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Thu 10th Apr 2014 - Propel Thursday News Briefing

Story of the Day:

Jonathan Kaye – we’d like ten Cleavers by the end of 2014: Prezzo chief executive Jonathan Kaye has told Propel his company would like to have ten Cleaver sites by the end of 2014. It is planning between 25 and 30 openings at a cost of around £650,000 each this financial year. The company is currently converting a Chimichanga site in Billericay, Essex to its fifth Cleaver opening after unveiling the first site in Cobham, Surrey last summer. “The current sites are doing pretty well and if they continue to do well we’d like to open more although we don’t want to get ahead of ourselves,” Kaye said. He said the company had noted a rise in lease premiums and rental expectations in the London market but Prezzo had always been more regionally focused. Asked if any new openings were enjoying particularly strong trading, Kaye said: “I mentioned New Brighton last time and PizzaExpress and La Tasca have both opened there since, so I’m going to keep my trap shut.” Numis Securities’ leisure analyst, Douglas Jack, issued a ‘Hold’ recommendation on Prezzo shares with a target price of 155p. He said: “Full-year profit before tax rose 12% to £20.4m (we forecast £20.4m; consensus £20.2m). Against a backdrop of store space growing by 12.5%, we estimate average sales grew 2.5% and average outlet profits grew 3.6%. We are holding our forecasts, but our stance remains ‘Hold’, reflecting what we view as a very full rating. Prezzo’s rating has doubled to 20x P/E and 11x EV/Ebitda relative to its 2008-12 average (10.3 P/E; 5.0x EV/Ebitda), following the trend at the Restaurant Group. However, unlike the Restaurant Group, Prezzo’s trading is weaker than it was during 2008-12. Given this and the restaurant sector growing supply at 6% versus 2% demand growth, we believe Prezzo’s valuation is too high.”
   

Industry News:

Middle-class diners are treating themselves to Michelin meals: A new group of middle-class foodies has emerged that has begun to treat themselves to outings to Michelin-starred restaurants like they plan a mini-break, new research has found. University of Cambridge academic Professor Christel Lane, who has written a book called The Cultivation of Taste, said: “The snobbery of fine dining is being eroded. There is a new developing group of largely professional people who are interested in the origin of their food and, in the same way they might plan a mini-break, are willing to save up for the occasional treat in a one-star or two-star restaurant.” Professor Lane found British diners are more adventurous than German diners. “The Brits are less puritan about their food.”
   
Technomic – US burger chains have reached maturity: US Burger chains have finally reached maturity as limited-service burger segment sales contracted in 2013. Although the burger chains in the 2014 Technomic Top 500 Chain Restaurant Report tallied US sales of more than $72 billion, they recorded nominal growth of only 1.2%. Adjusting for price inflation, the segment’s sales declined. Overall units increased by only 1% to 42,853 locations. Quick service burger chains accounted for $69.7 billion in sales but increased only 0.9% in sales volume with weak U.S. performance from McDonald’s (whose sales are up just 0.7%, to $35.9 billion), Wendy’s (up 1%, to $8.8 billion) and Burger King (down 1% to $8.5 billion).
   
Richard Matthews retires from the BBPA: British Beer & Pub Association Midlands Regional Secretary Richard Matthews has retired after 11 years in the post and 35 years in the industry. He joined the BBPA in 2003 after previously being Midlands Editor of the then Morning Advertiser newspaper and, before that, Midlands and Wales correspondent for the Licensee, the National Licensed Victuallers Association’s house journal. Giles Kendall, current BBPA Midlands chairman, said: “Richard was an outstanding Midlands BBPA Secretary, combining an unrivalled, wide-ranging knowledge across the industry with a quiet and dignified way of getting things done and the charm to keep everyone positive and working towards the same goals. These skills made his support incredibly valuable to myself and various individuals who have held the post of Midlands Chairman and he’ll be sadly missed.”
   
New app offers dynamic pricing: A new app is being trialed in the United States called Go Dish which seeks to get more customers into restaurants during off-peak hours by offering discounts on meals picked up before or after a typical restaurant’s lunch rush. Users are notified every day at around 9.30am to discounts on meals being offered by nearby restaurants. Those discounts typically range from 20% to 35%, but can go as high as 50% for select dishes each day. Discounts also depend on users scheduling their lunch plans around the usual 11.30am-2.00pm lunch rush, with bigger discounts offered the earlier customers decide to get lunch before or after the busy period. Currently Go Dish has about 45 restaurants on board in the financial district in San Francisco.
   
22,000 visitors attend London Coffee Festival: More than 22,000 visitors – 8,000 industry and 14,600 consumers –attended the London Coffee Festival, held at the Old Truman Brewery, Brick Lane, East London over the weekend. Festival organiser Ludovic Rossignol said: “The exciting coffee journey London has been experiencing for the last decade is an indication that it is fast becoming one of the most advanced coffee cities on earth. More than an obsession, coffee is becoming a lifestyle, not just in London but across the UK. The informal environment at the London Coffee Festival provides exhibitors with the opportunity to engage with our industry visitors in an interactive and memorable way.” The event saw latte art battles, DJ collaborations, design wear, pop up restaurants and coffee shops, pro-triangulation tests, live roasting, mixologists, brewing tutorials, cooking lessons and a competition for the best baristas in the country.
   
Banks behind schedule on interest rate swap review: All the major banks are behind schedule on the current review of interest rate swaps. A deadline of May has been set for the completion of the review. But figures released by the Financial Conduct Authority show that, as of the end of March, RBS had completed 61% of reviews with a target of 70%, while Lloyds had finished 73% of reviews against a target of 89%. HSBC is the most advanced bank, with 89% of reviews complete, against a goal of 92%. Banks have been warned that they may be fined if they hold up payments to victims.
   

Company News:

Real China site closed over mice infestation and poor cleaning standards: A branch of the 24-strong buffet restaurant chain Real China, in Chatham Maritime, Kent, has been shut down by environmental health officers for several days after it was found to have an infestation of mice, it has emerged. The venue, in Leviathan Way, opposite the Dockside Outlet Centre, was closed down by environmental health officers from Medway Council when they carried out a routine food hygiene inspection. During their visit, on Monday17 March, officers also found the all-you-can-eat establishment had poor cleaning standards in the kitchen and other food areas. Officers worked with staff on site for three days to get the premises clean so it could meet the necessary food safety and hygiene standards. Staff at the restaurant also called in pest control contractors to get rid of the mice and environmental health officers were able to allow the establishment to reopen for business on Friday 21 March.
   
M&B opens first of new airport All Bar Ones – with Espresso All Bar One innovation: Mitchells & Butlers opened of the first of its two debut All Bar One airport sites yesterday (Wednesday 9 April) at Birmingham Airport. It comes after the recent transport hub opening at Euston station in London and takes the company to almost 50 sites nationwide. The new 160-seat All Bar One Airside is located in Birmingham airport’s South departure lounge by gates 1-20. The chain also opened its debut Espresso All Bar One, a fast grab-and-go service next door to the main bar, selling coffees, frappes, cakes, panini and fresh-boxed salads. The second, larger, 490 sq metre, 120-cover bar is due to open in the airport’s North landside area in June. Design features consistent with All Bar One’s newest remodelled sites include exposed brick walls, natural wood, low-hanging lights and a combination of leather banquettes, high stools and chairs. Susan Chappell, All Bar One’s retail director, said: “We are delighted to be launching All Bar One within one of the country’s most vibrant and expanding airports. It follows on from the recent success of Euston station, representing another step forward for the brand into the travel sector.”
   
McMullen’s discounts beer by 50p a pint to thank Chancellor George Osborne: The Hertford-based brewer and retailer McMullen & Sons has decided to pass on to its customers the 1p a pint reduction in beer duty over a “Thank You George” weekend by discounting all its draught products by 50p a pint. Heydon Mizon, McMullen’s retail director, said: “We believe this will make a noticeable and material statement and be more appreciated by our regular customers than giving the duty back in small, arguably, insubstantial amounts. In any event we work in 5p price points, so reducing prices by 1p was not really an option for us.” The company’s managing director, Peter Furness-Smith, said: “Whilst the abolition of the damaging and vindictive ‘duty escalator’ along with the reduction in duty for two years running is very welcome, the fact remains that beer and pubs are still heavily over taxed. For example, over 40p in every pound spent by one of our customers in a community pub goes directly to government coffers in taxation (VAT, rates, duty, employment taxes – to name just four!). All these taxes paid amount to over four times more than we, as a company, make in profit! It would not be unreasonable therefore for us to keep the 1p duty saving to either offset increases in other taxes or just to help lower our overall tax bill. However, we think it is important that we pass the benefit of the Chancellor’s wise actions on to our customers. If George Osborne has at last acknowledged that beer and pubs are over-taxed, you never know, he might feel inclined to go even further which will give us all the confidence to invest more and in the process create many badly needed jobs, particularly for the young.” The “Thank You George” weekend will run from Friday 25 to Sunday 27 April, and all MPs who have a McMullen pub in their constituency have been invited to share an even better value pint and to give the company “the opportunity to thank them for their continued support with helping to get the important taxation message across to the Chancellor”, McMullen’s said.
   
Galvan Research – Whitbread is a ‘Buy’ ahead of full-year results: Whitbread should be a ‘Buy’ ahead of its full-year results, according to Galvan Research and Trading. Galvan said that the stock has been in a “steady, rising trend channel” since September 2013, trading well above the rising 100- and 200-day moving averages. However, there has been a period of consolidation after the shares hit a 52-week high in March; the stock has fallen nearly 5% over the past month despite Whitbread saying in late February that full-year results will come in at the top-end of current expectations. Galvan expects the shares to revisit a level of 4476p by its annual results announcement on 29 April. “As the UK’s largest hotel, restaurant and coffee shop operator, Whitbread occupies a unique but enviable position as its two key brands – Premier Inns and Costa Coffee – continue their rapid expansion,” said Ed Woolfitt, head of trading at Galvan. “Costa, in particular, is benefiting from the UK’s apparently insatiable appetite for coffee shops, and with a clear strategy for growth providing plenty of visibility, Galvan Research believe that the current dip in the share price warrants an investor alert call to pick the stock up in the run-up to the full-year results at the end of the month.”
   
Six major brands to open on York’s new Vangarde shopping park in May: Six major brands – Costa, Nando’s, Prezzo, Giraffe, Frankie & Benny’s and Ed’s Easy Diner – are scheduled to on York’s new Vangarde shopping park next month. The park’s new John Lewis store, along with Marks and Spencer and Next outlets, opens this week. The John Lewis is the first in North Yorkshire and the chain’s only store between Sheffield and Newcastle. The chain said: “We are expecting footfall to be in the thousands, one estimate puts it at around 5,000 but this is the first time we have opened a store with footfall counters installed, so it will be interesting to see the numbers.”
   
Brewery owner bids to buy under-threat Lancashire pub: The owner of an award-winning real ale brewery is making a bid to buy an historic pub threatened with closure. Sara D’Arcy, who runs the Irwell Works Brewery in Ramsbottom, Lancashire, wants to buy the 150-year-old Alma Inn in West Street, Padiham, near Burnley, which could be shut and turned into houses. D’Arcy, a former Padiham resident, said she would match the offer developers have put to the pub’s owner, Punch Taverns. Plans to convert the pub into two houses were refused by Burnley Council, though developers have put in an appeal against the refusal. D’Arcy, who helped organise Padiham Beer Festival, said: “If we manage to take it over, it will have the feel of a traditional pub. Many people don’t want the big pubs. They want a traditional pub.”
   
Llandudno nightclub set to be converted to restaurant: A nightclub in Llandudno, Conwy which closed suddenly in 2012 is due to be re-opened as a bar and restaurant. The Washington, on East Parade in Llandudno, closed two years ago, making 20 people redundant. It was bought from Punch Taverns by Fu Lee, owner of Fu’s Cantonese Restaurant in Caernarfon. Now an application has been submitted to Conwy County Council to carry out a series of alterations to develop the site as a restaurant and bar.
   
Caffe Nero partners music company for Northern Ireland tour: A record company, Smalltown America Music, has partnered Caffe Nero for a series of live shows across Northern Ireland this month. Paul Ettinger, music director at Caffe Nero, said: “The Nero live experience has never been taken to Northern Ireland until now, and we are confident that these tours will be as successful as the UK tours and will lead on to similar success for the artists. Music has always been critical to the Caffe Nero experience and the support for grassroots talent is fundamental to our brand values.” Caffe Nero has a dozen outlets in the province.
   
More than 1,000 apply for 30 jobs at new Nando’s site: More than 1,000 people applied for 30 jobs at a new Nando’s which opened in Londonderry yesterday. The mayor of Derry, Martin Reilly, has called for an urgent investment to create new jobs for the city. He said: “News that over 1,000 people in the city applied for 30 jobs at a newly opened restaurant in the city is evidence of the city’s urgent need for investment and jobs to the local economy.”
   
Charlotte’s Holdings to open third site: Charlotte’s Holdings, the group behind the Charlotte’s Place and Charlotte’s Bistro restaurants, will open a third west London site this autumn. The new restaurant, to be called Charlotte’s, will launch in Dickens Yard, Ealing, later in the year. The group’s flagship restaurant, Charlotte’s Place, also in Ealing, will close for major refurbishment. The outlet will re-open in early 2015 with a new chef and menu, as well as a new look.
   
M&B shareholder hires new chief executive for US upmarket restaurant division: Joe Lewis, the prominent Mitchells & Butlers shareholder, has hired Joe Bettin as the chief executive for his upmarket Tavistock Restaurants sites in the United States. The restaurant group had its headquarters in the San Francisco area and has decided to move its fast-growing Freebirds World Burrito fast-casual chain’s headquarters to Austin, Texas and its Upscale Collection headquarters to Orlando, Florida, where about 20 senior executives will work. Bettin has more than 30 years of restaurant experience. He was most recently chief executive of the Palm Restaurant Group. He was also chief executive officer of Buca di Beppo before it moved its headquarters to Orlando. Bettin replaces Bryan Lockwood, who stepped down in October.
   
Buenos Aires unveils opening date for eighth site: The Buenos Aires restaurant brand, headed by Cristian and Linda Barrioneuvo, has unveiled an opening date, Monday 14 April for its eighth site, in Richmond, South West London. The brand serves Argentine cuts of beef from the lowlands of Las Pampas and cooked on an authentic “parrilla” (barbecue). The brand is opening in the former FishWorks premises on The Square in Richmond. Property agent AG&G acted for the vendor.
   
Stonegate pub division launches new range of low-calories dishes: Stonegate Pub Company’s Great Traditional Pubs (GTP) division has launched a range of low calorie dishes on its new spring menu which was unveiled last week. Seb Leheup-Jones, marketing manager for Stonegate, said: “We have created an interesting range of specialty dishes including new choices in the under-500 calorie selection. Guests can choose between the Thai-style yellow chicken curry (423 calories), a coconut sauce with spring onion, red peppers, garlic and lemon grass, served with rice, the broccoli and brie pasta in tomato sauce (476 calories) or the rump steak and mushroom salad (476 calories). In anticipation of garden BBQs to come, we have also transformed our choice of burgers, introducing the flavour of the season – pulled pork – on our pulled pork beef burger, as well as introducing a Mexican-styled inspiration in the form of the nachos grande burger. Other BBQ influences include the new hot dogs section, with a choice of three dogs – pulled pork, chili or BBQ – as well as the whole rack of BBQ pork ribs and the BBQ sharing plank from the grill. We will still be offering an assortment of meal deals. Lunchtime customers can choose from a variety of sandwiches, ciabattas; wraps and jacket potatoes with a selected drink for a set price or enjoy a meal deal on ten main dishes.”
   
Earl of Sandwich closes only UK site: The Earl of Sandwich sandwich chain has closed its only UK outlet. The company, a partnership between the 11th Earl of Sandwich, John Montagu, and Planet Hollywood’s founder, Robert Earl, has 30 outlets in the United States, and opened its first UK shop in Ludgate Hill, central London in 2011. This site was sold to Itsu last month. However, the brand is close to signing a deal to open two Earl of Sandwich outlets in travel location, with a simplified menu. The most popular of the 24 Earl of Sandwich outlets, at Disneyland in Orlando, Florida, turns over $10m (£8.57m) annually.
   
Yum Yum to open second site alongside Turtle Bay’s first London opening: The Thai restaurant brand Yum Yum is to open a second branch, in the former Arcade site development in Walthamstow, East London. Yum Yum, which was founded in Stoke Newington, East London, will join the Caribbean restaurant Turtle Bay, whose arrival in Walthamstow Propel reported on Monday, and Nando’s as the current named food outlets to open in the Cleveland Place development. Yum Yum’s managing director, Atique Choudhury, said he had rejected offers from across the UK in favour of opening the store’s second branch in Walthamstow. “Over the next five years this borough will continue to go from strength to strength and we wanted to be here and be a part of that,” he told the local newspaper. Of Turtle Bay’s first London opening, Jake Bernstone, restaurant agent at Davis Coffer Lyons, said: “Turtle Bay’s recent investment from Piper Private Equity means it is well funded and is actively looking for further sites. I believe it will fit in exceptionally well with the diverse, up-and-coming demographic of Walthamstow, which I have no doubt will fully embrace Turtle Bay’s food, which is certainly in high demand.”
   
Carat Manchester wins slice of Pizza Hut media account: Carat Manchester has been awarded a slice of the UK Pizza Hut business, taking the media planning and buying account for its restaurants from the incumbent, Starcom MediaVest Group. The brief does not include the takeaway business, which is still held by Starcom. It will cover all promotion of the “dine in” menu and regional campaigns. According to official figures from Nielsen, Pizza Hut spent £3.8m on advertising for its restaurant business during 2012, which dropped to £670,000 in 2013. Starcom has held the £11m combined restaurant and takeaway business for Pizza Hut since 2004. Kathryn Austin, head of marketing at Pizza Hut Restaurants, said: “Localised content is at the heart of our brand building activity through online and social – it’s key to communicating our vibrant, upbeat brand personality and ensuring that we’re being targeted and strategic with all our communications.”
   
TripAdvisor launches investigation into Andy Murray reviews before opening: Tennis player Andy Murray’s new luxury hotel is the subject of a TripAdvisor investigation after five-star reviews appeared before its opening night. Questions were raised after six five-star tributes appeared for the tennis champion’s high-end Cromlix Hotel in Kinbuck, Perthshire, almost a week before the resort officially opened on 1 April. A spokesman for the travel review site said an investigation had been launched into allegations that the reviews were “incentivised”.
   
Shropshire brewery opens visitor centre: A Shropshire brewery has opened a £50,000 visitor centre with the help of government funding. Hobsons Brewery, based at Newhouse Farm, Clebury Mortimer, opened the doors of its visitors centre to coincide with English Tourism Week. The project was funded by the Department for Environment, Food and Rural Affairs, and rural affairs minister Dan Rogerson was on hand at the official opening to celebrate the boost to the local economy. Rogerson said: “With our investment, Hobsons is contributing to a stronger economy in the West Midlands by creating jobs and by partnering with B&Bs and local suppliers.” The centre has a bar area and kitchen to present food and beer tasting.
   
Marston’s has 92 target locations as it seeks to boost Scottish presence: The brewer and pub owner Marston’s has unveiled long-term plans to boost its footprint in Scotland. The company said it aimed to open six new pubs north of the border in the next year, and was looking to open an average of five new pubs each year after that. It has drawn up 92 “target locations” for its countrywide rollout. The announcement came one year to the day since Marston’s opened its first pub in Scotland. The company said its long-term expansion plans represented an annual investment of £15m, creating more than 200 new jobs per year plus construction jobs at each site. Marston’s currently has four pubs in Scotland, in Dunbar, Braehead in Renfrewshire, Danderhall in Midlothian and Forfar in Angus. Within the next 12 months, it expects to open sites in Armadale in West Lothian, Balloch in West Dunbartonshire, Dumfries, Dunfermline, Port Glasgow in Inverclyde and Ravenscraig in North Lanarkshire. Steve Roberts, head of acquisitions for Marston’s, said: “Our first year of trading in Scotland has been strong and we are now ready to step up our search for new sites right across the country. We are on the lookout for locations in our target towns and cities that front main roads, are on retail parks or are close to residential developments of more than 500 homes.”
   
North east pub operator takes third Star Pubs & Bars site: North eastern leased pub operator JM Pubs Ltd, owned by Andrew McKenzie, has taken its third site with Star Pubs & Bars, The Londonderry Arms at Long Newton. A former chef, McKenzie entered the pub industry five years ago when he took his first lease with Star Pubs & Bars on the Jolly Farmers at Stockton on Tees. This was followed two years later by a lease on the Penny Black, also in Stockton. Situated in the middle of Long Newtown village, The Londonderry Arms is a destination food pub that attracts trade from Stockton and Darlington as well as from the immediate area. All three of McKenzie’s pubs are in close proximity making them easy to manage but the pubs are diverse in nature. The Jolly Farmers is a wet only community local while the Penny Black is a suburban community pub with traditional pub food accounting for 60% of trade. Said McKenzie: “The Londonderry Arms is a great pub and as a multi faceted business offers plenty of scope for growth.”
   
Faucet Inn to open £1m Stratford site: Faucet Inn, the London operator led by Steve Cox, is to open a new £1m site in Stratford, East London called Neighbourhood. A spokesman said: “It will be the heart of the community, offering everything from craft beers to cocktails, pizza and some pretty decent sharing boards.” Last month, Propel reported that Faucet Inn had launched The Craft Beer Pub Co, a new joint venture with the Downing Pub EIS Fund, with the Pensioners in Southampton as its first site. Cox said at the time: “It is very exciting to be embarking on this new venture with Downing and is hopefully the first of many new openings to come.”
   
Nando’s and Patisserie Valerie join Wetherspoon on M40 site: Both Nando’s and Patisserie Valerie will break new ground this summer by opening their first motorway service station sites, joining JD Wetherspoon in opening at the Beaconsfield M40 service station this summer. Andrew Long, chief executive of Extra MSA Group, said: “Extra are pleased to be working with both Nando’s and Patisserie Valerie to further expand the range of customer choice and popular major national brands represented at its service areas.” Alteration work will start later this month to create a new unit for Patisserie Valerie and Nando’s. This will be in place of the existing floor space in the Food Court Building, currently occupied by Le Petit Four Français. Long said that the intention was to have both new facilities open for June or July this year, ahead of the busy summer trading period. The Patisserie Valerie opening comes after a range of new types of sites for the brand in the past year – Propel broke the news that it had signed to open inside three Next shops as concessions. This month, it opened its first stand-alone out-of-town site at the Ford Kinnaird Shopping Park in Edinburgh. It opened a 1,438 square foot unit on a ten-year lease at the park. The controversial JD Wetherspoon pub at the service station, The Hope and Champion, opened in January this year. Last month, JD Wetherspoon chief executive John Hutson reported that the Beaconsfield site was taking slightly less per week than the £35,300 company average. He told Propel: “For sure there will be other opportunities, but we are not chasing them and no one has come to us yet, but as and when they do, we will look at them site by site. As we thought, it’s performed much like an airport pub, two thirds of sales coming from food. Average sales are a bit under our average pubs, but food sales are higher, twice the company average. Drinks overall are at 30%, with alcohol sales around ten to 20%. However, Beaconsfield is one of the busiest service stations for coaches and there’s a 105-room hotel adjoining our pub.” The JD Wetherspoon venue was not the first pub to open at a motorway service station. Moto Hospitality, opened a Harvester under franchise from Mitchells & Butlers, at its Donington Park Services on the M1 in May of last year. The plan was to add further Harvester sites at Moto’s 40 roadside service stations if the trial is successful.

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