchid remains the only managed pub company to achieve IIP accreditation, never mind gold status. A big thank-you to everyone for doing what you do and making us ‘indestructible’. We remain a proudly independent company and we succeed because ‘Our People Make The Difference’.”

Slug & Lettuce to add four more low-cal options: Slug & Lettuce, the 70-strong premium bar chain owned by Stonegate Pub Company, is launching a limited edition menu in January with four new dishes under 500 calories. They are pork pad Thai (439 calories), slices of pork with peppers and noodles marinated in oriental spices topped with edamame beans, spring onions and pomegranate; beef Stroganoff with basmati rice (442 calories); jerk chicken skewer salad (410 calories); and seared salmon with three-grain risotto (439 calories). Nicola Stuart, senior brand development manager for the chain, said: “It seemed fitting to introduce four new dishes to the existing ‘Under 500’ section in January, especially when people look to start the year with a fresh, healthier outlook. That said, the ‘Under 500’ dishes on the current menu have been extremely popular since they were introduced back in April 2013, no matter what the season or weather. It’s about creating a menu that has a range of options to suit our customers.”

Young’s puts £300,000 into pub with mini-cinema: The pub operator Young’s has invested £300,000 in the refurbishment of Horts on Broad Street in Bristol, which features a new 26-seat cinema, a first for the chain. The addition of the premium “Director’s Cut” cinema is part of Young’s strategy to encourage pre-booked business and caters for the city’s thriving creative/media community, the largest outside London. With surround sound and leather recliners, state-of-the-art presentation equipment, Wi-Fi and a variety of hire packages, Horts is proving popular for corporate events and screenings and, Young’s says, with regular drinks, dinner and movie packages, the pub is appealing to consumers looking for a complete night out under one roof. Steve Gallagher, Young’s operations director, said: “The cinema has given Horts a new lease of life and feedback has been terrific. We’ve seen a significant increase in food sales and private bookings.”

Entrepreneur invests £500,000 in Derby bar: Entrepreneur Tony Sandhu has invested £500,000 opening Josephine’s in Derby city centre’s historic Wardwick building, premises formerly occupied by Yau’s Chinese restaurant. It took around a year for Sandhu to receive planning permission for the project, which was finally granted in March. He had hoped to get the bar opened in July, but the building’s Grade II-listed status has meant the refurbishment has had to be meticulous. The property was a townhouse from the late 17th to earl 18th century. Sandhu spent £520,000 converting the Masala Art Indian restaurant in Midland Road into the Mansion Wine Bar. He helped launch both The Qube bar and Squeeze nightclub in Ripley, and Queen’s Counsel, in Ilkeston.

Soho redevelopment plan gets go-ahead: A £10m plan to redevelop an historic area of Soho in London has won planning consent. Soho Estates was given permission to demolish parts of Walkers Court, Peter Street and Brewer Street to create new nightclubs, offices and a restaurant. The £10m scheme was given permission by Westminster Council on Tuesday. Councillors said the benefits of removing “sex-related uses” outweighed their concerns, which included the loss of “unlisted buildings of merit”, the increase in height of the buildings and the “poor-quality” studio flats that would be built at another part of the development in Wardour Street. Paul Raymond’s grand-daughter Fawn James, who is director of Soho Estates, submitted the application earlier this year and plans to open an “off-Broadway” theatre in the old Boulevard Theatre and return the famous Revuebar neon lights to their former glory.

Analyst Geof Collyer issues ‘Buy’ note on Enterprise shares: Deutsche Bank analyst Geof Collyer has issued a Buy’ note on Enterprise shares with a 205p price target. He said: “We have consistently argued that the group would be able to prove that the pubco model has been cyclically challenged and can return to growth, and when it does so, the share price will respond accordingly. We believe that the group has also now ticked off all of the debt concerns that have plagued the shares in recent years and the group ended the 2013 financial year with quarter four like-for-like net income in positive territory. With soft comps for the 2014 financial year, we expect this positive trend to continue. We have consistently contended that Enterprise is an equity story not based on ‘strong trading’ growth – the tenanted and leased model has never claimed that – but that it was a strong equity growth story in the making, based on the achievement of stable trading after six years of underlying declines. We believe that actions taken by management have now stabilised trading, further evidence of which should drive a significant narrowing of the Net Asset Value discount. This process is beginning to get under way. The final step for Enterprise’s rehabilitation should therefore come from the achievement of absolute Ebitda growth. Though we are forecasting like-for-like Ebitda growth in FY14, we see absolute ebitda growth as a probability in FY15E – just over a year away. We would expect the shares to rise ahead of this event once investors can see a clear road map to its eventuality.”

Giggs and Neville’s Cafe Football opens: The 140-cover football-themed restaurant Cafe Football, launched by former Manchester United teammates Gary Neville and Ryan Giggs, has opened in Westfield Stratford City in East London. The menu has been created by Michael Wignall, the two-Michelin star chef, and Cafe Football’s executive chef Brendan Fyldes, and includes a Starting Eleven Platter for The Kick Off, Nev’s Noodle Pot for the terrace and a host of fans’ favourites including Karen Brady’s Match-Day Classic, pie and mash. The drinks menu features more than 20 wines from ten different countries, together with a range of hand-selected international craft beers.

Dunkin’ Donuts opens first UK store: Dunkin’ Donuts has opened its first sit in the UK, in Harrow, North London. Dunkin’ Donuts has signed deals with two franchise groups to roll out the company’s restaurants in the UK. The agreements will see 50 Dunkin’ Donuts restaurants in opened in Greater London over the next five years, with an initial focus on North and East London. The company is also in “advanced discussions” with other potential franchise partners to develop a total of 150 Dunkin’ Donuts restaurants in the UK, including the initial 50 in London, over the next five years. The first two franchisees are the Court Group, chaired by British businessman David Sheepshanks, founder of the company Suffolk Foods, which will open 25 restaurants in East London over the next five years, and DDMG, a partnership formed by three experienced US Dunkin’ Donuts franchisees from the Baltimore/Philadelphia area and two local UK operators, which will develop 25 Dunkin’ Donuts outlets in North London between now and 2018.

Burger & Lobster to open in New York: Burger & Lobster has secured its first site in New York. The group, which is owned by Goodman Restaurants and has five restaurants around London, is to be launch in August in Manhattan’s Flatiron District. Eater NY reports that dishes will cost $20 ($12.26), against £20 in London.

New brewery already supplying bars from London to Edinburgh: A new brewery in Hull, East Yorkshire, is already supplying cask ale outlets in London, York, Glasgow and Edinburgh, as well as a local micropub. Atom Beers, based at the Food Innovation and Technology Park on Sutton Fields Industrial Estate, Hull, is a ten-barrel plant founded by Allan Rice, 33, who previously worked for Tempest Brewery in Kelso, in the Scottish Borders. Rice said he expects the beers and modern brand to appeal to 25 to 45 year olds, a younger audience than is traditionally associated with real ale. He said: “We will be creating beers with big flavours, using more hops and complex malts.” The brewery, which was given its name by Rice’s partner Sarah, a science teacher at Scarborough Sixth Form College, has an initial four core beers; a pale ale, India pale ale, a golden ale and a dark beer, but Rice has plans to launch a range of “experimental” beers. He said: “The only thing that limits us is our imagination. We have enough recipes to do 30 beers and we are coming up with new ones all the time but they have to make financial sense. We may add to the core range as well.” Locally, the beer is on sale in The Chequers micropub in Beverley and three outlets in Hull: Pave, Larkins and Henry Yeast and Son.

Success for fund-raising at first community-owned pub on a council estate: The country’s first community-owned pub on a council estate is set to open its doors after a £130,000 funding boost. The Bevendean in Moulsecoomb, Brighton, was closed by police after a string of violent incidents in 2010. But, after a two-year campaign to reopen the once-troubled pub in Hillside as a place for the whole community, those behind it have received a six-figure boost from Social Investment Business. Together with more than £44,000 raised from selling shares to more than 500 people, work can now start on the revamp of the “Bevy” with the aim of opening in the next few months.

Ministry of Sound reports 5% turnover boost: The Ministry of Sound nightclub saw revenue rise by 5% to £6.3m in the year to 31 December 2012, with gross margin rising from 38% to 40%. Turnover of the group dropped 5% to £36.01m from £38.17m the year before. Pre-tax profit was £738,000, up from £79,000 the year before. Pre-tax operating profits increased by 20% to £4.9m. The company accounted for one in ten of all compilation albums sold in the UK in 2012. The overall 5% drop in income is related to the shift to digital downloads, which generate lower income at higher margins.

Whitbread signs £4m furniture deal with Warings: Whitbread has signed a £4m deal with Warings Furniture for it to design and supply furniture for the leisure company’s coffee shop, restaurant and hotel outlets over the next two years. Warings, based in Norfolk, will provide all internal and external furniture for more than 2,400 sites across the Whitbread portfolio, including Costa Coffee, Premier Inn, Brewers Fayre, TableTable, Kitchen, Beefeater and Thyme. The company has already delivered to more than 100 sites, with hundreds more to follow as part of Whitbread’s new openings and refurbishment programme. Paul Barber, buying director at Costa, said Warings’ ability to develop new ideas and concepts for different briefs and to supply in quantity for a portfolio of brands were essential factors in the company winning the contract. The contract with Whitbread is Warings’ largest single contract win to date. Its other hospitality clients include PizzaExpress, Pret A Manger, JD Wetherspoon, Jamie’s Italian, Union Jacks, Revolution Bars and Travelodge. Rachael Waring, co-owner of the company with her husband Graham, said: “We love working with companies we respect, and have had Whitbread in our sights for some time. It has excellent brands, provides great customer experiences and is a hugely successful business.”

East Sussex pub sold off a guide price of £500,000: The White Horse at Cowden in East Sussex could become a destination restaurant or stay as a pub with letting rooms – it has 11 to offer – having been bought off a guide price of £500,000 through the agent AG&G. “The buyer is going to take some time considering options,” said Michael Penfold of AG&G. “The views are spectacular and it sits on a big site of nearly two acres, with lots of room for parking.”

Owners lose pub expansion application, buy second pub instead: The owners of The Withy Arms in Station Road, Bamber Bridge, near Preston have bought a second pub with the money originally set aside to build an extension on their first one. Lee Forshaw and his business partner Alan Burdett, who also own the School Lane club in Bamber Bridge, had applied for planning permission to add a conservatory to the front of the Withy Arms on top of the existing flat roof, to provide additional seating for diners. The expansion would have seen the size of the pub double. However, South Ribble Council refused the application on the grounds that it would not be in keeping with the area. Forshaw and Burdett then took the £50,000 they were going to spend on the conservatory and bought the Roebuck pub in nearby Leyland, which they are renaming the Withy Arms. The new Withy Arms has now been revamped, with a sheltered dining area added.

‘Flagship’ hotel proposed for Manchester: Plans for what would be the flagship Holiday Inn in the UK have been submitted for the former employment exchange site in Manchester, which has been vacant for 18 years. The proposed 306-bedroom, four-star hotel would be partly six storeys high and partly eight, with a canal-side terrace, conference facilities and a ground floor restaurant to be run by an independent operator, which has not yet been confirmed. The developer is Dominvs Project 2, a company run by Sukhpal Singh Ahluwalia, the founder of Euro Car Parts., and the project is fully funded subject to planning permission. InterContinental Hotels Group, the owner of Holiday Inn, said the scheme would be its “flagship” Holiday Inn in the UK. About 140 new jobs could be created if the scheme goes ahead, as well as further jobs in the restaurant. In 2005 planning permission was granted for the construction of a 44-storey building of 237 apartments with retail and leisure space on the site, but this was never implemented and expired in 2010. Three letters of objection have been received for the latest scheme, two from adjacent hotel operators and one from a local resident. The Ministry of Justice, which operates Minshull Street Crown Court opposite to the building, has also raised concerns about changes to the road layout, the court being overlooked and security. Planning officers have recommended that the scheme be approved by the planning committee, which is due to discuss it on Thursday, December 19.

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