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Morning Briefing for pub, restaurant and food wervice operators

Fri 20th Dec 2013 - Propel Friday News Briefing

Story of the Day:

Darden concedes need for break-up: Darden, owner of the American restaurant chains Olive Garden and Red Lobster, has made major concessions to a campaign let by activist investors by moving to break itself up, announcing a plan to spin off the Red Lobster business, which has 705 restaurants in the United States and Canada and sales of $2.6bn a year. Earlier this week, an investor group led by Barington Capital published a critique of five years of what it called value destruction, producing a litany of complaints, from failed acquisitions to poor menu choices. Yesterday, Darden unveiled a five-point plan to “enhance shareholder value”, which included separating out Red Lobster, either through a spin-off or a sale: suspending new unit growth at Olive Garden and limiting growth at LongHorn Steakhouse and its speciality restaurant group, lower capital spending by at least $100m a year, while at the same time ceasing to pursue the acquisition of new brands; increasing cost savings by another $10m a year to $60m; increasing returns to shareholders through dividends and share repurchases; and “refining” the compensation and incentive programmes to senior management to “more directly emphasise same-restaurant sales growth and free cash flow”. Clarence Otis, Darden’s chairman and chief executive said: “After thorough and extensive consideration, we have decided that the actions announced today best position us to enhance value for our shareholders. These are clearly exciting steps for everyone in our company.” The announcement came as Darden revealed a 41.1% decline in profit for the second quarter ended 24 November.

Christmas message: Propel Newsletter takes next Monday and Tuesday off as news flow starts to taper down. We thank readers for their interest in 2013 and hope Christmas and New Year trading is spectacular. The Propel Friday Opinion e-mail appears as normal later this morning.

Industry News:

JD Wetherspoon and Greene King area managers win top award: JD Wetherspoon senior area manager Will Fotheringham and Greene King business development manager Barrie Robinson were named the winners in the managed and tenanted sections of the Association of Licensed Multiple Retailers Operations Managers’ Awards yesterday. Enterprise Inns business development manager Helen McKenna was named “rising star”.

Shake Shack opens in Moscow: The American burger chain Shake Shack, which still only has 24 restaurants in five states in its home country, opened a store on the historic Arbat Street in Moscow yesterday. ShackBurgers were on sale for 235 rubles (£4.36), against £5 in London, but almost triple the price of a local Big Mac. Danny Meyer, chief executive of Union Square Hospitality Group, which manages a number of chains including Shake Shack, told the Moscow Times that opting to come to Russia without having fully developed in the domestic market first was an “unusual expansion plan”, but one that might seem a “no-brainer to anyone who has stood in the long but patient queues to get into the chain’s restaurants”. He added: “It has always been interesting for us to go somewhere sooner than other people.” Shake Shack now has nine international outlets, in London (which opened on 4 July), Turkey, Dubai, Abu Dhabi, Saudi Arabia, Qatar, Lebanon and Russia. 

Credit card company to rank restaurants on how many of its users dine in them: MasterCard, the credit card company, is looking to mine its customer card payment data to build a site which will rank popular restaurant destinations in cities around the world based on how many people use them. Cristobel von Walstrom, vice-president of MasterCard Advisors Information Services, said the site would run on purchasing behaviour, “that is, how people are voting for restaurants with their wallets”. Von Walstrom said that where people actually eat when they are in their home towns and when they are travelling helped to provide a better insight into popular destinations than online review sites such as Yelp and TripAdvisor, which are too easily filled with fake reviews. She said: “With petabytes of purchase behaviour, we’ll be able to make a variety of recommendations, so you can eat where New Yorkers eat when they’re in Barcelona – or, if you want to avoid New Yorkers when you’re in Barcelona, where they don’t eat.”

UK consumers switch from tea to coffee: UK consumers are switching from tea to coffee, with volume sales of tea down by more than 6% in the past 12 months, twice the 3% fall in the previous year. The Grocer magazine said sales of Tetley Round tea bags were down 17.3% in the past year, while PG Tips Pyramid sales were 6.4% lower. Typhoo sales were up 1.2%. At the same time, sales of Nescafe are up in supermarkets by more than 6.3%.

Gordon Ramsay celebrates first anniversary of Las Vegas double opening: Chef Gordon Ramsay has marked the double anniversaries of the opening of his Las Vegas restaurants Gordon Ramsay Pub & Grill at Caesars Palace and Gordon Ramsay BurGR at Planet Hollywood. His casual dining venue was named in the Top 10 New and Notable Restaurants by the travel survey Gayot. As of this week, Gordon Ramsay BurGR has served more than 500,000 customers and 466,000 burgers. The half-million mark for burgers should be surpassed in less than three weeks.

New pub specific accommodation website to be launched: Pub sector utility specialists UBS is to launch a brand new pub specific accommodation finder website to compete with the likes of and Laterooms. Directors Paul and Andrew Fannon, who also operate a number of Cheshire venues including the highly successful Kings Head & Henry’s Yard in Warrington town centre, believe there is a niche in the market. Fannon said: “We felt that a website dedicated to the pub industry would offer publicans the opportunity to attract a specific kind of guest, namely businessmen and woman and contractors looking for short term stays.” The site,, will be launched early next year and aims to provide access to the 50,000 or so bedrooms available in pubs up and down the country.

Company News:

New Clevely concept delayed by three months: The new project planned by the founders of Geronimo Inns, Rupert and Jo Clevely, has been delayed until April 2014. The couple has formed Greenwell & Tipple to work with Southern Trains to open its first site, The Cyclist Refreshment Room, in the soon-to-be renovated Brighton station, and had hoped to open next month. However, Rupert Clevely told Propel that there have been delays getting on site: “We haven’t started work yet – it’s very frustrating.” Brighton station sees 36,000 passengers pass through it daily. The Clevely’s plan to “move away from the gastro-pub clichés, and towards the individuality befitting a modern train station drinking and dining venue”. Clevely said the new company had one or two other things in the pipeline.

Mitchells & Butlers chief executive earns £982,000: Mitchells & Butlers chief executive Alastair Darby earned a total of £982,000 in 2013, according to the company’s annual report published yesterday. His basic salary was £525,000 supplemented by “short-term incentives” of £365,000 plus other benefits. Finance director Tim Jones earned a total of £788,000, made up of basic salary of £408,000, “short-term incentives” of £290,000 plus other benefits. Chairman Bob Ivell earned £319,000 down from £582,000 the year before.

All Our Bars acquires Bramwell Pub Company site: All Our Bars, the south east operator of 36 sites led by Paul Wigham, has re-opened The Pilgrim in Caterham, Surrey after the surrender of the lease in the wake of Bramwell Pub Company’s administration. The site is a former Smith & Jones, with a trading area of 4,000 sq ft and will be operated as a bar and grill in the American style. Wigham said: “Bramwell operated some very good bars in decent locations and it has to be said that they fitted out their bars to an extremely high standard. The Pilgrim is no exception. Our challenge will be to re-invigorate the business here and to develop a US ‘sports style’ bar with a grill menu and a great vibe. We really look forward to that challenge.” All Our Bars also revealed the disposal of one of its sites in Hemel Hempstead, Hertfordshire last week, leaving the estate number unchanged at 36 sites.

Jack Daniels owner reports profit lift: Jack Daniels and Southern Comfort owner Brown-Forman Beverages has reported turnover up to £260.3m in the year to 30 April 2013, compared to £242.8m the year before. Profit before tax was £41.344m compared to £30.478m the year before.

Ministry of Sound loses battle over block of flats: The Ministry of Sound dance club has lost its battle to persuade the Mayor of London, Boris Johnson, to turn down plans for a block of flats directly opposite its entrance in Elephant and Castle, South London. The club’s bosses are concerned that if any of the new residents complain about noise from the club, where up to 1,600 revellers gather on Friday and Saturday nights, its licence and its long-term survival will be in jeopardy. The 41-storey block will contain 335 flats. Southwark council refused permission in 2011 but Johnson called in the decision on the grounds that the area had “over-riding” housing needs. In a decision announced yesterday, the mayor Johnson said changes made by the developer to the design would protect future residents from external disturbance. “The Ministry of Sound makes a huge contribution to the area’s thriving night-time economy,” he said. “We want the club to be at the heart of our plans to transform the area into a thriving town centre which is attractive to live, work and play, particularly for young people and students. I have fully considered the concerns raised by the club and having visited the site myself and believe that, on balance, the amendments to the original plans should allow residents of the new development to co-exist with visitors to the club.”

Red’s True Barbecue plans three openings for 2014: Red’s True Barbecue, the smokehouse barbecue concept inspired by the Deep South of the United States, is to open its second restaurant in Manchester, with two more planned for 2014 after a £1.2m investment. The company’s first outlet, in Leeds, hit turnover of £3.2m in its first year, and the 107-cover restaurant now serves, on average, 18,000 diners a month, selling more than 16 tonnes of locally sourced meat. The 6,050 sq ft Manchester restaurant, at 22 Lloyd Street on Albert Square, a former textile mill, will operate 185 covers, with accommodation for a further 60 standing in a dedicated bar area, featuring a stage and DJ booth, offering weekly live music. The company says it plans to hit turnover of £4.2m in its first year in Manchester. James Douglas, one of Red’s co-founders, said: “We’re delighted to be opening in Manchester. The city has a wealth of great restaurants and a buzzing nightlife, so it was the obvious choice in our expansion plans. With the launch of Manchester, and a further two locations in the offing for 2014, true barbecue has really arrived here in the UK and will keep us on our five-year plan to have at least 15 restaurants across the UK.”

Cote takes site by river in Kingston: Cote, the French brasserie chain, has taken a unit at Riverside Walk in Kingston upon Thames, a new development next to Kingston Bridge. The 3,000 sq ft unit came with a rent of £120,000 a year on a 20-year lease, and is expected to open in April. The landlord is Canadian & Portland Estates. Nick Weir, of Shelley Sandzer, which acted for the chain, said: “Cote has been one of the outstanding success stories of the last few years and we have found many of their sites. This latest one in Kingston is likely to do very well, as it is an excellent riverside location. We have also had a lot of interest in the remaining five units.” Cote was set up by Richard Caring, Andy Bassadone, Chris Benians and Nick Fiddler and opened its first restaurant in Wimbledon in 2007. It was sold to the private equity firm CBPE in September this year for a reputed £100m.

JW Lees in ‘dine now, 25% off in January’ offer: The Manchester brewer and pub operator JW Lees is offering customers a voucher for 25% off a meal and drinks in January next year when they dine in one of its managed houses during the rest of December. The offer excludes some pubs, and only applies when drinks are purchased with at least a main meal per person. 

Jamie Rollo – Mitchells & Butlers could surprise with an acquisition but the investment case is weak: Morgan Stanley leisure analyst Jamie Rollo has argued that the investment case at Mitchells & Butlers (M&B) remains weak although the company could surprise with a major acquisition. He said: “We see M&B’s like-for-like sales momentum staying low, margin expansion slowing, and FCF still weak given the step-up in capex and pension payments. We now think a dividend resumption is unlikely until 2015. The shares are cheap, but this is not enough of an investment case to buy them, we think. We struggle to see what the investment case is. With like-for-like sales underperforming the peers for the last three years despite a high-quality pub estate, operating margins having already held up pretty well, an expansion profile that is quite slow, and FCF still paltry, M&B seems neither a growth, a cyclical nor an income stock. However, our price target rises from 380p to 420p as we roll forward and update for peer multiples. We do not expect a dividend resumption until 2015. We forecast 2014 and 2015 FCF of £0-10m, as the step-up in capex, the pension costs and ongoing securitisation amortisation consume most of the FCF. We now assume an 8p resumption in 2015, but even this might be generous, given FCF is still depressed. We think a positive surprise could come in the form of an acquisition. M&B has £250m-plus of net PLC cash, and we think it could take on more debt, giving it plenty of firepower. We estimate this could be circa 10% EPS enhancing, and reflect this in our 550p bull case. However, there are few high-quality and large estates currently available, so this cash could remain unused.”

19 MSPs sign motion to oppose Wetherspoon buying Picture House: A total of 19 members of the Scottish Parliament have signed a petition in opposition to JD Wetherspoon’s acquisition of The Picture House in Edinburgh, a live music venue with a capacity of 3,000. The motion, put forward by Marco Biagi, SNP MSP for Edinburgh Central, has the support of 14 other SNP MSPs and three Labour MSPs from across Scotland, plus independent Lothians representative Margo MacDonald. The motion reads: “That the Parliament notes the recent purchase of the Edinburgh live music venue, the Picture House, by JD Wetherspoon; considers that the Picture House is a much-loved venue and a key part of Edinburgh’s music scene; believes that the loss of the capacity to host musical performances would be a cultural and economic loss to the city; understands that a petition urging the new owners to retain the Picture House as a venue for music has attracted over 10,000 signatures, and urges JD Wetherspoon to preserve the place of live music in its plans for the Picture House.” Biagi said he put the motion forward after registering the “huge outpouring of support” for the venue. He said: “When you compare the provision of live music venues in Edinburgh with Glasgow, it’s really quite embarrassing. What’s offered by the Picture House is not replicated anywhere else in this city and once it’s gone, it’s gone. Our aim now is to pressure JD Wetherspoon into confirming they will continue to use the Picture House as a place for live music in this city. If we’re not successful then we may encourage someone else to take over the venue.”

Prezzo and Nando’s set for Darlington: A leisure complex in Darlington has been given the go-ahead, with Nando’s and Prezzo due to open. The Feethams Leisure project will transform the former bus depot site in Darlington into a nine-screen multiplex Vue cinema and an 80-bedroom Premier Inn hotel, plus a number of other unconfirmed bars and restaurants. The detailed plans, submitted by developers Terrace Hill, have been approved by Darlington Council’s planning applications committee and work is expected to begin next year, with the complex opening in autumn 2015.

Harry Ramsden’s opens Welcome Break outlet on M1: Harry Ramsden’s has celebrated its 85th birthday with the opening of a new catering unit in conjunction with Welcome Break at the Welcome Break Woodall motorway service station on the M1 near Sheffield. Harry Ramsden’s at Welcome Break opens at 6am daily, offering the Welcome Break Full English breakfast and then from 11.30am until 8pm, an extensive menu including Harry Ramsden’s fish and chips. Joe Teixeira, chief executive of Harry Ramsden’s, said: “It is fitting that we are able to celebrate the 85th anniversary of the launch of the first ever Harry Ramsden’s, which took place on 20 December 1928, with another new opening. We are delighted to have opened our doors at Welcome Break Woodall, which attracts millions of visitors each year.” Rod McKie, chief executive of Welcome Break, said: “The positive feedback we’ve received so far has been overwhelming and we fully expect that we will be introducing Harry Ramsden’s to other Welcome Breaks across the UK in the very near future,” he said. 

Peel Outlets opens £60m Gloucester leisure centre extension: Peel Outlets has formally opened its new £60m leisure quarter in Gloucester Quays. The new extension includes a 1,600-seat, ten-screen Cineworld and a 16,000 sq ft health and fitness centre operated by The Gym along with Ed’s Easy Diner, Zizzi, Chimichanga, The Real China and Loungers who have all opened restaurant units along with Nando’s and PizzaExpress. The new leisure quarter takes Gloucester Quays Outlet Centre to 362,600 sq ft. The 110-unit centre is expected to attract a footfall of four million a year by the end of 2014. Jason Pullen, managing director of Peel Outlets, said: “The formal opening of Gloucester Quays’ leisure quarter marks a key milestone for the centre as it evolves into a recognised regional outlet destination. We have introduced 20 new fashion and leisure brands to the centre over this past year.”

McDonald’s widens young farmer programme: McDonald’s UK is trying to encourage more students to consider a career in farming as it opens applications for its young farmer training programme. McDonald’s is looking to recruit the 2014-15 intake for its Progressive Young Farmer training programme, which, for the first time, will include students at colleges and universities throughout the UK, not just those studying agriculture. It is a 12-month paid training scheme. Only 12% of people working in UK farming today are aged between 16 and 24. Research indicates more than 595,000 people will be required to join the sector in the next ten years to safeguard the future of the industry. Warren Anderson, the vice-president (supply chain) at McDonald’s UK, said: “There’s much more to a career in farming than many people think. In addition to skills such as animal husbandry, farmers need business acumen and an awareness of the latest technical innovations.”

Spirit wins double supply chain award: Spirit Pub Company has been recognised for its waste management systems after being named a winner at both The European Supply Chain Excellence Awards and The Sustainability Leader Awards. The pub company, which operates around 800 managed pubs across the UK, fought off strong competition to take the Consumer Product title at the Supply Chain Excellence Awards 2013. The award recognised the company’s effective partnership with Kuehne + Nagel in developing a culture that improves the service level to pubs and supports projects such as waste recycling, and supplying services to the leased estate. To top off their success, the company also won the award for Internal Operation Engagement at the Sustainability Leaders Awards 2013. The company was praised for its achievements in engaging pub teams and key distribution partners to create a comprehensive and effective waste recycling process, diverting away from landfill.

Red Hot World Buffet site in Northampton destroyed by fire: The Red Hot World Buffet site in Northampton has been destroyed by fire. The restaurant was evacuated just before the fire took hold at about 11pm on Wednesday night. Six crews were called to the fire.

Pierre Condou lines up new site: Pierre Condou, the man behind some of the best-known restaurants, bars and clubs in the capital including Paramount and Century, is set to open a cocktail bar and restaurant in the West End next year. The all-day drinking and dining venue is expected to have 30 to 40 covers with a large courtyard for a further 100 covers. A spokesman said: “Guests can expect a low down and dirty cocktail bar vibe with a strong wine list and premium world beers.” The venue is due to open in the spring, but the name, location and cuisine remain a secret at this stage.

Cornish town gets first nightclub in a decade: The Cornish town of Hayles has seen a new nightclub open, after a decade without one. Jonathan Oates, a DJ and music producer, is launching Boxx Club Lounge and Studio at Foundry Place, which will double up as a fitness studio during the day. Oates said: “I didn’t want to put one in any other place than Hayle. It needs it, there is just nowhere for people in the town to go. There has been a need now for a long time.” The owner said Boxx will be a “funky, stylish place” which will play chart and request music on Fridays, and house music on Saturdays. The club has a licence to open until 3am on Saturday and Sunday mornings and has obtained permission to play music outside during the summer months.

Poncho 8 to launch grab ‘n’ go range: Poncho 8, the award-winning Mexican restaurant chain, is set to launch a UK exclusive cold grab ‘n’ go Mexican food range. The launch will coincide with the opening of their new site in Sheldon Square, Paddington on Wednesday 15 January 2014. The new store will also feature a full barista coffee range made with Mexican coffee beans sourced from Hackney-based coffee roastery, Climpson & Sons.

Rare burgers back at Davy’s as Westminster Council case collapses: The wine bar and restaurant chain Davy’s is offering burgers “as you like it” again after Westminster City Council failed to offer any evidence in court this week as the final part of a hygiene improvement notice it had served on the chain in 2011. The final success for Davy’s, which has 28 outlets in London, came after a judgment in June that found it was entitled under EU and English law to legally serve rare and medium-rare burgers. Davy’s chairman, Jonathan Davy, said: “We have always worked hard to ensure that the food we serve is not only of the highest quality and taste, but is safe. We are delighted to have succeeded in demonstrating that to the court.” Davy said it was a great relief that after almost two years of defending charges by Westminster Council, which additionally chose to pursue a criminal prosecution against the chain’s managing director, Bruce Edwards, all charges have been dropped with an award of costs in Davy’s favour. “Our ability to stay the course was much aided by having proper insurance cover in place,” Davy said. “Davy’s would recommend that other food businesses check their cover if they wish to legitimately resist enforcement action.”

PizzaExpress overseas expansion continues: PizzaExpress has opened another two restaurants in Mumbai, India, to add to the one it already had, with a fourth outlet in the city due to open in January. The openings take the number of overseas PizzaExpress restaurants to more than 60, with the brand making its debut in Bali and Saudi Arabia in recent months and expanding its presence in Hong Kong and Shanghai. Its declared medium-term aim is to open a further 200 sites internationally and another 200 in the UK. Four of the top 20 PizzaExpress restaurants ranked globally by sales volume are now in Asia. Richard Hodgson, PizzaExpress’s chief executive, said: “Over the last two months alone we have opened eight new restaurants overseas, a sign of the continued momentum behind our successful expansion strategy, which has seen the PizzaExpress estate grow to over 485 sites globally.” 

Award-winning chef to open Dundee fine-dining restaurant: Award-winning chef Adam Newth is to open a fine-dining restaurant in Dundee early in the New Year. The ground floor eatery, to be called Castlehill, will be located at 22 Exchange Street, where a French restaurant, Bon Appetit, used to be. Newth, the current holder of the Young Scottish Chef and Young Scottish Seafood Chef of the Year awards, is tasked with delivering a menu filled with contemporary Scottish cuisine. Jonathan Reid, a partner at Shepherd Chartered Surveyors, which has leased the property to BJM Hospitality, said: “We’re delighted to secure this lease, which provides further welcome evidence of Dundee’s buoyant hospitality sector.”

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