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Morning Briefing for pub, restaurant and food wervice operators

Fri 30th Oct 2015 - Update: Soaring London rents, Burger King, YO! Sushi, BrewDog, MPW et al
Jamie Rollo charts changing market capitalisations of sector’s biggest companies: Morgan Stanley leisure analyst Jamie Rollo has produced a chart showing the changing fortunes of the sector’s biggest companies since 2010 in terms of their market capitalisations. He stated: “Our chart shows the market caps of the largest UK pub and restaurant companies since 2010. While not a proxy for relative share price performance, the changing nature of the sector is stark. Mitchells & Butlers has been replaced as the largest company five years ago by Greene King, which recently acquired Spirit. Domino’s and The Restaurant Group move into number two and three spots, having been amongst the smallest in 2010. JD Wetherspoon and Marston’s have still risen strongly since their recession troughs, but are now much smaller than the ‘big four’. The emergence of the restaurant chains and dull like-for-like sales performance of some pub companies reflects the widening supply and demand drivers in these segments, as well as changing consumer habits, with the UK eating out market enjoying a revolution.”

Burger King franchisee lodges licensing application to sell beer at four of its sites: Burger King franchisee CPL Foods has lodged licensing applications to sell beer at four of its restaurants. The company, which operates Burger King restaurants across the UK, is hoping to include beer on the menus of its venues in Blackpool, Bury St Edmund’s, Hull and Newcastle-under-Lyme by the end of November. It is proposing to sell beer “for consumption on the premises only” each day from 10am-11pm. A CPL Foods spokeswoman said it was “excited” about being asked to launch the scheme, which was already working well in Burger King restaurants overseas. “It’s very successful everywhere else so we’re just catching up with the rest of the world really,” she said. If the licences are granted, she said the beer would only be served in plastic bottles. “It’ll probably be an American beer to fall in line with the brand,” she added. CPL also trailed a home delivery service at some of its sites earlier this year.

Marco Pierre White launches fourth restaurant brand: Marco Pierre White has chosen Birmingham as the location for his first chophouse restaurant brand. Mr White’s English Chophouse will make its debut at the city’s four-star Hotel La Tour next month following months of development by the celebrity chef’s Black & White Hospitality business. The new venue, which opens in November, will serve a range of fresh, high quality meat cuts alongside traditional home-grown classics such as Welsh rarebit, grilled oysters, trout tartar and roast chicken and leek pie. Guests can expect to enjoy a décor that includes the luxury and opulence of a four-star stylish hotel alongside some traditional touches and effects of a historic brand. Mr White’s English Chophouse will become the group’s fourth restaurant brand alongside Steakhouse Bar & Grill, Marco’s New York Italian and Wheeler’s of St James’s. Nick Taplin, chief executive of Black & White Hospitality, said: “A traditional British chophouse conjures up homely images of succulent joints prepared with precision by trained craftsmen with cleavers. That’s exactly the experience we aim to deliver at Mr White’s; the best of land and sea, delivered with skill and served in warm, enjoyable surroundings. We’ve been working on the concept for some time but it was always on the understanding that we would need to find exactly the right home for it. We know that Birmingham has a real appetite for affordable glamour; restaurants that offer top quality dishes in a sumptuous environment, at a price to suit all budgets. The final piece of the jigsaw fell into place when we discovered the Hotel La Tour. The venue itself and the team behind it give us enormous confidence that Mr White’s will be a major success.” Pierre White added: “Chophouses were created in London in the 1700s and became fashionable in the 1960s. Our past is our foundation, let’s not forget that. As my dear mother used to say ‘a tree without roots is a piece of wood’.”

YO! Sushi lines up flagship US opening in Boston, Massachusetts: YO! Sushi has lined up a flagship US opening in Boston, Massachusetts, the first US opening outside of a shopping mall. Alison Vickers, who oversees YO! Sushi’s international expansion, told local media the company has signed a lease for a space in Seaport Square, next door to the forthcoming Shake Shack. YO! Sushi is working on the project with local firm WS Development – Vickers said it wanted to team up with a local developer that had a feel for Boston. “We’ve got a floor plan, we’re working on the design right now,” Vickers said. The company will use its UK architect in conjunction with a local architect. We think we get the quirkiness and the fun of the UK with really efficient American style. According to Vickers, the Boston store will be the flagship for the US, as it will be the first location outside of a mall. The company will soon look for a general manager and a head chef, who will undergo training in the UK before returning to head up Boston’s restaurant, which will offer a standard YO! Sushi menu, plus takeout and beer, wine, and saki, to cater to both the lunch and after-work crowds in Seaport. Vickers spent six years in Boston working with the Back Bay Restaurant Group in the 1990s. YO! Sushi has three sites open in the US at the moment, all directly managed.

BrewDog to open first ‘game-changing’ mega-hub DogHouse in Glasgow tomorrow: Scottish brewer and retailer BrewDog will open its first DogHouse venue in Glasgow tomorrow (Saturday, 31 October), which it said is a “game-changer” for the company and the city. The company stated: “Glasgow was the obvious choice for our new mega-hub for everything BrewDog; since 2011 our Kelvingrove bar has been a centrepiece of the city’s craft beer scene and we have long wanted a second location for Scotland’s biggest city. We are tearing up the Merchant City in true BrewDog style – leading with amazing food but also celebrating the majesty of beer at every turn. DogHouse majors in insanely good old-time barbecue food. Like all our bars, DogHouse has super-fresh craft beer as a cornerstone – but on this corner of the Merchant City it runs through every aspect of the site. Pair it with the barbecue food on offer, enjoy it in the 25-tap bar alongside – filled with a cutting-edge list of BrewDog and guest draft beer – or buy it to go from the attached BottleDog. DogHouse also has a spacious external seating area. Indoors you’ll find a welcoming range of booths and long communal tables, plus a fairly unique terraced seating area between the bar and BottleDog. DogHouse is a game-changer for BrewDog – and for Glasgow. The city has a fantastic craft beer scene and we can’t wait for this weekend to take it to another level in Scotland’s biggest city!”

London’s first gourmet baked potato restaurant concept opens in Soho: A new gourmet baked potato restaurant concept has launched in London. The Potato Project has opened the first venue of its kind in the capital in Noel Street, Soho, reports The Metro. The menu includes potatoes filled with chilli beef ragu and blue cheese and beetroot relish, horseradish and stracciatella. There is currently only one dessert available – sweet potato cheese cake with granola crumb. Potato Project said on its website: “We are passionate about providing a quality fresh menu and an atmospheric, homely and exciting experience for all our customers. We want to show the nation that the humble potato can be more than just something you have with beans!”

Turtle Bay opens new restaurant in Huddersfield: Caribbean restaurant Turtle Bay has launched its new restaurant in Huddersfield. The company has opened the £800,000 190-seater venue on the site of the former Cotton Factory cocktail lounge and club in King Street, creating 50 jobs. Founder Ajith Jayawickrema told the Huddersfield Examiner: “I am delighted to be opening our Huddersfield restaurant and am confident that our concept and offering will fit in well with the local student population and residents of Huddersfield and its surrounding areas. Turtle Bay is about great food and good times; it’s as simple as that. I think the restaurant will offer something new and exciting that will appeal to everyone.” Turtle Bay, which was founded in 2011, will open a site in Leeds at The Light on the Headrow in December.

TGI Friday’s completes refranchising early:
TGI Friday’s completed its refranchising initiative this week, ahead of its own schedule, leaving the chain with ownership of about 10% of domestic units, a company executive said. Ricky Richardson, chief operating officer of TGI Friday’s, told Nation’s Restaurant News that a 49-unit deal completed earlier in the week with Gold Coast Holdings Restaurants, a new franchisee, completed the refranchising program about six months ahead of schedule. Terms were not disclosed. Since launching the initiative in September 2014, TGI Friday’s has refranchised about 175 restaurants in four transactions, going from about a 50-50 franchised versus company-owned split, to 90-10, Richardson said. “We thought it would take us about 18 months to get to the 90% [franchised] level. That is one of the benchmarks in this process.” The company now owns and operates about 50 of its 490 domestic restaurants, he said. Internationally, Fridays restaurants are about 95% franchised, he added. As part of the refranchising program, TGI Friday’s is reimaging its restaurants as part of push that began last year. “We have completed reimaging in the US about 30% of the system,” Richardson said, which includes company-owned restaurants. “All of our refranchising transactions include capital commitments from our partners to reinvest and reimage their entire portfolio.” Richardson said the company expects the system to be completely reimaged within about three years.

Bouji’s ordered to close for two weekends: London nightclub Bouji’s has been forced to shut its doors after a mass brawl, the London Evening Standard has reported. Boujis has been ordered to close down for two weekends and faces a battle to retain its licence after the fight at the weekend. The incident at the Kensington club, whose partygoers include celebrities and royals, triggered a police application to suspend its licence. Licensing committee members at Kensington and Chelsea Council yesterday (Thursday, 29 October) suspended the club’s licence from last night until 9 November. The venue can then reopen but must stop selling alcohol at 2am rather than 3am until a full hearing on the club licence to be held within the next 28 days. They must also ban anyone under 21.

Cornish boutique hotel collection on the market for £4.75m: A unique hotel collection offering boutique hotel service with a surf chic twist is being marketed by Colliers International. The three hotels – Hebasca, An Mor and Tommy Jacks are located in Bude on North Cornwall’s Atlantic coast. Currently owned and managed by a local Bude family, the recently refurbished hotels which offer a total of 70 bedrooms have been placed on the market at £4.75m for the freehold. Colliers International hotels director Simon Wells said: “Three Hotels in Bude sounds like a Channel 4 reality show but is in fact a marvellous leisure concept aimed at the young and young-at-heart holidaymaker as well as North Cornwall’s surfing community. Accommodation ranges from the ultra-smart and chic Hebasca, the gloriously refurbished An Mor, with breathtaking views of the harbour, to the award winning Tommy Jacks - a favourite with families and the surf and skate crowd. The hotels have been overhauled and refurbished for a whole new generation of fun-loving but demanding holidaymakers and offer a terrific year-round business and not to mention exciting growth potential.” The three hotels in Bude have proved to be a very successful concept and have seen unprecedented growth in a very short time from a standing start. The family, who have a passion for property development, now wish to retire.

Fleurets – London property prices at record levels, many more rent reviews taking place, regional hotspot rents may not be sustainable: Property agent Fleurets has published its annual rent survey, reporting London property prices at record levels, a sharp increase in the number of rent reviews and wondering whether rents in regional hotspots are becoming unsustainable. The average annual free-of-tie rent in London was £93,085 last year (a 25% increase since 2011), the average shell rent is £157,559 (an increase of 17%) and the average tied lease rent is £83,058 (an increase of 11% since 2011). By contrast, average free-of-tie rent in the north last year was £47,593 (an increase of 18%), a shell unit’s average rent was £69,774 (up 3%) and an average tied rent was £45,021 (a drop of 23%). A report by Fleurets stated: “The London market continues to dominate as the largest single area of activity. Many more lease renewals and rent reviews have been concluded in London than throughout the rest of the UK. This is in part down to the buoyant market that has been experienced over the past three years. This is in sharp contrast to the rest of the country, particularly the northern regions. With the booming economy within the M25 operators have been keen to secure sites to maximise the benefits of the increased leisure spend. With only a limited amount of operating space being available and an increase in demand, which has outstripped supply, rents as a consequence have been forced upwards. New entrants to the market are also creating a surge in rents, particularly within the restaurant sector. One of the biggest drivers to the London market has been the significant increase in overseas investment, as referred to above. This coupled with occupier demand has pushed property prices to record levels. With the increasing property prices investors are, not surprisingly, keen to see return on their investment. This has resulted in many more rent reviews being actioned. Major areas of activity have included the West End, Soho and Covent Garden. In addition, areas that were once considered to be secondary locations are starting to attract mainstream corporate interest. These areas include districts such as Shoreditch, Stoke Newington, Hackney and Brixton. A further consequence of London’s growth is that many operators are starting to see a squeeze in returns due to higher overheads, particularly rents. This has forced many to seek outlets in less pressured areas on the outskirts of the city. In addition many London operators are now seeking representation in the wider UK market. When considering any statistics it is no surprise that London rents are significantly higher than the rest of the UK. Of particular note are levels of shell rents within central London, which have an average rent of £151,000 per annum. This is underpinned by some significant rents in prime locations, which have, in a number of cases, been well into the hundreds of thousands of pounds per annum. In fact, the highest rent we have seen has been in excess of one million pounds per annum. Growth within London appears to be unabated, although as with any cycle, this cannot continue indefinitely. The difficulty is predicting when this level of growth will slow down. Apart from London, the rest of the UK has seen significant variations. Some of the urban centres, particularly the likes of Manchester, have witnessed increased rents, particularly in prime areas such as Spinningfields. A similar situation has been witnessed in Liverpool, with the Liverpool One scheme. One common theme identified in the regions has been London operators seeking representation outside the capital. We have seen regional shell rents in some areas being pushed to figures well in excess of £40 psf. Whilst this level of rent may appear cheap in comparison to prime rents within central London, this is still a significant increase over historic levels. These rents may ultimately be at a level that are unsustainable in the long term. As has been voiced elsewhere there are concerns of London operators coming into the regions, opening up new outlets at high rents and ultimately failing because their offer did not work outside London. This has left the legacy of high rental evidence, which astute landlord’s surveyors are utilising to force rents up to levels that are not sustainable. This may only be a short term benefit to any landlord. More failures may result in empty units that may prove difficult to re-let and ultimately have a negative impact on rental values. Landlords are also heavily incentivising tenants by way of reverse premiums, contributions towards fit-outs, extended rent free periods etc. These transactions may not always be transparent and may create problems for the unwary surveyor. It is essential to know the full details of any new letting. These deals also put into doubt the old adage that new lettings are the best evidence. Restaurants is one area of the leisure market that has seen the most significant levels of activity. The growth in dining out appears to be unabated. Corporate restaurants continue to be one of the main driving forces in new openings, with many new leisure schemes having new units taken up as pre-lets.”

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