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Morning Briefing for pub, restaurant and food wervice operators

Mon 26th Mar 2018 - Propel Monday News Briefing

Story of the Day:

Casual dining sector faces ‘restructuring wave’ with quarter suffering severe financial distress, warns KPMG: Britain’s casual dining sector will endure a wave of closures in the coming months, with a quarter of restaurant groups already suffering severe financial stress, according to KPMG. It said the crisis ripping through the sector will continue long into 2018, with Company Voluntary Arrangements (CVA) proving a popular choice on the restructuring menu. Better burger brand Byron, Jamie’s Italian and Prezzo have all embarked on CVAs since the start of the year, allowing them to close loss-making stores and secure rent discounts. Figures from KPMG found 25% of companies in the casual dining space had booked an operating loss at least once over the past two quarters. It comes as restaurants struggle to stomach the cocktail of pressures engulfing the industry, as margins are reduced by rising business rates, the National Living Wage, the Apprenticeship Levy and persistently high inflation. KPMG partner Will Wright said cash-squeezed consumers are overloaded with options of where to eat and tend to choose “alternative ‘experiential’ dining experiences” over “familiar fare”. He told the Press Association: “We certainly anticipate this wave of restructuring to continue over the months ahead, as stakeholders take measures to ‘right size’ their estates to a more profitable core, with the ultimate aim of safeguarding their long-term futures.” KPMG analysed 125 casual dining companies with revenues of £15m or more. It found 78% of businesses had seen their net debt swell over the past two quarters. Of those that added to their debt pile, a fifth saw a decrease in their cash balance. Margins were also coming under pressure, with 69% of firms working with operating margins of under 5%. Wright added: “With profit margins being squeezed and debt burdens increasing, and all economic indicators pointing to signs that things aren’t going to improve any time soon, restaurant businesses are looking for cost cutting measures through operational and financial restructuring, including negotiations with lessors and in some cases, considering the need for a CVA.” Despite the tough trading conditions, Wright said: “I firmly believe the long-term future of casual dining remains bright, particularly for those operators who are able to stay relevant and who place the customer experience at the heart of their business.”

Industry News: 

Food-to-go growth driven by apps, potential for operators to ‘stretch appeal into later dayparts’: Robust growth in the food-to-go market is being driven by apps, while operators have an opportunity to “stretch their appeal into later dayparts”, according to retail analysis company IGD. The company pointed to innovative apps launched by Wagamama and London-based healthy food and juice brand Crussh as “targeting food-to-go consumers”, while IGD sees a “lot of potential” for food-to-go operators currently targeting lunch-time to “build on their core brand values and stretch appeal into later dayparts”. IGD stated: “We’re seeing more use of apps to improve the food-to-go customer experience. While Wagamama’s new app isn’t about pure food to go, it’s a significant move from an operator that does influence (and compete with) many purer food-to-go operators. Crussh’s app is definitely one that is targeting the food-to-go consumers. Outside the UK, new apps that target convenience and food-to-go by the likes of Jumbo in the Netherlands and Franprix in France provide great stimulus around how more retailers could use apps to better embrace the wider food-to-go opportunity.” Regarding operators stretching their appeal, IGD stated: “It’s still early stages but we see a number of operators, particularly those in transit locations, giving a great indication of how this could develop. We’re expecting a wide range of operators across a number of markets to look more closely at how they can take advantage of this opportunity.” IGD highlighted London-based Black Sheep Coffee as an example of robust growth in the market with a “significant number of 2018 openings” in the pipeline, while pasty specialist Warrens Bakery is an operator “growing rapidly on a franchise basis” primarily across the south of England. The company also highlighted Leon and Pret A Manger for their opening plans outside the UK as they looked to launch into new markets such as the Netherlands. IGD stated: “More innovation is coming through from a variety of sources. Whether it is Sainsbury’s new-look Pimlico store, Eat 17’s Bishop Stortford store or the continuing evolution and improvement we are seeing at the likes of Marks & Spencer, there’s much to show that retailers are more focused than ever on leveraging the food-to-go opportunity.”
Britain’s favourite dishes ‘under threat’ from climate change: Some of Britain’s favourite dishes are “under threat” from climate change, according to a report by the World Wildlife Fund (WWF). The WWF said consumers eating more sustainably by cutting back on meat, fish and dairy could “help future-proof our best-loved dishes and reduce our overall impact on the planet”. Setting a timescale of 2050, the organisation said favourite dishes such as chicken tikka masala, fish and chips, cheese ploughman’s and lamb cawl could cost a much as a third more as climate change threatened the supply of key ingredients. The report predicts chickens could be fed alternatives such as insects and algae by 2050, with higher prices for tomatoes due to extreme rainfall and heatwaves, anchovies substituted for cod due to warmer oceans, and cheese production affected by heat stress on dairy herds. The WWF stated: “The threat to these classic dishes shows climate change could impact every aspect of our lives in future if we don’t act now. If each of us takes a small action, together we can combat climate change and future-proof our best-loved dishes.”
Scottish doggy bag scheme more than doubles in size: The number of hospitality businesses taking part in Scotland’s doggy bag scheme has more than doubled in the past year. More than 40,000 Good To Go boxes have gone into circulation in the past 12 months according to Zero Waste Scotland, which runs the scheme. The compostable boxes are offered to customers at the end of their meal to take leftovers home. Zero Waste Scotland estimates one in six meals served by restaurants is thrown away, costing the Scottish hospitality industry £64m a year. Good To Go is aimed at changing attitudes towards leftovers with research showing two-fifths of Scots are too embarrassed to ask for a doggy bag but three-quarters would welcome the option. Zero Waste Scotland chief executive Iain Gulland told Footprint: “Good To Go has demonstrated the tremendous appetite for doggy bags – not just from consumers but from restaurants that have found, through our trials, that it enhances their customer service and helps them monitor and deal with food waste.”
Agency launches petition calling for gig economy reform: Antony Woodcock, co-founder and chief executive of London-based hospitality temp agency GIG, has launched a petition calling on the government to introduce reforms to ensure all gig economy workers get holiday pay, sick pay and minimum wage. The petition specifically refers to outdated definitions of employment status. It states that ambiguity over how these statuses could be interpreted had allowed hundreds of thousands of workers to be classed as self-employed and therefore ineligible for employment protections, including minimum wage. Woodcock said this ambiguity had been at the centre of high-profile legal disputes involving Uber and Deliveroo and was one of several themes explored in Good Work, the Taylor review of modern working practices commissioned by the prime minister last year. Woodcock added: “I am a firm believer the gig economy can be a force for good. I also believe all work should be fair and decent. Yet currently, basic rights are being circumvented in the name of flexibility. The government response to the Taylor review has been underwhelming. The working world has changed. It is essential our legislative approach changes with it. We need to build a fair and decent labour market that works for everyone – workers, providers and employers. We need to make gig work, work.” The petition can be signed here.
McDonald's UK boss – ‘it's a perfect storm of challenges’: McDonald's UK boss Paul Pomroy has told Sky News the sector faces a "perfect storm of challenges”. He said: "I am really concerned by the amount of inflation that companies are carrying at the moment. Food inflation is running at between 4% and 7% across retail, there's pressure on wage inflation, interest rate movements and now you are seeing businesses becoming less brave in their decision-making. They're not making the investment decisions they would normally make and that will affect their business. You're seeing that up and down the country – businesses who are failing, and others who are becoming really tight and squeezed." He argued one of the most important challenges for British businesses was to keep innovating at a time of economic nervousness, but he believes companies that stand still run the risk of being overtaken by new, dynamic rivals. "You will be able to spot those brands that have listened to their customers and disrupted their own markets," he said. "For retailers, to be successful, you have got to keep changing and look to disrupt the market yourselves before you are disrupted. Other people will undercut you, or disrupt the market that you're in. So it's going to be a tough three or four months, and unfortunately there will be closures. We need to make sure we're doing the right things, and be bold in our decision making. We serve 3.8 million customers a day, and 90% of the population come to us at least once a year. We work on lots of scenarios and, at the moment, there's a lot of change on the way. And businesses can only handle so much change."

Next to host prosecco bars and cafes to win back customers: Next is planning to fit out stores with prosecco bars, hairdressers, coffee shops and even a car showroom as it battles to win back customers. Lamenting the fashion retailer’s most challenging year in a quarter of a century, chief executive Simon Wolfson has unveiled his blueprint to revive the high street chain. With profits from its shops tumbling 24% last year, Next is launching a fightback by renting out space to travel agents, florists, wedding-dress makers and spas to coax shoppers back. The company is even opening a car showroom at its store in the Arndale Centre in Manchester, where Ford will display five models. The shake-up, which Wolfson admitted could leave Next looking like a department store, comes just days after John Lewis opened its “department store of the future” in west London’s Westfield shopping centre. The store has its own spa, personal stylist service and offers classes for customers to learn how to host a dinner party or make Easter cards. 

Company News:

PizzaExpress launches new app in partnership with Flyt: PizzaExpress has launched its new app created with technology company Flyt, originally known as Flypay. A recent survey by PizzaExpress revealed as a nation of time-poor Brits, 69% of consumers found waiting to pay the bill the most frustrating part of eating out. Now PizzaExpress will save each customer more than three hours a year, with diners now able to pay and go in under a minute. The waiter-less experience starts from the moment a customer is seated in the restaurant. When their order is taken, they are given a table number and when ready to leave, they simply open the app, pop in their table number, view the bill, pay and leave – and all without involving the waiting staff. The waiter-less theme continues, with diners able to redeem their offers within the app, rather than passing across codes to be entered into the till. The new PizzaExpress app runs on Flyt’s technology platform, with “pay at table” and an “integrated vouchers” service from Eagle Eye, also being included. The technology positions PizzaExpress as the first restaurant brand in the UK to offer an entirely waiter-less payment solution, combined with bespoke customer rewards. It will be available across all 470-plus PizzaExpress restaurants. Discussions regarding the next chapter in the partnership are already underway with PizzaExpress keen to progress with further innovations available through Flyt, such as EPOS-integrated delivery. Tom Weaver, Flyt chief executive, said: “We’re delighted to welcome PizzaExpress to the Flyt platform. It joins other fantastic household names taking advantage of easy to integrate digital services. The addition of PizzaExpress to the Flyt platform brings the total number of UK sites able to offer these digital services to their customers to more than 2,300. This news firmly establishes Flyt as the universal integration platform for operators looking to link digital experiences to physical environments in hospitality. We are proud to be part of the PizzaExpress journey and committed to making this new strategic partnership elevate the PizzaExpress experience to even greater heights for customers dining with such a pioneering brand.”
Little Britain Pub Company opens fifth site: Little Britain Pub Company has opened its fifth site – a Leicestershire pub, The Langton Arms in Church Langton, which has been closed for two years. Little Britain Pub Company was established in 2009 by two families, Ben and Katie Moore, and Mike and Lesley Herington, with the intention of creating “well-designed, food-led village pubs with an emphasis on fresh food and service standards that, while not being fine dining, are a good notch ahead of your average boozer". The company also operates The Windmill in Wymeswold, The Curzon Arms in Woodhouse Eaves, The Blue Bell in Rothley and The Crown Inn in Old Dalby. The Langton Arms has been the biggest project to date for the Little Britain Pub Company, which has the mantra: “If the village had a heart it would be the pub.” The menu offers a selection of dishes – from classics such as British mussels, scampi in a basket, fish and chips, or pie of the week, to pan fried scallops, braised ox cheek, or a 35-day aged Chateaubriand for two to share.
Caffe Nero posts first Irish profit: Caffe Nero have claimed there are strong growth prospects for the branded coffee market in Ireland after the company returned its first profit there. New accounts showed Caffe Nero Ireland recorded pre-tax profits of €562,000 in the year to 31 May 2017. It comes after the company recording pre-tax losses of €138,000 in 2016. The company recorded the profit after revenues increased by 71.5% to 3.6m compared with €2.1m the previous year. The company's gross profit more than tripled to €788,000. The company opened two new outlets in Ireland in the past year. It now has ten cafes with eight in Dublin and one each in Galway city and Drogheda. The directors stated the profit for the year arose due to continued growth from stores opened towards the end of the prior year as well as a reduction in startup costs in the new territory. Last year, Caffe Nero opened 33 new stores in Ireland and the UK and handed back eight outlets to landlords resulting in a net increase of 24 stores. Globally, Caffe Nero had 822 stores in eight countries and highlighting the growth plans, the company increased its store count by 89 during the year. Last year, revenues at Caffe Nero increased 14% to £313m and it recorded operating profits of £17.69m.

Hakkasan – we're still making great profits in Las Vegas: UK-based nightclub and restaurant company Hakkasan has reported it continues to generate “great profits” from its Las Vegas nightclubs. Group chief executive Nick McCabe said: “I think there has long been predictions of the death of dance music and death of the DJ, which I have never bought into and continue not to buy into. As long as the talent and people in that world continue to be innovative, it will stay on top.” Stars such as Calvin Harris and Tiesto continue to attract crowds, especially VIP guests willing to spend thousands of dollars for a table at the company’s top venues such as Hakkasan, Omnia and Jewel. VIP clients generate 65% of nightclub revenue, McCabe said. He added: “We keep asking ourselves, what is the next phenomenon. Is music going to change? It is not that we don’t want to stay ahead of the game, but it’s also a ‘if it’s not broke, don’t fix it’ kind of approach.” The company’s first major club – Hakkasan – is now in its sixth year of operation. The biggest change in the nightclub music scene has been the crossover between electronic dance music and hip-hop as well as commercial pop over the past 18 months, McCabe said. McCabe credited former Wynn Resorts chief executive Steve Wynn with leading the change in the city’s nightlife scene with the opening of XS in December 2008. Before XS, Las Vegas nightclubs tended to be black boxes with simple build-outs, he said. The 40,000-square-foot XS club features pyrotechnics, LEDs, lasers and a round DJ booth that can be seen from anywhere in the club, according to Wynn Resorts’ website. “I think with XS, Steve really changed the game and created a level of opulence and luxury with a nightclub that hadn’t been seen before,” said McCabe. “And with it came a level of spending that hadn’t been seen before.” 
Deltic buys Exeter nightclub: Deltic Group, the UK’s largest operator of premium late-night bars and clubs with 57 venues, has acquired The Terrace in Exeter's Guildhall Shopping Centre. The cocktail bar, which was ran by Exeter-based company HK4 Group, which also owns Artigiano and The Book Cover, will continue to be managed and operated in its existing format by Deltic. Russell Quelch, regional director of Deltic Group, said: “The Terrace is an outstanding venue with a well-deserved reputation for food and entertainment. We plan to build on its success over recent years with ongoing investment and staff development, to maintain its position in the local area.” Previous owner Joe Hill added: “I am delighted to be passing The Terrace on to the capable team at Deltic. We have worked hard over the years to build a successful business and are proud of what we have achieved. It’s good to know our exclusive rooftop bar and luxury club lounge will continue to be run as it is now and customers will still be able to enjoy a great night out." 
Distinct Group boss – more growth potential in hotels than pubs: Gareth Leakey, group manager at Distinct Group, has told Propel he believes there is more growth potential for the company in hotels than the pub sector. The company, which sold its four-strong London leasehold pub estate to Laine Pub Company in December, has just acquired its second hotel. Distinct Group has bought the Bedford Swan hotel in Bedford from BDL Select Hotels off a guide price of £11.5m to add to its debut site – Cromwell Hotel in Stevenage. Leakey said the focus would be on growing the hotel estate in the Home Counties and potentially the M4 corridor and he added the company would also like to make a reappearance in London. He said: “The main reason we sold the pubs was operational. You need to get to a decent quorum to make it work and with more models and formats appearing and a limited number of decent opportunities available, it was becoming more and more difficult. When the opportunity with Laine came it just made sense. We had the hotel and I think there’s more potential for growth with hotels than pubs.” Leakey said the company was looking to add a third hotel to the portfolio “as soon as the opportunity arose” and grow at a steady pace from there. Distinct Group will carry out a refurbishment of the 113-bedroom, grade II-listed Bedford Swan. Leakey added: “We are not a brand and each property will have its own individual stamp. It’s been a year since refurbishment of the Cromwell and trading there is really good.”
Oklava founders to open second site, in Fitzrovia: Selin Kiazim and Laura Christie, founders of Oklava in Shoreditch, are to open their second site, this time in Fitzrovia. The duo will launch Kyseri in May in Grafton Way, near Warren Street tube station. It will showcase modern Turkish plates and draw inspiration from the Kayseri region as well as from Selin’s Turkish-Cypriot heritage. The restaurant will also focus on Turkish “pasta” and house-cured pastirma. Dishes will be offered in a format that takes in snacks, starters, pasta, mains and desserts. Christie will use her extensive wine knowledge, which includes her solo project Linden Stores – a boutique wine shop and restaurant in Highbury Corner – to offer a list from small producers across Turkey and the Middle East.
Merlin chief executive sees remuneration drop by almost £1.1m: Merlin Entertainments chief executive Nick Varney saw his remuneration drop by almost £1.1m for the year ending 31 December 2017 as he missed out on his bonus for a third successive year, the company’s annual report has revealed. Varney received a total of £934,000, compared with £2,028,000 the previous year. His remuneration for 2017 consisted of £597,000 salary and fees, £21,000 in benefits, £185,000 in long-term incentive payments and £131,000 pension. Varney will receive a 2.5% pay increase on Sunday, 1 April taking his salary to £609,432. Meanwhile, chief financial officer Anne-Francoise Nesmes received total remuneration of £493,000 in her first full year in office. This consisted of £387,000 salary and fees, £17,000 in benefits, £4,000 in other payments and £85,000 pension. Nesmes will also receive a 2.5% salary increase at the start of next month taking her pay to £399,567. The average salary increase for Merlin UK’s workforce in 2018 is 1.5%.
Kanada-Ya opens third London restaurant, in Islington: London-based Japanese ramen restaurant Kanada-Ya has opened its third eponymous site in the capital. The company, led by Tony Lam and Aaron Burgess-Smith, has launched the venue in Upper Street, Islington. The restaurant offers the same selection of ramen as its Covent Garden and Soho sites such as Tonkotsu X and Pork Chashu, alongside new additions such as gyoza, an extended sake menu and a small list of cocktails inspired by Japan. The 55-cover restaurant features an open kitchen and offers lunch and dinner. Kanada-Ya also operates “homely” Japanese cooking concept Machiya in Soho, which launched in April last year.
Ellory owners launch Parisian-style bistro in Shoreditch: The owners of recently closed Michelin-starred restaurant Ellory have launched Parisian bistro concept Leroy in Shoreditch, east London. Jack Lewens and Ed Thaw secured the lease of a site just off Great Eastern Street that was formerly occupied by Edwin’s French Wine Bar. The 50-cover venue comprises a lobby, open-plan interior with bar counter, and outside seating for a further 25 covers. Ellory, which was in Mare Street, Hackney, closed on 5 March. The Leroy website states: “The name is one of our pet names for Ellory since many people couldn’t seem to say our name properly. Some things are the same – but many are different.”
East Yorkshire-based pizzeria Bert’s to open second site, in Hull: East Yorkshire-based pizzeria Bert’s is set to open its second site, in Hull. The family-owned company, which has a venue in the village of Brandesburton, has applied for a premises licence for a site in the regenerated Fruit Market area. The company has applied to the city council for the licence, which would allow it to serve alcohol daily between 10am and 11pm. Bert’s, which plans to venture into gelato at the new site, would be based on the bottom floor of The Dock building. Manager Ellie Mewburn told the Hull Daily Mail: “The important thing for us is keeping it simple. It’s going to be wood-fired pizza and Italian gelato. It will be slightly different but keeping the core idea behind Bert’s and keeping it family oriented and simple.” John Gouldthorp, assets manager at Wykeland Group, owner of the development, said: “Bert’s owners have built a great reputation at their lakeside restaurant in Brandesburton and they see The Dock as the perfect place to launch their second pizzeria.”
Black and White Hospitality opens Marco Pierre White Steakhouse Bar and Grill site in Durham: Black and White Hospitality, which owns the rights to five restaurant brands belonging to celebrity chef Marco Pierre White, has opened a Steakhouse Bar and Grill site in Durham. The company has opened the venue at the new £15m Hotel Indigo in the Old Shire Hall following months of work on the grade-II listed building, a former Durham County Council headquarters. A former debating chamber and lobby have been converted into the 100-cover restaurant with adjacent cocktail room, reports Chronicle Live. Black and White Hospitality’s other Marco Pierre White brands are Steakhouse Bar & Grill, New York Italian, Wheeler’s of St James’s, and Bardolino Pizzeria, Bellini & Espresso Bar. It operates 45 sites across the UK.
JD Wetherspoon to open in Midsomer Norton five years after obtaining consents: JD Wetherspoon has confirmed it is opening in the Somerset town of Midsomer Norton (population: 10.997) five years after originally obtaining the consents. The company initially hoped to turn the former Palladium Electric cinema in High Street into a pub and open back in July 2015. But a series of issues have seen the renovation and opening pushed back. The company was granted planning and licensing permission for the building almost five years ago, with this due to expire in October. A spokesman for JD Wetherspoon said the company would start development on Monday, 2 April and the pub is set to open on Tuesday, 4 September.
Hook Norton Brewery registers Edgehill pub as wedding venue: Hook Norton Brewery has had one of its pubs registered as a wedding venue. The Castle in Edgehill, Warwickshire, a 17th century pub with “beautiful grounds and spectacular views of the Warwickshire countryside”, is now fully licensed for civil ceremonies and partnerships. The pub is overseen by British Institute of Innkeeping licensee of the year Mark Higgs and offers private gardens and a terrace with capacity for 60 guests and 150 in the evening. Couples can tie the knot in the dining room, library or glasshouse with a number of packages available. A 120-capacity marquee can also be erected in the grounds, while the pub fully caters for food and drink. Additionally, its horse-drawn dray can act as a wedding car and the couple can brew their own wedding beer. Hook Norton Brewery operations manager Gerard Winder said: “Mark and his team will bring their usual outstanding level of service to this new area of their business.” Founded in the Cotswolds in 1849, the family-run brewer operates almost 40 pubs.
Former JD Wetherspoon and Belhaven duo take on Fairlie pub: Experienced hospitality duo Brian Flannigan and Debbie Johnstone have taken over the running of a pub in Fairlie, Ayrshire. The pair, who have 40 years of experience between them in the industry including at JD Wetherspoon and Belhaven, have acquired the lease of The Village Inn. They are in the process of refurbishing the pub, which has been closed since September, to “bring it back to its traditional roots”, reports the Largs & Millport News. The Village Inn is owned by Largs businessman John Corrigan.
Adventure Leisure to open tenth Mr Mulligan’s Lost World Golf site, in Milton Keynes: Adventure Leisure is bringing its adventure golf brand Mr Mulligan’s Lost World Golf to Milton Keynes next month. The company will open the site – the brand’s tenth to date – in the Theatre District on Friday, 27 April. It will feature two adventure golf courses, a bar and party room. There will also be a restaurant with seating for up to 150 people, offering a variety of meals including pizza, salad and sharing plates. One of the courses will have an underwater kingdom theme while the other will be based on an enchanted forest, reports the MK Citizen. 
Wolverhampton banqueting hall, hotel and function room plans refused: Plans to build a banqueting hall, hotel and function room on a site in Wolverhampton have been refused by the city council. Permission was sought to construct a two-storey, 600-capacity hall on land formerly known as the Volvo Bridge Cross Garage in Parkfield Road together with a 400-capacity function room above a 30-bedroom hotel. Buildings on the site that formerly housed a car dealership have already been demolished, while a bowling green on the site is now in a “poor state of repair”, according to a council document. The move would have created 45 jobs, Insider Media reports. The plans were originally recommended for approval by council officers.

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