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Tue 18th Feb 2014 - Propel Tuesday News Briefing

Story of the Day:

Nick Batram – Domino’s franchisees done less well that the company since 2007: Peel Hunt leisure analyst Nick Batram has argued that the traditional split of profit between Domino’s UK and its franchisees – one third to two-thirds of all profit – has re-balanced in favour of the company in recent years. Batram also noted that franchisee income has been in slight decline although franchisees are still earning a 39% Return on Investment (ROI). He said: “While (franchisee) EBITDA per mature store grew in 2012 (£108,907) and we expect it to grow in 2013, this is below the level achieved in 2009 (£115,019) and 2010 (£110,550). Stores have consistently delivered like-for-like sales growth, and therefore it is rising costs that have impacted franchisee margins and profitability. The two largest cost components are labour and food. It is mainly inflation within the latter that has hit franchisee margins. In 2007, food costs represented around 27% of sales, and this has risen to circa 29% of sales today. From a PLC perspective, Domino’s has been good at passing on significant food price rises to franchisees. Management would argue that franchisee food costs would have risen even further if the PLC had not made significant commissary investment over recent years. Nevertheless, this does create an interesting dynamic. Success has not been equally shared. Domino’s management has consistently stated that store profits are split two-thirds franchisee, one-third PLC. This may have been the case six years ago, but we no longer believe this to be accurate. If we look at gross store profit, franchisee EBITDA plus PLC net royalty & food commissary margin, then Domino’s share has risen from 36% in 2007 to 45% in 2012. In absolute terms, we estimate that Domino’s share of store gross profit has risen 68%, versus 15% for the franchisee.” However, Batram concluded that Domino’s franchisees are still earning a 39% return on their investment in each store, the same as in 2007. He added: “At 39%, not only does the potential return look highly attractive but it is unchanged on 2007. This gives us confidence that Domino’s remains a highly attractive franchise proposition.”

Industry News:

Colliers – blanket floods coverage could damage hospitality sector in the south west: 24-hour media coverage of severe flooding in Somerset and Gloucestershire could do more harm to the south west’s recovering hospitality sector than the flooding itself, according to agent Colliers International. Hotels director Simon Wells said many pub and hotels businesses had been lucky enough to escape the devastation witnessed around the Somerset Levels, Dawlish, Tewkesbury and Gloucester but were still seeing reduced footfall as people stayed away, not just from their village pub but from the region as a whole. He said: “Listening to a number of our clients over the last few weeks they have all told me that the high levels of media coverage about the flooding on the Somerset Levels is affecting their trade, even if they operate in entirely different areas. Without seeking to diminish the impact or effect of the flooding the fact is it is still confined to a relatively small area of the south west.”

Sustainable operators recognised at awards: Geronimo Inns has won the award for Large Group of the Year at the Sustainable Restaurant Awards. Carluccio’s won the Innovation awards for its move to post all menus on the Good Food Talks app to help visually-impaired people read them more easily. River Cottage HQ picked up the Sourcing Award for the third consecutive year. The Sustainability Hero Award went to Jill McDonald, UK chief executive of McDonald’s in recognition of the fast food chain’s efforts in sourcing British produce. It sources 110 million free-range eggs, 80 million litres of organic milk, 18 million “Filet-o-fish” and eight million fish finger portions from Marine Stewardship Council certified fish annually. Café ODE was named Sustainable Restaurant of the Year for the second year running and Le Manoir Aux Quat’ Saisons won the Sustainable Hotel Restaurant of the Year award. Mark Linehan, managing director of the SRA, said: “Competition for these awards is getting stiffer every year, as more restaurants respond to increasing consumer demand for a sustainable dining experience.”

Three pubs sold to community groups in East Anglia since the start of the year: Three pubs have been acquired by different community groups in East Anglia since the start of the year, with two of them sold by agent Everard Cole in the past week. The Case is Altered, Bentley Ipswich was sold on behalf of Punch Taverns off an asking price of £240,000 and The Tharp Arms, Chippenham, Ely, was sold on behalf of Greene King off an asking price of £285,000 to two separate community groups. The former sale was at the end of the full moratorium being triggered by it being declared an Asset of Community Value. Shouldham Community Enterprises took ownership of The King’s Arms, Shouldham, Norfolk last month, becoming the first community-owned pub in West Norfolk – Everard Cole also sold this pub.

Insolvency Service consults on stricter insolvency fees: The Insolvency Service has begun a consultation on new measures to impose stricter controls on insolvency fees. Under the proposals, insolvency practitioners (IPs) will have limitations placed on charging by the hour for their work and instead could have to base their fee on a percentage of property dealt with or realised, or as a fixed fee. This will mean that business and individuals will have a clear idea at the beginning of the insolvency process of how much they will be charged. The changes, part of a package of measures in a six-week consultation, give the Insolvency Service stronger powers to effectively monitor and regulate practitioners. The new measures will also introduce clear objectives to strengthen the regulation of the insolvency profession and give the Insolvency Service the power to enforce them, including imposing and publicising fines and sanctions.

Greater Manchester rolling out virtual ID app: Greater Manchester police is rolling out a virtual ID app to help pubs combat the sale of alcohol to underage customers. The “IDApp4U” has been developed by two Manchester entrepreneurs and is being rolled out in a three-month pilot in Bolton from April. The app works as a virtual ID card that holds information about the user including name, photo, address and date of birth. 

Costa Coffee boss to reveal new high street rescue plan: A new plan to revive high streets, which will involve the testing of “common factors for success” as part of “town visions”, will be tested at nine locations from May. The new plan has been developed by Costa Coffee UK managing director Jason Cotta and a group of other high street company executives. Mary Portas has taken a back seat in the new proposal and Cotta is credited with bringing a “business-like approach” to the new plan. Pilot towns will be set three to five year town visions that are reviewed annually against a set of targets, with businesses and local councils heavily involved. Bedminster, Braintree, Dartford, Rotherham and Sydenham are among the ton that will be involved in the trial. 

Company News:

Red Hot Buffet restaurant in Northampton to be demolished: The fire-damaged Red Hot Buffet restaurant in Northampton, destroyed by a fire in December, is to be demolished to make the site safe, the building’s owner has said. A major fire ripped through Red Hot World Buffet in Sixfields on 18 December and caused irreparable damage to the restaurant, which had about 700 bookings for Christmas Day alone. A planning application has now been submitted to Northampton Borough Council for the building to be demolished. A spokesman for Red Hot World Buffet said no decision had been made on whether the restaurant would be rebuilt but said the site needed to be demolished to make it safe. James Horler, chief executive of Red Hot World Buffet, said a total of 33 people worked at the Northampton restaurant, including 18 full-time and 15 part-time.

Castle Rock Taproom opens at East Midlands Airport: The Castle Rock Taproom and Kitchen has opened in the main upstairs departure lounge at East Midlands Airport. It is the latest development in the airport’s on-going £12 million refurbishment. The new bar and food area, branded by and named after the Nottingham-based brewer, was initiated by Autogrill Catering UK, the airport’s catering operators, keen to showcase local providers. Autogrill Catering UK is part of HMSHost International. The taproom and kitchen, which will be operated by their staff following cellar and bar training by the operational team at Castle Rock Brewery, offers a full range of pub food and drink including Harvest Pale, the real ale recently voted CAMRA UK supreme champion. East Brewery managing director Colin Wilde said: “For us to see our locally brewed Harvest Pale on sale in the departure area at East Midlands Airport, the region’s leading international venue, gives us a feeling of great pride. Autogrill’s determination to involve a local supplier such as us gives UK and East Midlands passengers a chance to enjoy that last bit of home before flying away. More importantly, perhaps, it gives our international visitors a reminder of all that is good about East Midlands food and drink giving them an incentive to return.”

JD Wetherspoon temporarily closes Hackney pub after cockroach infestation: JD Wetherspoon’s Hackney Central pub was ordered to stop serving food after cockroaches were found in the kitchen. The company’s Baxter’s Court, Mare Street was issued with a court order to stop making and serving food after environmental health officers found the vermin. During a visit, officers found the cockroach monitor in the first floor kitchen to be full of German cockroaches in different stages of development including egg, nymph and adult. Live cockroaches were also found in other areas of the kitchen including next to uncovered containers of clean cutlery located in the main food preparation and cooking area. Officers found there was no evidence in the kitchen log-book to show what measures had been taken to protect food and food equipment from contamination by the cockroaches. Other cleaning issues included poor cleaning of the plate warmer, and the plates within, poor cleaning at the back of some fridges, and a build-up of dust on the walk-in fridge and filters. Stratford Magistrates’ Court issued a hygiene emergency prohibition order, prohibiting the preparation and cooking of food at the premises. The pub was also ordered to pay the council costs of £865. The pub has reopened its kitchen after a follow-up inspection to give it the all-clear. Cllr Feryal Demirci, cabinet member for neighbourhoods, said: “Staff at JD Wetherspoon in Mare Street have shown a disregard for the health of customers. Hackney Council will not tolerate this, and we will take action against any business that puts the health of our residents at risk.” JD Wetherspoon spokesman Eddie Gershon said: “We wholeheartedly apologise to our customers for the cockroach infestation at Baxter’s Court in Hackney.”

Orchid chief executive – Florida is booming: Orchid Pub Company chief executive Rufus Hall has reported that the US state of Florida is booming – and could presage similar economic strength in the UK. Hall, on holiday in Florida, wrote in his company blog: “Florida is booming – things are definitely picking up. It’s so busy down here. House prices are on the up, there are job vacancies everywhere. In 27 years (of coming here) I’ve never heard of: having to book a restaurant two weeks ahead – it’s reservations pretty much everywhere; Holiday Inn charging $340 per night (more than £200) – hotels are pretty much all full; not being able to get into the Publix (supermarket) carpark, it’s so busy. Well it’s booming here so let’s hope that some of this economic good news is on the way to the UK.”

Le Gavroche re-opens with private dining room after refurbishment: Michel Roux Jr’s Le Gavroche, closed since the New Year, has re-opened after a major kitchen renovation and the addition of a private dining area – the chef’s library six-seater dining room. A daily changing menu in the chef’s dining room, comprising eight courses, is cooked and presented by a chef from the kitchen and there is also a video link to the kitchen if diners wish to follow the action as it happens. The menu costs £800 minimum, excluding drinks and service.

Norfolk coaching inn sells for more than £995,000 asking price: A property agent has reported a “number of offers” were received above the £995,000 asking price for the Grade II listed Cornwallis Country House Hotel in Brome, close to the main A140 Norwich/Ipswich road, which was placed on the market last November. Agent TW Gaze of Diss reports the coaching inn has been bought by local businessman, Fraser Duffin, who will return the name back its original name, The Oaksmere. Alan Crowest, of TW Gaze, said: “My initial thoughts that the 16 bedroom hotel was not of a large enough scale to appeal to companies, proved correct. In total, we conducted 17 viewings of the property, all from private individuals, and culminated in seeking best and final offers. As a result, a number of offers were received in excess of the asking price.”

Former Caprice Holding boss lines up £2m brasserie opening: Des McDonald, the former chief executive of Caprice Holdings, will open a £2m brasserie, Holborn Dining Room & Delicatessen, this month. The venue aims to combine European “café culture” informality with defiantly British “comfort food” such as kippers, mutton broth, calf’s liver and jam sponge. The 160-seat restaurant is located in the East Banking Hall of the Grade II-listed Pearl Assurance building, now the Rosewood London hotel. McDonald said he wanted to create a destination that was “relaxed, informal and inclusive” in a part of London dominated by anonymous offices, but emerging as a vibrant “Midtown” district. He said: “I want it to be a drop-in place, like a Parisian brasserie, but somewhere you could have a sandwich, high tea, or breakfast or you could come in and have three courses. London is more of a café society than it has ever been, but the Europeans do it so well.” A delicatessen next door will sell coffees, croissants and sandwiches, as well as British groceries such as bread, marmalade and clotted cream.

Abokado opens 20th site this week: Abokado, the healthy food brand headed by Mark Lilley and backed by private equity firm Kings Park Capital, will open its 20th store on Alie Street/Mansell Street in the Aldgate area of the City of London today. At last year’s Propel Multi Club conference, Kings Park Capital principal Jason Katz explained that his firm invested in the quick service restaurant concept three years ago. “It is focused on the lunchtime office market and we think it has a differentiated range of products,” he said. Abokado plans ten opening this year. 

Scoff & Quaff looking for acquisitions after major refurbishment: Six-strong West Midlands pub and restaurant operator Scoff & Quaff is ‘actively considering’ opportunities to acquire other Worcestershire pubs to add to its portfolio. The news comes after the company undertook a major refurbishment of The Kings Head in Sidbury, which includes the revamping of a new covered outdoor area alongside contemporary lighting, a complete redecoration and new furniture. The revamp has also seen extensive renovations to the pub’s kitchen and washrooms with new outdoor seating and tables added to its canal side patio area. Scoff & Quaff is owned by Nick Mossop, Brian Hulme and Stephen Ballard. Aside from The Kings Head they also own The Swan at Whittington, The Crown & Sandys in Ombersley, The Ewe & Lamb in Bromsgrove, The Leopard at Bishops Tachbrook and Cheltenham’s The Tivoli.

Luminar to invest £500,000 in St Albans nightspot: The UK’s largest nightclub operator, The Luminar Group, has announced a major £500,000 refurbishment of Batchwood Hall in St Albans, creating 50 new jobs. The 1380 capacity venue on Batchwood Drive will close on 8 February for a three month investment that will transform this iconic building into a luxury nightclub with three dance rooms, a stylish bar and pre-bookable VIP booths. Commenting on the investment, Luminar’s regional director for the Midlands, Mark Molton said: “This is an iconic venue that has played a key role in the local night time economy in St Albans for over 25 years. We’re very excited by the plans that will restore the building to its former beauty and update facilities to create a modern, elegant venue for our customers.” The refurbishment will run alongside the redevelopment of the Batchwood Sports Centre, due for completion in summer 2014, which will become an east of England regional centre of excellence with six indoor tennis courts and a special judo dojo facility.

Burger plans UK roll-out after Edinburgh launch: A new better burger brand called Burger is launch in Edinburgh with a view to a national roll-out. Burger is opening in the former Cuthbert’s bistro in the Fountainbridge area of the city. The brand is a joint venture between Malcolm Gray and Alison Davies. Gray said: “It is a brand that is being built; it’s not just a one-off. The market we are looking for isn’t really in Scotland at the moment – we want to have a good quality, freshly prepared and reasonably priced burger. In Edinburgh you’ve got quite limited choices for that kind of thing. We have destination burger restaurants, fast food places and pubs that sell burgers, but no outright high quality fast food burger restaurants.” Alison Davies added: “If you know Shake Shack in America, we are very similar to that in terms of our food, but our price point is slightly cheaper. This isn’t a destination restaurant – we are very much an open destination where people can drop in for a quality burger. I think it’s probably best described as ‘designer fast food’.”

Action Hotels and Whitbread sign Middle East partnership: Action Hotels and Whitbread has unveiled a partnership to develop the Premier Inn brand across the Middle East. Premier Inn will undertake long-term management contracts on four new Premier Inn hotels owned by Action Hotels, to open between now and 2016. Action Hotels plans to invest £63m over the course of the next two years as they build and develop the new hotels, which will create 170 new jobs in the region. Managing director of Premier Inn Middle East and Africa Darroch Crawford said: “Premier Inn already has five hotels operating in Dubai and Abu Dhabi and the brand is proving very popular with customers who are looking for great value accommodation and a great quality product. We are delighted to be partnering with Action Hotels to introduce the Premier Inn brand to new countries and significantly increase our presence in the region.” Alain Debare, chief executive of Action Hotels, added: “We have established a strong hotel business which is well-placed to take advantage of the significant growth opportunities for branded economy and midscale hotels across the Middle East. Our partnership with Whitbread’s Premier Inn brand will enable us to strengthen our leading position in the region.”

Gravity Station to open in Cardiff: Cardiff’s reputation as a “real ale Mecca” is getting a boost with the opening of a new high-end bottle shop in the city centre. The Gravity Station will be opening in late February, adding to a thriving scene in Cardiff. Jim Swidenbank, manager of the new Barrack Lane venue, said: “The Gravity Station will be offering an array of bottled beers from some of the hundreds of breweries currently operating within the UK as well as interesting offerings from breweries situated in other far-reaching global locations. Available on tap will be a varied selection of cask ales which will be gravity-fed and served straight from the tap into tasting trays allowing those unsure as to which style of ale is for them to sample and discuss the different types available.”

Fourth generation Sunderland businessman to open traditional pub: A fourth generation Sunderland publican is opening a traditional pub in the city’s cultural quarter. Chris Royal is re-opening a derelict basement in Maritime Buildings, West Sunniside, as Sam’s Bar this Friday. To create a shabby chic, industrial-cum-vintage feel, he’s reclaimed bars, fireplaces and fittings from other pubs in the city including Oddies in Hylton Road and the Grindon Mill. Royal said: “We wanted to create a pub that will mix in well with the other restaurants and bars here. We can see the potential the area has. It’s not a dance spot, this has more of a traditional, cosy pub feel. Somewhere for people to come after a meal or before they go to the cinema.”

Frankie & Benny’s in Redhill scores low food hygiene rating: Three East Surrey outlets currently hold the worst possible food hygiene rating. Three years after the Scores on the Doors system, a Reigate restaurant, Redhill pub and Caterham newsagent have a rating of zero, requiring “urgent improvement”. A further 37, including shops, takeaways, a pub and a national chain – Frankie & Benny’s in Redhill – have a rating of just one, meaning “major improvement” is required.

Wetherspoon acquires two units in Morley: JD Wetherspoon has confirmed it has bought two units in Morley’s Queen Street to open as a pub later this year. As well as the former Blockbuster store, Wetherspoon completed the purchase of the premises next door, the Arthritis UK shop, last week. Both units have since been boarded up by the new owners while its application for renovating both buildings goes through Leeds City Council’s planning department.

Bath’s biggest venue plans coffee shop: Bath’s biggest venue is hoping to open a new coffee shop in time for the building’s 80th anniversary this year. The Bath Christian Trust, which operates The Forum in St James’s Parade, has applied for planning permission to convert what was the Wesley Owen Christian bookshop into an independent coffee shop. The trust aims to get the coffee shop open by May, which will be the 80th anniversary of the building’s opening as a cinema. General manager Dan Hogston said: “Over the last few years we have been making huge investment in the infrastructure of The Forum. We are aiming to offer a great new cafe space for the city, designed to bring a contemporary vibe to our classic art deco venue. It’s all part of our strategy to open up The Forum as a great meeting place in the heart of the city, and now we are going to offer a vibrant new independent coffee shop.” The coffee shop – called Forum Coffee – will use the Monmouth Coffee brand, which operates three outlets in London.

Receivers close to selling New Zealand Nando’s franchisee: Receivers are close to finalising a sale of the company that runs the Nando’s network in New Zealand, after the owner of the master franchise went into receivership last year. The company that runs the Nando’s restaurant network in New Zealand had defaulted on royalty payments and owed $1.6 million to its bank when it went into receivership late last year, according to the first receivers’ report. Auckland-based Shivram, which has held the local master franchise for the 31-store chain since 2006, which into receivership on 29 November. In the lead up to the receivership Shivram had defaulted on royalty payments due to the master franchisor for the region – Nando’s Australia – and had been issued with a breach notice under its franchise agreement. The company owed $1.6 million to Heartland Bank at the time of the receivers’ appointment. In December Shivram’s sole director, Shailen Ramjee, said he and Heartland had agreed on the receivership, which would “protect the assets so that everyone can be paid” and avoid the franchise agreement being terminated by Nando’s Australia.

Star Pubs & Bars puts two pubs on the market: Star Pubs & Bars has instructed agent Christie + Co to sell two freehold pubs in Scotland – The Sitting Room on Colinton Road in Edinburgh (£250,000), and The Mayfield Inn, Mayfield by Dalkeith (£230,000). Barry McNeil, of Christie + Co, said: “In the last ten years Christie + Co has completed several high profile disposal campaigns for all the main corporate operators in Scotland. Given this, we believe these two units should attract significant interest. Indeed, prior to openly marketing the properties we have already received several serious enquiries.”

Adnams pubs opens for first time since December storm surge: An Adnams pub on the Suffolk coast, The Crown pub at Snape plans to open its doors this Thursday (20 February) for the first time since December’s storm surge. A tidal surge tide overtopped rivers and waterways on 5 December. The pub had hoped to reopen for St Valentine’s Day, but it was not be ready in time. The Crown estimated the cost of lost kitchen equipment, damage to its cellar and dead livestock was £55,000 to £60,000.

Enterprise Inns pub sold in Brixham: An Enterprise inns pub in Brixham, Devon, The Watermans Arms, has been sold by agent Christie + Co off an asking price of £225,000. The pub is to be converted to a second Cattlemans Restaurant – the existing site is in Paignton. Richard Wood, of Christie + Co’s Exeter office, said: “With this becoming the third public house that we have sold in the Brixham area recently, it shows real demand for well priced freehold properties. It also demonstrates that for the right opportunity, there is always a buyer in the current market.”

Prezzo and Pret A Manger line up for Edinburgh development: An investment of £9.6m is being put into a £200m development of offices, shops, bars and restaurants on an empty site next to Haymarket station in Edinburgh. The former goods yard in the city has lain empty for years and is currently used as a car park. Construction company Interserve has joined forces with landowner Tiger Developments to build a complex of four office buildings along with retail and leisure space. Prezzo and Pret A Manger have committed to opening in the second phase of the development. It is hoped the site will create 3500 jobs in the city when it opens in 2016.

Oregano may be secret weapon in fight against norvovirus: Heston Blumenthal may have had the answer to the norvovirus outbreak that closed his Dinner restaurant in Knightsbridge in the kitchen all the time – oregano. Carvacrol, a plant compound found in oregano oil, is effective against norovirus, the chief cause of vomiting and diarrhoea around the world. The chemical strips the virus of its “armour”, a tough outer protein coat, making it easier to destroy with other agents. Dr Kelly Bright, from the University of Arizona in the United States, who led the researchers who discovered the power of carvacrol, said: “Carvacrol could potentially be used as a food sanitiser and possibly as a surface sanitiser, particularly in conjunction with other antimicrobials. We have some work to do to assess its potential but carvacrol has a unique way of attacking the virus, which makes it an interesting prospect.” However, the researchers say eating large amounts of oregano will not protect anyone from norovirus. Nor do they recommend taking concentrated carvacrol, which, while non-toxic, would cause burning and numbness of the tongue.

Major US brands spot Alaska opportunity: Three major brands – Texas Roadhouse, Hard Rock Café and Krispy Kreme – are opening their first units in Alaska this year, debuting new stores in Anchorage, the state’s largest city. They follow on the heels of brands such as Buffalo Wild Wings, Chili’s Too, Dairy Queen, Pita Pit and Olive Garden. Anchorage has a population of more than 292,000 and 2012 per capital personal income of $54,570. “I think some of the folks that have blazed the trail, especially casual diners, have met some success,” said Travis Doster, director of public relations for Texas Roadhouse.

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