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Morning Briefing for pub, restaurant and food wervice operators

Mon 1st Jun 2020 - Propel Monday News Briefing

Story of the Day:

Osmond – the hospitality industry needs to call out ‘ridiculous’ two-metre rule: Hugh Osmond, serial sector investor and current backer of Coppa Club, has said those in the hospitality industry need to be brave and call out the “ridiculous and unjustified two-metre social distancing rule”. In a special opinion piece for Propel, which will be published on Monday afternoon (1 June), the founder of Punch Taverns, writes: “Maintaining lock-down or opening with ridiculous two-metre social distancing rules will kill retail and kill the hospitality industry. A healthy 20-year-old is more at risk of being struck by lightning than dying of covid-19, and at far more risk of drowning, a traffic accident or suicide. Confining people to their homes is the death sentence, not letting them out. In the hospitality industry, we need to be brave – we need to call out the ridiculous and unjustified two-metre rule; we need to get customers back through the doors and show them they can have a great time and are not going to die of the Black Death. We need to lead from the front; stand up for what is right, not for what is proven to be nonsense. We need to shout from the rooftops: ‘This virus is not to be afraid of – come on out and have fun’.” Osmond has reopened his Coppa Club site in Streatley, Berkshire, for takeaway – but according to his Twitter updates last week the move has not been well-received by all. Osmond wrote: “So we opened our restaurant for takeaway and (bottled) beer, which people are taking for picnics in the gardens next door. We've had police, trading standards, parish council and all local busybodies. Are they protecting the NHS or just hating people having a nice time?”  

Industry News:

Thousands of curry houses ‘may never open again’: Up to 2,500 of the UK’s 8,500 curry houses could struggle to reopen after coronavirus, according to an experienced restaurateur and a leading academic on small business. Speaking on a podcast from Aston Business School, Shahab Uddin, who owns Streetly Balti in the West Midlands, said he reckoned as many as 30% of big venues could fall victim to the pandemic if they are no longer able to pack diners in. The impact “could actually be worse”, according to professor Monder Ram, director of the Centre for Research in Ethnic Minority Entrepreneurship at Aston Business School, unless venues invested and raised prices to realistic levels. The estimates would potentially lead to 30,000-plus job losses. Uddin, who’s been in the curry house trade since 1993, said Streetly Balti had accessed the government’s furlough support and a £10,000 local council grant, and his and some other restaurants had developed takeaway services to tick-over in the short-term. But he warned damage to the wider industry had been more severe because many operators had no knowledge of assistance available, and grants were not enough to tide larger venues over. He said: “The debt they’re going to accrue [means] it’s going to be difficult for them to continue. Having talked to friends up and down the country, I’m estimating at least 25% to 30% of bigger restaurants are not going to open again. My restaurant is quite small – we’ve built our reputation on being small and cosy. After coronavirus I don’t think cosy and small is going to work.” Professor Ram said: “The estimate [of closures] that Shahab’s given isn’t out of line with industry estimates – it could actually be worse. The traditional model in this sector has always been low technology, low wages and low prices. This is unlikely to survive in the future and major changes will have to be introduced.”

Guest sentiment towards off-premise offerings at US restaurants recovers: Guest sentiment around off-premise restaurant offerings in the US, which dipped as outlets began reopening in early May after coronavirus closures, have started to recover, according to analytics company Black Box Intelligence’s guest metrics. It said “guest sentiment trends have started to recover as of week ended 24 May, with off-premise sentiment returning to similar levels as seen in April”. In early May, consumers had complained of long waiting times for kerbside pick-up orders, Black Box said. The company also noted third-party delivery adoption has continued to increase for all age groups since the pandemic began. It added year-on-year restaurant sales continued to improve for the week ended 17 May. “Average transaction value continues increasing rapidly for limited-service brands,” the company said. “However, growth in average spending per guest remains negative for full-service restaurants.” The industry segments with the biggest decline in sales over the past year continued to be family dining and fine dining.

UK hotel market continues to see steady decline in average daily rate: The UK hotel market continued to see a steady decline in average daily rate in the week ending 24 May, where it was down 41% compared with the previous year, according to the latest data from STR. Revpar drops during the period ranged between 81% and 89% compared with the previous year. Occupancy levels have remained in the “mid to high-20s” on weekdays and “mid to high-teens” at weekends, with many hotels accommodating front line staff that are not able to go home and long-stay guests. Among the key UK markets, Aberdeen has experienced the highest occupancy level in May to date, at 40%, while Edinburgh was the lowest, with 15%. STR director Thomas Emanuel said the number of long-stay guests was strong in Aberdeen predominately because of demand from the oil industry.

Tributes paid after St Austell brewing director passes away: Cornwall-based St Austell Brewery has announced its brewing director Roger Ryman passed away peacefully last week – aged 52 – following a brave battle with cancer. Ryman, who led St Austell’s brewing team for more than two decades, played a leading role in the company’s growth and success. Since joining the brewery, he has been responsible for transforming the family brewery’s portfolio of brands. Chief executive Kevin Georgel said: “We’re devastated to have lost Roger – a much-loved friend, and highly respected colleague. All of our thoughts are with Roger’s wife Toni, his father, two sisters and wider family, at this terribly sad time. Roger was a world-class brewer and a leader in his field, who we were incredibly lucky to work alongside. The growing reputation and quality of our beer, since Roger joined St Austell Brewery in 1999, is testimony to his hard work, leadership and passion. He will be sorely missed.” In addition to his role in Cornwall, Ryman also oversaw production at Bath Ales’ Hare Brewery, which St Austell acquired in 2016. He oversaw the building of a new brewery that opened in 2018. Steve Livens, policy manager – product assurance and supply chain at the British Beer & Pub Association, said: “There will be many who will make their way through the industry with Roger’s insight and skill at the heart of their journey and there can be no greater legacy than this.”

Job of the day: COREcruitment is working with a drinks business that is looking to grow and expand. To support growth, the business is keen to appoint a sales manager/director, with excellence knowledge of food and beverage products as well as an excellent understanding of off-trade/grocery channels. Ideally they will have experience in a standalone position within a targets-based sales role. However, they will also have a lot of support and will work closely with a sales and operations team to collectively grow the brand. The position is a remote role, ideally with candidates being based in the Home Counties, the south west or the Midlands. A salary of up to £65,000 is being considered plus commission and benefits. Anyone interested can email with their CV or profile.
CORErecuitment is a Propel BeatTheVirus campaign member

Company News:

Cook – we’re looking at how we can take TGI Friday’s to next level: Robert Cook, chief executive of TGI Friday’s UK, has said the company’s new management team is looking at several new ways in which it can take the brand to “new levels” while social distancing restrictions are in place. Speaking to Elliotts chief executive Ann Elliott as part of Propel’s “navigating the coronavirus” series, Cook said the group was launching “alcohol to go” through 20 of the 36 sites it has so far reopened for click-and-collect and delivery, while it was trying its own moped delivery service out of one of its Manchester stores to “see how that goes”. Cook said: “We have realised as a team we have a fantastic brand here, with a well-known name that deserves to be leveraged. Click-and-collect and delivery is our first real foray out of the real estate store and that’s given us a bit of confidence to think about other things. Click-and-collect has been four times more successful in terms of revenue than we thought, but we realise when we reopen that may be the die-hard TGI Friday’s guest that has been using it, so that might change. There are a few things in the pipeline we are looking at to see how we can in the short-term fill that gap of revenue we will lose, because for us two-metre distancing means a 50 to 55% capacity restriction. Fortunately, our stores are quite big, at about 6,000 square foot per store. E-commerce and digital is another side where we are looking at a lot of things that may bring Friday’s into the home. One thought we had needed to get authorisation from our franchisor in the US. I can’t go into details now, but it has given me the okay to develop something new it is going to get involved in. The mantra is our yesterday is not going to be our tomorrow, and with that we are looking at how we can use this great brand and take it to new levels.” The company reopened 12 sites last Wednesday (27 May) for click-and-collect and delivery having been “very encouraged” by the performance of the 24 sites that it reopened at the start of May. TGI Friday’s closed all 87 sites in March as the country went into lock-down. Cook will share more of his thoughts in the video, which will be released on Monday (1 June). Meanwhile, readers can support independent sector journalism and get their news 12 hours early (at 7pm each night) with a Propel Premium subscription. It costs £395 plus VAT per annum for operators and £495 plus VAT for suppliers. Email to sign up.

KFC UK reaches 700-site mark in restaurant reopenings: KFC has said it has now reopened 700 of its circa 950 sites in the UK and Ireland. It said as well as delivery and drive-thru, more than half are now back open for takeaway as well. KFC re-emphasised it was being careful in how it managed reopenings, with strict new rules and hygiene measures in place as well as a limited menu. It stated: “The restaurants will look a little different to how they did before. We’ve made a few changes to ensure we’re offering takeaway in a way that’s responsible as it is convenient. These include protective screens, gloves and face masks for our teams as required and social distancing guidance clearly marked on the floor. Ultimately, the well-being of our guests and teams remains the most important thing – so if we can’t reopen a restaurant responsibly, we won’t.” The company said the newly opened restaurants also mean it can donate more of its food to the NHS and key workers. 

Cote secures extra space to match at-home service demand: Cote, the 96-strong French brasserie chain, has moved to match the increasing demand for its delivery service, Cote At Home. The company, which launched the service in response to closing all of its sites due to government restrictions, is converting a newly acquired warehouse space into a refrigerated order fulfilment warehouse solely to cope with new demand. Meanwhile, it is creating a new production kitchen to keep up with volume. Now available nationwide, Cote At Home offers consumers the chance to order main meals, sides, desserts, wine and items from the company’s butchery. It requires a £40 minimum order. There is free delivery with purchases of more than £80 and £4.95 on all other orders. Deliveries are made Monday to Saturday, between 7am and 6pm.

Black Sheep Coffee reopens three sites for delivery and takeaway: London-based speciality coffee shop operator Black Sheep Coffee has begun a phased reopening of its circa 35-strong estate. The company has reopened three of its sites in London – in Aldgate, Victoria and Southwark. It is working with UberEats and Deliveroo on its delivery offer. Earlier this year, it made its debut in Oxford and opened a fourth site in Manchester. The group operates circa 30 sites in the capital and two franchise sites in Manila in the Philippines.

Tim Hortons plans new Belfast drive-thru due to demand: Canadian cafe and bake shop Tim Hortons is planning a new drive-thru in south Belfast amid a spike in demand during the coronavirus pandemic. SK Group, which is leading the UK roll-out of the brand, is eyeing a site at the Balmoral Plaza Retail Park in the Boucher Road area of the city. The application from Boucher Developments centres on an area at the north west end of the site, currently used for parking. A report produced by Gravis Planning has confirmed, subject to approval by the city council, the unit will be occupied by Tim Hortons, reports The Irish News. Tim Hortons currently operates three stores in Northern Ireland – two drive-thru outlets in Glengormley and the Connswater Retail Park and a coffee shop close to Belfast City Hall. Two other outlets in Coleraine and Portadown are in the planning process. Last year SK Group indicated it wanted to open 25 Tim Hortons outlets in Northern Ireland.

Restaurant Brands International reports Popeye’s like-for-likes up more than 40%: Restaurant Brands International has said like-for-like sales for its Popeyes Louisiana Kitchen brand were up more than 40% in the third full week of May compared with last year. Restaurant Brands International, which also owns the Burger King and Tim Hortons brands, provided the update as the company reopened restaurants in many markets as coronavirus restrictions eased. Earlier in May, Restaurant Brands International said despite stay-at-home coronavirus orders broadly affecting US restaurants in March, Popeyes posted like-for-like growth of 29.2% in the market during the first quarter. Despite Popeyes’ strong performance in the third week of May, Restaurant Brands International said its Tim Hortons Canada like-for-like sales were trending in the “negative mid-20s”, but up from the “negative mid-40s” in the second half of March, and its Burger King units in the US were trending in “negative mid-single digits”, up from the “negative low-30s” in the second half of March. Restaurant Brands International stated: “Sequential improvement in comparable sales in our home markets has primarily been driven by the continued strength of our safe and convenient drive-thrus; the acceleration of our digital platforms, particularly in home delivery; growth in group orders and family bundles as an attractive and affordable dining option; and an overall improvement in guest perception of how our restaurant brands have positively responded to this crisis.” The company also noted its monthly like-for-like sales were calculated with the exclusion of any restaurant closed for a significant portion of a month. It added substantially all restaurants in its home markets remained open. In other markets, the company said about 60% of its restaurants were open in Europe, the Middle East and Africa; more than 85% were open in the Asia Pacific region – including 98% of restaurants in China; and about 50% were open in Latin America. Many continue to operate with limited service.

Marston’s receives waiver approval from noteholders: Marston’s has received approval from holders of its secured class A notes for a limited number of technical waivers and amendments. The company announced 96.12% of holders voted in favour of the resolution, which Marston’s made as a consequence of the enforced temporary closure of its pubs by the UK government because of coronavirus. A total of 950 of Marston’s 1,400 pubs are held within the security scheme. Last month Marston’s announced a joint venture partnership with Carlsberg UK to create a “best in class, brand-led UK brewer of scale”. The move will allow Marston’s to focus on its “high-quality, well-invested pub and accommodation business while retaining a 40% interest in a larger, more attractive brewing business”. 

Travelodge landlords plot to seize control in rent row: Travelodge landlords are plotting to seize control of the hotel chain amid claims rent cuts proposed by its hedge fund owners would leave some facing financial ruin. The Travelodge Owners Action Group, which claims to represent owners of more than 400 of the chain’s 580 hotels, is threatening to block the rent cuts and effectively shut down the company to create “Travelodge 2.0”. The landlords said they could evict Travelodge, owned by GoldenTree, Avenue Capital and Goldman Sachs, and establish a new hotel operator to run their properties instead. Viv Watts, who leads the group, told The Sunday Telegraph he has lined up financial backers and the support of at least 150 landlords. He said: “Travelodge does not own its hotels, so they are reliant on other landlords to invest in the real estate. We have more than £100m in commitments from other private investors to create a Travelodge 2.0. which would give landlords a stake in the company.” The plans represent an escalation of a row between Travelodge and its landlords that erupted as the pandemic forced hotels to close. Travelodge withheld quarterly rents due at the end of March and proposed rent reductions until 2021. Nick Leslau, Travelodge’s biggest landlord with 120 hotels, and Watts claim the company is trying to force through a restructuring under the cover of emergency covid-19 laws that prevent landlords from taking action over unpaid rent. Travelodge wrote to landlords on 13 May appealing for their support, saying it expected to miss out on £350m in lost revenue due to coronavirus. It also warned if landlords did not accept lower rents it would attempt an insolvency process such as a company voluntary arrangement, a court process Watts said he has the necessary support to block. 

Camden Market owner expects 80% of F&B tenants to be part of reopening: Camden Market owner LabTech has said it expects up to 80% of its food and beverage traders to be part of the venue’s gradual reopening from Monday (1 June). The market is reopening in phases with retail traders starting to join from Monday, 15 June. A strict one-way system will be enforced across the market site with queuing spots outside shops and directional wayfinding arrows. Maps outlining the correct flow of traffic will also be available at hand sanitiser stations that will be positioned at key points throughout the market. For the foreseeable future, traders will also be expected to adhere to factors in line with government recommendations, including limiting the number of customers entering at any one time; maintaining a strict cleaning regime; and accepting card payments only, where possible. LabTech said it was also extending the rent-free period for all traders it introduced to the market three months ago. While timings are to be confirmed, LabTech’s Buck Street Market is likely to follow the phased reopening approach in the coming weeks. 

Barclays – Whitbread compelling in the long term but short-term challenges: Barclays leisure analyst Vicki Stern has said Whitbread is compelling in the long term but has short-term challenges. Issuing an ‘Equalweight’ rating on the shares with a target price of 2,500p, Stern said: “With the £1bn raise, we see a compelling long-term opportunity for the group to accelerate the German roll-out via portfolio mergers and acquisitions such that this could become a meaningful part of the equity story in coming years. We also see scope for the group to transform its UK opportunity by taking advantage of independent hotel weakness as well as the higher leverage of some competitors, which are at the very least likely to be more cash-constrained going forward. While we see some structural long-term risks relating to reduced business travel, we also see opportunity for some of this to be mitigated in Whitbread’s case via share gains. So why not upgrade to ‘Overweight’? For us this is simply a question of time-frames and the unprecedented scale and nature of the near-term uncertainty for a business with such high operating leverage. Being positive here requires ‘looking through’ what we expect to be a very difficult 12 to 18 months for the group in light of social distancing requirements, consumer caution, higher unemployment and reduced business travel budgets, all of which make projecting the pace of revpar recovery exceptionally difficult. Valuation becomes interesting, however, when we look out to 2022-23, which will be possible for some investors, though less so for others. The stock is trading on a pre-IFRS16 price to earnings ratio of 35 times or 12.3 times EV/Ebitda on our base case February 2022E. This falls to 22 times and 9.1 times, respectively, by February 2023E and compares with the group's historical average one-year forward EV/Ebitda of ten times. We retain our 2,500p target price based on ten times 2022-23E EV/Ebitda (25 times price-to-earnings ratio multiple).”

Sato extends Japanese food delivery service to south London: Yatai, the Japanese food delivery service created by Angelo Sato, has been extended to south London. The concept was brought to life in 2019 by Japanese-born Sato, following a bento box pop-up, Mission Sato, in Old Street, and the launch of his first permanent grab-and-go concept, Omoide, in 2018. Previously operating as a residence at Market Halls in the West End, Yatai is now available to Battersea residents for delivery via Deliveroo as well as click-and-collect. The menu features a selection of sushi and donburi bowls, katsu curries and sandos. Sato worked in Michelin-starred restaurants in Tokyo and New York before making the move to London where he worked under chefs including Adam Byatt and Tom Sellers. 

Buzzworks helps deliver more than 40,000 meals to vulnerable residents: Scottish bar and restaurant operator Buzzworks Holdings has helped deliver more than 40,000 meals to vulnerable Ayrshire residents through the lock-down. Chefs and front-of-house staff from the company have joined forces with Ayrshire charity Centrestage to feed locals, with ingredients gifted by charity Fareshare, public donations and Buzzworks’ own suppliers. So far, meals have ranged from mac ‘n’ cheese to Sunday roasts along with daily fresh soup and even pheasant. Alongside providing volunteers to help Centrestage, Buzzworks has also given use of its Bakehouse premises to store cooked meals safely, while its refrigerated van has helped distribute thousands of meals to those who require them. Buzzworks chairman Colin Blair said: “Supporting charities and communities where we operate has always been a key pillar for Buzzworks for many years. However, it has never been more important to give back and we have been truly inspired by our selfless team going above and beyond to help those who require it.”

Group of Derbyshire hotels secures six-figure sum through CBILS: A group of Derbyshire hotels has secured a six-figure sum through the Coronavirus Business Interruption Loan Scheme (CBILS) from Lloyds Bank. The Boar’s Head in Draycott-in-the-Clay, The Lion Hotel in Belper and The Littleover Lodge Hotel in Littleover are owned and run by John Crooks. Crooks, who runs the sites with his wife Gail and their five children, bought The Boar’s Head in 1984, a building originally part of the Vernon estate, which he transformed into a 23-bedroom hotel with an a la carte restaurant to seat 80. The family business now employs 140 people across its three sites, with all staff currently furloughed. Crooks said: “This is the most challenging time our business has faced but we know we’re not alone. Pubs, restaurants and hotels across the region are feeling the same effects that we are and planning for the future is particularly difficult given the uncertainty surrounding when we’ll be able to open again. We must remain optimistic and we’re doing everything we can to ensure we’re ready to provide our customers with the quality and experience they have come to expect from us, when the time comes.”

Plans lodged to transform Nottingham’s Guildhall into £120m hotel and rooftop restaurant: Plans have been submitted for the £120m redevelopment of the Guildhall in Nottingham city centre into a hotel and rooftop restaurant. Locksley Hotels and hotel group Ascena have lodged an application with the city council for a 162-bedroom hotel. It is seeking to demolish parts of the building to construct a hotel set over 13 storeys. The hotel would also include a rooftop restaurant, conference facilities, a bar and spa. The work would take two years to complete. Ascena owns and operates a number of luxury hotels and restaurants in Birmingham and the south west. Aktar Islam, who is a business partner at Ascena and runs Michelin-starred restaurant Opheem in Birmingham, is set to run the rooftop restaurant at the new hotel.

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