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Morning Briefing for pub, restaurant and food wervice operators

Mon 5th Aug 2019 - Propel Monday News Briefing

Story of the Day: 

Giggling Squid ends sales process, Kossoff to step down as chair: Giggling Squid, the 32-strong Thai restaurant brand founded by Andy and Pranee Laurillard that was placed on the market earlier this year, is no longer in discussions regarding attracting external investment, Propel has learned. The company said although it had received considerable interest from potential investors, this was not at a level its board believed “sufficiently reflects the company’s track record to date and future prospects”. As previously revealed by Propel, private equity firms, including Piper, LDC, True Capital and Primary, had all shown an initial interest in acquiring a stake in the BGF-backed business. Propel learned CBPE, the former backers of Cote, had jumped to the front of the queue in the process, but it is understood its bid of between £42m to £45m was short of the valuation of in excess of £50m that was placed on Giggling Squid earlier this year. BGF, which invested £6.4m in the then 13-strong Giggling Squid in 2015, remains supportive of the company’s self-financed roll out strategy and is said to be looking forward to further growth. The pipeline for new sites remains strong as Giggling Squid looks to open between six and ten restaurants each year, as well as embarking on a refurbishment programme of its more mature restaurants. Sites in Cambridge and Leicester have recently been added to the group’s pipeline, while a site in Weybridge is believed to be close to being secured. The business continues to trade well with all of the company’s sites understood to be profitable. Separately, the company said former Carluccio’s chief executive Simon Kossoff has decided it is the right time to step down as its chairman after four years in the role. Andy Laurillard, managing director, said: “We have a fantastic business that continues to perform well. While we had significant interest in Giggling Squid, the shareholders felt none of the offers received were strong enough. We will revisit our options in due course. On behalf of the board, I would also like to put on record my thanks to Simon Kossoff for his contribution to Giggling Squid during his tenure with the company. His experience and wise counsel have been invaluable in assisting Giggling Squid to become the business it is today. He leaves with our very best wishes for his future endeavours.” Kossoff added: “After almost four enjoyable years supporting the successful growth of the business, I felt this would be an appropriate time to step back and allow a new chair to guide the business on the next stage of its expansion.”

Industry News:

Book now for ground-breaking Operations Directors’ Conference: Propel has launched the Operations Directors’ Conference in which some of the sector’s leading operators will share expertise, ideas and insights into all areas of operations. The full-day event takes place on Wednesday, 25 September at One Moorgate Place in London and is open for bookings. The event, in partnership with Elliotts chief executive Ann Elliott, will see company leaders from across the industry talk about all parts of the operating model, from building and leading an effective operations team to maximising profitability. Speakers will include Soho Coffee Co managing director Penny Manuel, who will talk about the importance of operators in leading a business. Bill’s managing director Sarah Hills will discuss “getting the best out of absolutely everyone”, while Casper & Cole managing director Sam Lee will explain “why the detail matters”. Oakman Inns and Restaurants chief operating officer Dermot King will reveal how to lead an effective operations team in a dynamic world, while Vagabond managing director Stephen Finch will talk about how great operators maximise profitability. Tortilla managing director Richard Morris will look at what makes a great operator, while ETM Group owner Ed Martin will explain the importance of keeping operations at the heart of a business. Pret A Manger’s new chief executive Pano Christou will talk about operating in a fast-paced world, while former Fuller’s managing director Jonathon Swaine will look at the need to keep operations simple, focused and effective. There will also be two panel sessions. Miller & Carter retail operations director Sue Walsh, Pizza Pilgrims operations manager Charlie Warren, Caffe Nero managing director Glyn House, and Frankie & Benny’s managing director Ollie Humphries will discuss building the right operations team while protecting the brand and delivering consistency for guests. Meanwhile Ian Edward, co-founder of Hippo Inns; Peter Kemp-Welch, partner at Piper; and Paul Campbell, founder of Hill Capital Partners, will discuss investing in great operators. Ann Elliott said: “It is wonderful to partner with Propel on this event. We have put together a great line-up of speakers covering all areas of operations.” Propel managing director Paul Charity added: “I am delighted to launch the Operations Directors’ Conference. Effective operations and operators are so important to get the most out of your business and this is an opportunity to learn from some of the best in the sector.” Tickets are £295 plus VAT for Propel Premium subscribers and £345 plus VAT for all others. To book, email or call 01444 817691.
S4Labour – sector like-for-likes up 5.4% in July: Like-for-like sales were up 5.4% in July compared with the previous year, according to analysis of more than 100 sector businesses that use S4Labour software. S4Labour stated: “Both wet and dry-led operations saw positive like-for-likes, but it was food focused businesses that performed particularly well. Overall, sales in dry-led establishments went up 8.3%, the largest hike in like-for-like sales in 2019. The bumper month was split evenly between growth in food and drink sales, up 8.2% and 8.5% respectively. Unlike the same period the year before, the inconsistent weather may have been enough to deter many from lighting the barbecue and opting for an out-of-home eating experience instead. Improved sales figures were also a feature in drink focused businesses, however the growth here was largely driven by food sales. Sales of food in wet-led pubs grew by an encouraging 5.2%, compared with a modest uplift of 1.6% in drink sales. However, overall like-for-like sales growth was a welcome 2.3%. Like previous months, food sales, particularly in food focused businesses have been the stand out performers in the hospitality sector. This month was no different, however, modest gains for wet-led operations is good news for the sector.” 
Tim Martin – hard Brexit will not have an economic impact: JD Wetherspoon founder Tim Martin has insisted there will be no economic hit with Brexit – despite making the comments in the same week the pound hit a two-year low. Martin was asked about the impact of Brexit by Alastair Stewart on talkRADIO in his capacity as a businessman. Stewart said: “You've made a good deal of money out of a very successful business. Are you on the same side of the fence then as Nigel Farage, who once said ‘it's a price worth paying, the constitutional, democratic freedom for us to determine our own future is so important if it means we take an economic hit, we take an economic hit’?” But Martin insisted there would be no economic impact – and highly educated people and experts need to wise up to this. He said: “I sort of agree, but we won't take an economic hit if you stand back and look, and I think the public is very good at this – highly educated people aren't. If you stand back and look at the situation around the world, the higher the level of democracy the greater the level of prosperity. Look at North America, which has a constitution that is rooted in democracy, can't be shifted away from democracy. It's a fantastic performance, whatever you think of Donald Trump, the temporary resident of the White House, when you compare it with South America, which has the same population.” But Stewart argued such visions simply allow businessmen such as Martin to earn more money. But Martin insisted it was “cobblers”. He said: “I think look at South America, dogged by dictatorship, same geographical area, similar climate – democracy works. Look at Japan, how well it did once it became democratic. South Korea democratic, North Korea not.”
US delivery firm DoorDash buys Caviar: DoorDash, the US food delivery startup, is to buy rival Caviar for $410m. DoorDash is buying Caviar from Square, the payments company, which has owned the service since 2014. Caviar operates in about 15 cities and primarily offers food from upscale restaurants in urban areas. Tony Xu, chief executive of DoorDash, said Caviar’s selection of higher-end restaurants in cities complemented DoorDash’s offerings, which skew more heavily toward chain restaurants in the suburbs. When Jack Dorsey, chief executive of Square, called him about a potential deal, Xu said it was a “short conversation”. DoorDash raised $600m in May, lifting its valuation to $12.6bn. The company received $400m from Temasek and Dragoneer Investment Group in February. In 2018, the company raised $785m from investors. Xu said he did not see competition as a hindrance in food delivery because only 7% of “non-pizza” food sold in the US was delivered.
Job of the week: COREcruitment is seeking a franchise relationship director on behalf of a global retail business. Working for an established US company, the role will support the European executive team in developing effective communication and collaborative working with franchise partnerships. The position will help deliver new strategy and sales growth as well and ensure franchise partners have access to the right tools, support and training. Candidates need to have proven experience in a similar, franchised focused position. The position is west-London based and offers a salary of circa £120,000. For more details or a confidential chat, email

Company News:

TGI Friday's reports like-for-like sales down 6.7% in 2018: TGI Friday's has reported like-for-like sales dropped 6.7% in the year to 30 December 2018. Total sales were down 3.3% to £208.8m after four sites opened in the year. Ebitda was £24.7m, compared with £33m the year before. Exceptional items, including one onerous lease unwind and a number of lease impairments, cost £8,927,000, compared with £1,172,000 the year before. Operating profit before exceptional items was £85,000, compared with £8,564,000 the year before. 

Spudulike shuts all 37 sites after buyer withdraws from pre-package administration deal at last minute: Baked potato specialist Spudulike has shut all 37 of its sites after a prospective buyer withdrew from a pre-packaged administration deal at the last minute. Joint administrators Neil Bennett and Alex Cadwallader, of Leonard Curtis, said they were “very disappointed” with the outcome after working for several weeks firstly preparing a company voluntary arrangement, which was rejected by Spudulike’s creditors, and subsequently pursuing the sale of all or part of the group’s business and assets with a number of prospective purchasers. The situation has resulted in all the group’s outlets, plus its head office, being closed and all 298 employees made redundant with immediate effect. Bennett said: “Sadly a sale of the business and assets of the group on a going concern basis did not prove possible, following the last minute withdrawal of an offer that was close to completion. We had to act quickly once the prospect of a going concern sale fell away to safeguard the assets of the companies operating under the Spudulike Group. We worked with the group’s management team and staff in all outlets on Friday (2 August) to effect as smooth a closure as possible at very short notice. We are now focusing on seeking any interest in the group’s remaining assets while managing the impact of the closures on former employees, helping them prepare and submit claims for any arrears of wages, statutory notice entitlement and redundancy pay.” The Spudulike Group operated three trading companies – T&G Fast Food Developments, Courts Quality Foods and Spud-U-Like.

Signature Pubs paid £8.4m for Speratus Group portfolio: Edinburgh-based Signature Pub Group paid £8.4m to acquire seven sites from bar and restaurant operator Speratus Group last year, new accounts have revealed. Signature Pub Group, owned by Nic Wood, acquired the venues from Speratus Group, which is led by Wood's brother Garreth. The deal, in February last year, left Speratus Group with its site in George Street, Edinburgh, which continues to trade. Accounts filed at Companies House by Speratus Group for the year ending 31 October 2018 showed it received £8.4m for the seven sites – The Auld Hundred in Edinburgh; Nox and Paramount, both in Aberdeen; and The Boozy Cow sites in Aberdeen, Dundee, Edinburgh and Stirling. The Boozy Cow venues in Aberdeen and Stirling have since closed. As a result of the sale during the period, turnover at Speratus Group fell to £3,783,376, compared with £8,451,666 the year before. Ebitda was down to £324,140, compared with £1,030,454 the previous year. The company made a pre-tax profit of £165,275, compared with a loss of £1,520,374 the year before. Speratus Group said there were no plans currently to expand the portfolio.
Wagamama launches new staff app: Wagamama, which is owned by The Restaurant Group, has launched a new app for staff. The app, called Woksapp, is based on Fourth’s Engage app and has been in development for more than a year. It allow staff to instantly check their rota, view payslips, swap shifts and book holidays. It also gives staff access to benefits, well-being platforms, GP helpline, cycle to work schemes, discounts on high-street brands, policy documents and Human Resource information as well as act as a peer-to-peer messaging tool via Yapster. Woksapp can be accessed on smartphones and online and is designed to create a paperless work environment. Ed Austin, head of internal communications at Wagamama, said: “Woksapp was born from the feedback we received through listening groups and our annual ‘be you be heard’ engagement survey. Our people asked us for a digital platform to stay connected to the brand and that’s what we’ve given them.”
Goodbody – the focus during Domino's UK results will be on whether they have resolved differences with franchisees: Leisure analysts at Goodbody have argued the focus will be on Domino's UK relations with its franchisees when it unveils interim results on Tuesday (6 August). They stated: “The biggest catalyst would be confirmation by management they are closer to a resolution with franchisees. With this comes the probability of margin dilution for the plc as the universal issue among franchisees is a greater share of the profits. We do not think a more negative outlook for the international business should come as a surprise but would caution this could lead to further downgrades to our current FY19 forecasts (profit before tax: £93.9m; consensus: £93.5m). The share price has pulled back into results (down 11% over the past month). However trading on circa 13 times EV/Ebitda with limited earnings progression we believe valuation remains demanding. The ongoing conflict with franchisees has led to a significant slowdown in the roll-out run rate in 2019. In the year to May, Domino’s had net new stores of six in the UK. We continue to forecast 30 store openings for FY19 but would flag some downside risk to this if the franchisee issues continue. We expect management to give more firm store opening guidance given there should be better visibility at this point of the year. We expect a decent out-turn in UK like-for-like sales and forecast growth of 3% (ex-splits) in the first half (first quarter 2019: up 3.1%). Given our 3% growth forecast indicates a slowdown in the recent run rate we would consider anything below this to be disappointing. The like-for-like order/price mix is a key focus for us. Over the past three reported periods price and ticket size have been the primary drivers of like-for-like sales growth, with softness in underlying order count. If this trend persists we think it calls into question the feasibility of the 1,600 store target if it is unable to achieve underlying growth in its existing estate. Additionally, in the 2018 annual report the group noted its share of the delivered pizza market is 45%, down from 46% in 2017, indicating Domino’s may be losing market share. The 2018 annual report highlighted succession planning was underway for both chief executive David Wild and chairman Stephen Hemsley. While there has been media speculation around who could be Wild’s successor, there has been no further communication from the company on the matter. As we have said before we would view a change at the helm as a positive and could bring a fresh approach towards mending relations with the franchisees.”
Pieminister lines up Exeter opening: Pieminister is lining up an opening near Exeter Central station, off Queen Street. A licencing application has been lodged with the city council for an empty 833 square foot former piano shop. The site, in Station Crescent, was home to Music Unlimited until November, where it had been for 24 years. Pieminister sold more than five millions pies, and served 50 tonnes of mash and 4,500 litres of gravy in its restaurants over the 12-month period last year. The family-run business, which has branches across the UK, saw sales grow 14% to £14.3m for the year ending 31 March 2018 – up from £12.6m the year before.
Soho House to open Los Angeles site this month: Soho House will open Soho Warehouse in the southern end of Los Angeles' Arts District this month. The seven-story building that houses the Soho Warehouse dates to 1916. For roughly three decades prior to the arrival of the private club, the brick structure served as a musicians’ rehearsal space. The warehouse will feature a ground-floor restaurant, a gym, and an underground event space. The warehouse’s rooftop will have a pool, lounging space, and an indoor eatery and bar. The club will also have 48 bedrooms. The arrival of the Soho Warehouse was first announced in 2015. Located at Santa Fe Avenue and Bay Street, it’s south of Seventh Street in an area that has begun to attract more attention from investors, developers, and businesses.
Starbucks’ focus on digital eclipses coffee mentions in analysts' call: A report by Yahoo Finance found the word “digital” came up more often than “coffee” did on the Starbucks earnings call to analysts following its third-quarter results. The report stated: “After the company posted better than expected quarterly earnings, which sent the stock racing to a new all-time high, the coffee giant’s executive team dropped some fairly big hints about its future. As Starbucks broke down its fiscal third-quarter results with Wall Street's analyst community, references to technology received a surprising 42 mentions, while ‘coffee’ garnered only 31. Meanwhile, ‘beverage’ came up 36 times. What the call made clear is digital innovations continue to play a critical role for Starbucks, as technology shifts consumer habits and preferences. The company has reaped big dividends from its loyalty programme, which encourages customers to use the Starbucks app and rack up points in the process. During the call, Starbucks chief executive Kevin Johnson, a former technology executive, emphasised the long-term strategic importance of digital customer relationships to the company's ‘Growth At Scale Agenda’.”
Jinjuu chef founder departs: Jinjuu chef founder Judy Joo has left the business. Joo launched the Korean street food concept in London five years ago, opening in Kingly Street, Soho. She said: “I’ve loved being a part of it and the team is all very talented so I have no doubt it will continue bringing the best of Korean food to London. I am really looking forward to my next chapter and will be announcing new plans in the near future, as well as the launch of my new cookbook, Korean Soul Food, which publishes at the beginning of October.”
Paul Rankin buys Isle of Skye's oldest inn: Celebrity chef Paul Rankin has bought the oldest inn on The Isle of Skye. The Glasgow-born cook and his partner Charlie Haddock have taken over the 18th century Stein Inn in Waternish. Rankin grew up in Ballywater, County Down, in Northern Ireland. In 1989, Rankin opened Roscoff, the restaurant that was to become the first to win a Michelin star in Northern Ireland. Rankin sold the restaurant in 2005. He has since been a regular chef on the BBC cookery programme Ready Steady Cook and written several cook books. In 2006, he competed in the Northern Ireland heat of the BBC’s Great British Menu, a competition to cook for the Queen on her 80th birthday. It is believed Rankin and Haddock fell in love with the Stein Inn on a camping trip a few years ago.
PCA urges Star Pubs & Bars tenants to submit evidence for investigation as deadline looms: Deputy Pubs Code adjudicator Fiona Dickie has encouraged Star Pubs & Bars' tied pub tenants to submit evidence to an investigation into the pub-owning business before the deadline of 5pm on Wednesday (7 August). Pubs Code adjudicator Paul Newby and Dickie launched the investigation into Star Pubs & Bars last month because they suspect it has been imposing unreasonable stocking terms on tenants seeking to go free-of-tie. Star Pubs & Bars has previously said it will fully co-operate with the investigation while vigorously defending its position. Dickie said: “If you are a Star Pubs & Bars tenant who has been offered a Market Rent Only (MRO) tenancy or entered into one we want to know what stocking terms you were offered. We need to be able to assess whether the Pubs Code may have been breached and the impact of those terms on you. This includes whether Star Pubs & Bars has played any part in the decision you made about whether to go ahead with a free-of-tie tenancy or not. We are also interested in hearing if you had been told about these terms and whether or not it put you off exercising your right to ask for the MRO option.”
Aston Manor reports turnover boost, making £3.5m investment in facilities: Birmingham-based cider-maker Aston Manor has reported a turnover and pre-tax profit boost in the year it was bought by French food group Agrial for almost £100m. Aston Manor saw turnover rise to £133,297,126 for the year ending 31 December 2018, compared with £127,332,881 the year before. Ebitda amounted to £5.6m after one off costs relating to the sale of the business of £1.8m. Pre-tax profit was down to £2,122,374, compared with £7,134,135 the year before when the company made £4,257,773 profit on the sale and leaseback of its head office and distribution centre in Witton. The company is investing circa £3.5m across its facilities as well as further investment into its brand portfolio in 2019. Between 2013 and 2018, more than £30m has been invested in its seven sites across Birmingham, Stourport-on-Severn and Tiverton. Chief executive Gordon Johncox said: “In a market and a business environment that continues to be challenging, the clarity around our ambition to be a capable, progressive and professional business is being delivered by the commitment and great work of our people. While we expect the future to offer up further challenges to contend with, continuing to invest in our capability and being determined in our focus on what is important to us should mean we are well-placed to build on the progress we are making.” The Ellis family, including former Aston Villa chairman Doug Ellis, his son and former chief executive Peter, and grandson and chief financial officer James, ran the business for 35 years before selling it to Agrial in August last year. James Ellis and Johncox have remained with the business.
Burger King expands plant-based burgers across US estate: Burger King will begin selling the plant-based Impossible Whopper across 7,000 locations in the US this week after a successful run in six regions. The company has not said how many of the burgers it has sold since introducing them in April, but it was enticing more people to enter its stores. Impossible Foods, the company that makes the burgers for Burger King and White Castle, is struggling to meet surging demand. Last week, it announced a new partnership with OSI, one of the world’s largest food producers. Impossible Foods has doubled the workers at its plant and produced a record number of burgers in June, but demand is still outpacing production. Impossible Foods introduced the burger as the veggie patty that “bleeds” at the high-end New York restaurant Momofuku in 2016. The burger attains its red colour from genetically modified yeast.
Television chef Matthew Tebbutt tables plans for studio and cookery school near Abergavenny: Television chef Matthew Tebbutt has tabled plans to build his own studio and cookery school near Abergavenny. Tebbutt, who is known for hosting Saturday Kitchen among other shows, as well as operating his own restaurants, is looking to open the venue in Llantilio Crossenny. He has applied to Monmouthshire County Council to convert an existing workshop used for general storage into a multi-purpose venue. It would be used as a filming kitchen, residential cookery school, with additional use for holiday accommodation or a short-term business let. The 2,960 square foot steel shed sits within the grounds of the grade II-listed Weir House, reports Insider Media. A planning statement accompanying the application said: “The cookery school will be run by the occupiers of the main dwelling and is modest in scale. The kitchen can only be used as a cookery school when filming is not taking place and vice versa. There are five bedrooms proposed on the first floor, each of which is a double/twin.”

Spanish cafe concept Morano’s opens debut site, in Milton Keynes: Spanish cafe concept Morano’s has opened its debut site, at Centre:MK in Milton Keynes. The 1,812 square foot cafe in Eagle Walk offers fresh churros and Spanish coffee. Morano’s is one of five new openings at Centre:MK, which is jointly owned by investment firm Hermes Investment Management and AustralianSuper. Morano’s is joined by global footwear brand Skechers, gifting and stationery brand Typo, tour operator Trailfinders and jewellery and accessory brand Lovisa. Hermes Investment Management asset manager Ed Sellick said: “Our approach and resulting investment strategy continues to appeal to leading brands and is reflected in the latest deals. We are confident as we continue to build on Centre:MK’s robust performance we will be announcing more new names in the coming months.”
DHL reports damage to profits caused by KFC supply problems: Operating profit at DHL fell to £906,000 for the year to 31 December 2018 – down from £75.7m the year before after well publicised problems servicing a new KFC contract. The company put the decline down to “a number of one-off items in 2018, including issues with the startup of a new service to a restaurant chain that had a significant impact on profit for the year”. However, despite the well publicised problems with the KFC contract, it said the underlying business performance was robust with new business, transfers and renewals offsetting the effect of any lost business. Turnover for the year rose 4% to £3.27bn, compared with £3.15bn the previous year. Interest receivable meant pre-tax profit for the year was £3.9m, down from £78.9m the year before.
McDonald's consolidates estate in Dundee: McDonald's is to close its Dundee city centre site, reducing its presence to three sites in the city. McDonald’s will cease operations at its Wellgate Centre restaurant at the end of this month. No jobs are expected to be lost as a result of the closure, with staff being redistributed across the company’s other Dundee eateries.
Danieli Holdings gets go ahead to expand Newcastle pub as part of boutique hotel project: North east-based Danieli Holdings has been given the go-ahead to transform one of its pubs in Newcastle under proposals that include a new boutique hotel. The company has been granted permission by the city council to expand Yolo Townhouse into The Duke of Wellington in High Bridge. The scheme proposes the “refurbishment, redevelopment and integration” of the historic venue into a larger Yolo Townhouse restaurant and bar. The development comprises a ground-floor bar and restaurant area of about 2,400 square foot. The three upper floors above the Duke of Wellington, which are largely derelict, would be transformed to provide 14 boutique hotel rooms. The hotel accommodation would have separate, independent access, as well as a new lift, reports Insider Media. Danieli Holdings also operates pan-Asian restaurant and cocktail bar The Muddler, Hadrian’s Tipi and the Duke of Wellington in Newcastle, and Yolo bars in Ponteland and Newcastle. The company also owns shipping container leisure hub Stack in Newcastle and is planning a similar project in Sunderland.

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