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Fri 8th Jan 2021 - Propel Friday News Briefing

Story of the Day:

Scottish Hospitality Group says ‘worst December trading in living memory’ will hit sector until 2022, trade down 80%: The Scottish Hospitality Group (SHG) has said the “worst December trading in living memory” will continue to hit the sector until next year. The trade body claimed business at the country’s hospitality sites was 80% down on December 2019, resulting in SHG members losing an average of £12,000 revenue per week, per premises. It said the lack of money would impact on payments for property rent, utilities and equipment rent “until at least the summer”, which would affect suppliers, investors such as pension funds and others who depend on the industry. It also said existing plans for £30m of investment in 27 premises, which would create hundreds of new jobs as well as protecting existing ones, is now in doubt. Meanwhile, businesses are “still burning”, on average, almost £6,000 every week as the trade body called for “a more mature approach from both governments” because it is unclear how much financial support businesses are entitled to “due to conflicts between the Holyrood and Westminster governments”. SHG spokesman Stephen Montgomery said: “Without Christmas, when we earn around 30% of our entire annual income, most hospitality businesses just aren’t viable. We’ve had the worst December’s trading in living memory and we’re facing the worst start to a year ever. Instead of helping, our political leaders are squabbling with each other. It’s like arguing about who throws the lifebelt when someone’s already under water. The continued furlough scheme is welcome but it’s there to protect jobs rather than businesses, and we still have to pay all sorts of fixed costs. Even those businesses that survive will seriously struggle to recover this year. Not only is the support completely inadequate, in many cases, what little is available hasn’t appeared months after it was promised. We will soon be proposing specific, realistic measures that both governments can introduce so we’ve got a fighting chance of getting back on our feet by next year. First of all though, we need them to grow up and start working together so that the hospitality sector still exists to drive our economic recovery once the virus is under better control.” The Scottish Hospitality Group comprises many of the country’s largest and best-known restaurant and bar businesses, including The DRG Group, Buzzworks Holdings, Signature Pubs, Montpeliers, Manorview Group, Lisini Pub Co, Caledonia Inns, G1 Group, The Townhead Hotel Lockerbie, Mor-Rioghain Group and Caledonian Heritable. 

Industry News: 

Simon Stenning predicts what to expect for the year ahead as part of latest Premium column: Leading sector analyst Simon Stenning gives his views on what the year holds for the sector, including the key trends he sees emerging. Propel insights editor Mark Wingett asks whether the sector is able to get through the next few months and to start again. There will also be the latest sector rumblings from Premium Diary. Propel Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out, discounts to attend Propel conferences and events, and regular columns from Mark Wingett. Subscribers also receive access to our database of multi-site companies, which has grown to 1,600 businesses. An annual premium subscription costs £395 plus VAT for operators and £495 plus VAT for suppliers. Email

CAMRA demands pubs be allowed to trade as off-licences because current rules are ‘absolutely unfair’: The Campaign for Real Ale (CAMRA) has demanded pubs be allowed to trade as off-licences during the third lockdown. Currently, off-trade vendors such as supermarkets can sell alcohol as a takeaway product but the government has banned pubs, bars and restaurants from doing so and they can only sell alcohol through delivery services. CAMRA’s bid to help struggling sites was raised during an emergency debate on the new lockdown restrictions in England on Wednesday (6 January), with MP for Stroud, Siobhan Baillie, asking the government to look at the rules on the sale of takeaway alcohol because “it is not fair to stop this activity when supermarkets and off-licences can sell regardless”. CAMRA national chairman Nik Antona said: “It is absolutely unfair that while big supermarkets can continue to sell alcohol, our struggling local pubs in England can’t act as an off-licence too. This was a real lifeline for many pubs during previous lockdowns and is desperately needed again now, with landlords up and down the country struggling to make ends meet after months of closures, curfews and restrictions. Pubs are also the only place where people can get cask beer, which is under threat due to months of forced pub closures, with some breweries stopping production. The least the government can do is take a sensible approach, think again and allow community pubs to sell takeaway products. No one wants to see drinking in the streets during a lockdown – but allowing pubs to sell alcohol in sealed containers for people to take home – just like shops do – would be completely reasonable. Without a change in these lockdown laws, we risk seeing more locals going to the wall, traditional British cask ale under threat and people being forced into supermarkets instead of being allowed to support local businesses by buying beer from the pub to take home.” CAMRA claimed more than 6,000 pub-goers have flooded MPs’ inboxes to seek fair treatment for pubs and to protect cask beer during the third lockdown in England. 

PGB agrees to suspend all rent review negotiations: The Pub Governing Body (PGB) in conjunction with the PGB of Scotland has agreed with pub companies, which follow tenanted and leased codes of practice and self-regulation, that all rent review negotiations will be suspended until further notice. PGB chairman Sir Peter Luff said: “This pragmatic and sensible step is in addition to any agreements individual companies have put in place for their pubs and relieves all tenants of one possible worry during the coronavirus epidemic. This quick and flexible response to the current crisis brings real benefits to pubs and we hope it will be welcomed.” In practical terms, the move means there will be a pause in ongoing and upcoming rental negotiations; no requirement for BDMs to respond within 35 days, though best attempts to do so should be made, and accepting the response can be made by an alternative pub company representative; visits for the purposes of rent assessment being postponed until pubs reopen; any request submitted by a tenant for a rent review during the suspension period being paused until that period ends; and subsequent rent review periods being shortened by the length of the suspension period, ie, three months. The PGB’s members are six of the industry’s leading associations representing both tenants and landlords: UKHospitality, The Licensees Association, British Beer & Pub Association, British Institute of Innkeeping, Federation of Licensed Victuallers Associations and The Guild of Master Victuallers.

Kitchen Ventures secures $2m of funding: Kitchen Ventures, the new cloud kitchen and virtual dining start-up from Jonny Boud, co-founder of what was Goodlife Projects, the brand, marketing and consultancy business that helped launch Rum Kitchen, Passo, Foley’s and Island Poké, has secured $2m (£1.47m) of funding. London Impact Ventures, which has previously invested in Uber and Impossible Foods, was lead investor in the seed funding round. The new venture is on a “mission to make fresh, delicious, chef-cooked food accessible to every neighbourhood via our network of cloud kitchens”. The new funds will be used to expand its network of kitchens across London and select international markets, in addition to adding to its growing portfolio of owned and operated virtual brands. Virtual brands the business is currently working on include Giz ’n’ Green, the pizza collaboration between chef Gizzi Erskine and rapper Professor Green; a chicken concept from Lucy Pearce (ex-Petersham Nurseries and Rawduck) called Farmbird; and Tacos El Ray from Breddos Tacos founders Nud Dudhia and Chris Whitney. Current kitchens are located in Kensington Olympia in west London and Bethnal Green in east London. Dudhia said: “Building a delivery-only Mexican restaurant from the ground up has enabled us to create a menu that hones in on quality, speed, flavour and, most of all, customer experience. With Tacos El Rey, we’re offering what we believe is the best Mexican food you can get delivered to your home in London.” Boud, founder of Kitchen Ventures, said: “It feels like we now live in a world where a delivery-only, virtual restaurant brand can exist with as much, if not more relevance than a traditional restaurant. The delivery market has been growing steadily for years but when the world went into lockdown the trend accelerated considerably. With consumer trends shifting to becoming more adventurous with home dining, there is a huge opportunity for fresh concepts. We plan to grow our own concepts, license existing brands and build a network of franchise partners with under-utilised kitchen space to help scale the offering. It’s an exciting growth space.” Aboud Khaddam, managing partner at London Impact Ventures, said: “We are very excited to be part of Kitchen Ventures’ journey to disrupt the traditional dark kitchen model that has shown tremendous growth over the past few years, especially during the latest pandemic. Our experience in investing in both consumer food products like Impossible Foods and last mile delivery and logistics technology companies like Postmates and Uber will surely assist Kitchen Ventures in expanding their footprint and build on the current momentum. The recent and ongoing pandemic has had devastating effects on the restaurant industry, and this has obviously resulted in the rise of the direct-to-consumer delivery model. Kitchen Ventures’ own proprietary platform aims to bring high-quality chef and influencer-focused concepts to every home and help existing restaurants put their under-utilised kitchens to good use.”
US restaurant workers to start receiving vaccine in February: Restaurant workers in Washington DC, Virginia and Maryland are scheduled to start receiving covid-19 vaccinations from 1 February but sector staff in other US cities and states will have to wait. The Centers for Disease Control and Prevention prioritised restaurant workers in December as “other essential workers” and part of the third group in the first wave in line to receive covid-19 vaccinations. Now cities are beginning to provide timelines for when staff will be eligible for vaccinations. However, trade body the National Restaurant Association (NRA) advocated for foodservice workers to be placed into a higher category so vaccinations would have started sooner. NRA executive vice-president for public affairs Sean Kennedy told Nation’s Restaurant News: “The association requested vaccine priority for foodservice workers, behind health care workers, first responders and vulnerable populations, to help ensure the food supply chain. Prioritising testing and vaccine distribution will help ensure the food supply chain for our communities and ensure that agriculture industry and restaurant industry employees will be safe selling and serving healthy food.”

Company News: 

Star Pubs & Bars extends 90% rent reduction for tenanted and leased pubs: Heineken-owned Star Pubs & Bars has announced it will continue its 90% rent reduction for its leased and tenanted pubs forced to shut during lockdown in January. The move brings the pub company’s total investment in rent support to more than £44m since March 2020 – including over £4m this month for pubs in England, Scotland and Wales. The concession is still valid for affected pubs whether they choose to operate a delivery service or not. Star Pubs & Bars managing director Lawson Mountstevens said: “The prime minister needs to help pubs weather the months ahead by working with our sector on a roadmap to recovery. While the grants announced this week are welcome, their impact is temporary and limited. Pubs need an extension of the business rates holiday and a cut in VAT to survive the coming months. More immediately, the government needs to review the ban on sales of takeaway alcohol. This is unnecessary and damaging to many pubs for whom these sales provide a small lifeline during lockdown. Pubs, through no fault of their own, are being put in jeopardy by this latest lockdown and the well-being of those working in them put under enormous strain. We are doing our part to support our licensees through these difficult times, including continuing to invest heavily in rent concessions.” 

Douglas Jack – Mitchells & Butlers has the weakest liquidity position in the sector and an equity raise is likely: Peel Hunt leisure analyst Douglas Jack has claimed an equity raise at Mitchells & Butlers (M&B) is likely given it has the weakest liquidity position in the sector. In a note, he stated: “It has the weakest liquidity position in the quoted sector – an equity raise is likely in our view. Like-for-like sales were down 30.1% during the first quarter for trading sites. Total sales were down 67.1%. This converted to a cash burn that was little different to being under a full national lockdown. Since September, financial headroom has fallen from £298m to £125m. This drop equates to £41m of monthly operational cash burn and £50m of quarterly debt service (with interest slightly higher than bond debt amortisation). We estimate net debt has increased from £1,563m to £1,713m in the first quarter versus a debt facility that has fallen from £1,861m to £1,838m due to bond debt amortisation, reducing cash and undrawn facilities to £125m. Cash burn under the full closure period should be £35m to £40m before circa £10m of monthly interest costs and debt amortisation (less than £10m per month). At best, this equates to 3.5 months of liquidity if debt service is financed out of the £300m bond liquidity facility. M&B’s net asset value is 388p per share based on the September 2020’s upward revaluation. In comparison to this, our 275p target price (adjusted from 300p to reflect 2023E Ebitda and net debt changes) equates to 8x EV/Ebitda (2023E; IAS (international accounting standards) 17 and IFR (interim financial reporting) 16). We expect the shares will be unlikely to perform until the equity raise is undertaken.”
Adolf Fourie steps down as GBK MD: Adolf Fourie has stepped down as managing director of Gourmet Burger Kitchen (GBK) following the sale of the bulk of the business to Boparan Restaurant Group (BRG) last October, Propel has learned. Fourie, who was previously managing Famous Brands’ Steers concept in South Africa, joined GBK last October, replacing Derrian Nadauld as managing director. Nadauld left the role to return to GBK’s then parent company Famous Brands in South Africa. Fourie has also returned to South Africa and to Famous Brands, as a managing executive. BRG, which earlier this year acquired Carluccio’s out of administration, acquired the bulk of the GBK business through a pre-pack administration for £6m. It fought off six other indicative offers for the business, including an offer from Byron. The sale to BRG secured a “go forward” portfolio of 35 sites and 669 jobs – however, there were 26 site closures and 362 redundancies as a result of the administration, which was overseen by Deloitte.

Arc Inspirations – we’ve borrowed £5m to stay closed: Arc Inspirations founder Martin Wolstencroft has told the BBC his company has had to borrow £5m to survive. Wolstencroft told the BBC his company borrowed £4m to ensure the survival of 17-strong Arc Inspirations. The latest lockdown has forced the company to ask its bank to lend another £1m. “The money we are borrowing is really just to stand still,” he said. “We’ll be coming out of this in a far worse position with far greater debt and it totally reduces our ability to grow our business for the future. And all of this has been brought about through no fault of our own.” He claimed the debt taken on so far would take the business six years to pay back, which has left him facing some difficult decisions. Chancellor Rishi Sunak has announced a package of grants worth up to £3,000 a month per property to keep retail, hospitality and leisure businesses afloat until the spring. Wolstencroft described the grants as a “mere drop in the ocean”. “We are kidding ourselves if we think more debt upon more debt is going to be sustainable,” said Stephen Welton, executive chairman of the Business Growth Fund. “Past recessions have shown very clearly that it’s coming out of a recession – when companies are short of working capital – that they fall over.”
We Are Bar Group gains approval for CVA plans: We Are Bar Group, the London-based bar operator, has had its company voluntary arrangement (CVA) proposals approved by the majority of its creditors, Propel has learned. The company, which operates the Jamies wine bars brand, is understood to have worked on the proposals with restructuring adviser Quantuma. In March 2019, Ian Banks left his position as chief executive of We Are Bar Group after chairman Simon Vardigans took full control of the company. Vardigans brought in Enhanced Hospitality to help manage the group’s venues and is understood to have injected a substantial amount of cash into the business. At the time, We Are Bar Group operated its eponymous venue in Bishopsgate, six Jamies wine bars, Smollensky’s in Canary Wharf and No. 25 and Willy’s Wine Bar. It currently operates four individual bars in the capital, plus four sites under the Jamies name.

C&C Group takes 8% equity stake in craft beer brewer Innis & Gunn: Drinks company C&C Group has taken an 8% equity stake in Scottish brewer and retailer Innis & Gunn after agreeing to invest in the award-winning business. C&C Group will sell and distribute Innis & Gunn’s craft beers across the on-trade in the UK and Ireland. Innis & Gunn’s beers will continue to be produced and packaged at C&C’s Wellpark Brewery in Glasgow as part of a renewed agreement, as well as at Innis & Gunn’s brewery in Perth. A long-term incentive scheme is also in place that will make a number of additional shares available to C&C, based on performance targets being met. C&C will use its position to increase the distribution and availability of Innis & Gunn beers in the on-trade, wholesale and free-trade channels, through its distribution businesses Matthew Clark in the UK and through Bulmers Ireland and Tennent’s NI in Ireland. Innis & Gunn will continue to be responsible for all brand marketing and for sales and distribution to national pub chains, the off-trade and current international markets. Innis & Gunn founder Dougal Gunn Sharp said: “C&C’s strength in the on-trade across the whole of the UK and Ireland, and our long-term relationship, means we have solid foundations from which to build. We are retaining our independence and gaining a new distribution partner that can help introduce our brand to a much wider audience.” Kenny Gray, managing director Scotland at Tennent’s (owned by C&C Group) added: “[Innis & Gunn] will be a strong and complementary addition that, no doubt, will be well received by our customers who are increasingly seeking an extended range.”

Sierankowski joins buffet concept Cosmo as its new chief operating officer: Roman Sierankowski, formerly of PizzaExpress and the Azzurri Group, has joined buffet concept Cosmo, as its new chief operating officer, Propel has learned. Sierankowski joins the 18-strong group after stints as operations director at the Azzurri-backed Radio Alice and before that head of operational projects at the ASK and Zizzi operator. He also spent 10 years at PizzaExpress where he was head of central operations and openings. Cosmo currently has three of its sites still open for takeaway in Belfast, Edinburgh and Nottingham. As of 19 June, Cosmo had delivered more than 5,000 meals to NHS staff in hospitals and care homes across Derby, Glasgow, Manchester and Oxford.
Corbin & King to give relaunched delivery service profits to staff: London restaurant operator Corbin & King will give all profits from its relaunched Home Dining range to staff members to top up their wages. The nationwide delivery service from Corbin & King’s restaurants offers dishes that can be finished at home by customers. The website explained: “100% of the profits from our Home Dining range go to our staff to assist with topping up their wages at this time, until our restaurants can open at full capacity.” Dishes include Coq au Riesling with chestnut mushrooms and pearl onions; The Delaunay’s Seared Sea Bass, with white endive braised in orange juice, star anise and shallots; and the Wolseley Wiener Schnitzel, accompanied with a lingonberry compote. There are also side dishes and desserts, wines and champagnes as well as bartender bottled cocktails. Corbin & King operated a delivery service during the first lockdown that operated within six miles of its Colbert restaurant.
Dhillons signs to open Coventry city centre flagship site: A landmark Coventry building is being turned into a continental cafe bar in time for UK City of Culture after a deal was agreed with a local craft brewery. Dhillons Brewery has taken a 20-year-lease on Christchurch Spire in Coventry city centre and will be serving its own beers on tap as well as offering hot drinks and food from 9am to create a family-friendly venue. Dhillons, which has been in business for six years, will keep its main base near the Ricoh Arena where it brews a range of beers and attracts customers from across the region. It has agreed the deal on Christchurch Spire through commercial property agents Holt Commercial and it is part of the company’s plans to grow. Dal Dhillon, who runs Dhillons Brewery, said: “It’s always been the ambition to open up in the city centre – but we wanted a building with character so we could create something special and unique. Christchurch Spire gives us exactly that opportunity and we can’t wait to open. It was part of the plan to do this anyway but, of course, with City of Culture coming and so much investment in the city centre this is a great opportunity for us. We’re in talks in creating a nice outdoor space that could be utilised all year round and are working with street food providers to offer a food outlet for our customers. This has been a really difficult time for the hospitality sector but we see this as a really good investment and a chance to grow the Dhillons Brewery business.”
Macdonald & Jackson join forces to launch Trinity Hospitality Group: Ruaridh Macdonald and Simon Jackson, two of the UK’s foremost hospitality specialists, have announced the launch of Trinity Hospitality Group. Trinity will provide a diverse, yet niche range of services tailored to the hospitality sector built upon three core strands: management, ownership and consultancy provision. Combining more than 50 years of industry experience, founders Macdonald and Jackson aim to exploit a gap in the market to offer their expertise to hotels and resorts struggling due to the covid-19 pandemic. Experts in creating and unlocking value, Trinity Hospitality Group will use its extensive multi-sector and multi-discipline network to support on areas including operations, procurement and business development. Headquartered in the UK and covering the mainland, Ireland and other key European locations, Trinity Hospitality Group aims to deliver performance-driven management contracts and develop owner-operator relationships, while also building its own portfolio of quality assets. Trinity is currently in detailed discussions with various resort operators, investment funds and a major high street bank. The company expects to announce its first management contract and consultancy deal in the first quarter of 2021 with Trinity’s first acquisition expected later in the year. Both Macdonald, former deputy chief executive of Macdonald Hotels & Resorts, and Jackson, former chief operating officer at Macdonald Hotels & Resorts, have board level strategic and operational experience running hospitality businesses across the UK, Ireland, Spanish mainland, Canary Islands, Balearic Islands, Portugal, US and Caribbean.
PizzaExpress launches its first DIY pizza kits: PizzaExpress, the David Campbell-led business, has launched do-it-yourself pizza kits – a first for the 56-year-old business after it experienced huge demand for its ‘Homemade Favourites’ series. Available from 11 January, for a limited time only, the kits give customers the chance to create one of two of the pizzeria’s best-selling recipes at home: the Margherita or American Hot. There is also the option to go 50:50 and have half of each flavour on each pizza. Kits will have all the ingredients to make two 14-inch Romana pizzas and can be delivered nationwide with prices starting at £14, excluding delivery. Kits come with a branded pizza cutter tool while stocks last. PizzaExpress managing director Zoe Bowley said: “Since launching our Homemade Favourites series last year, it has been wonderful to see so many people recreate their favourite recipes, in the restaurant style they know and love. We’ll be delivering the very same ingredients we use in our pizzerias so that the PizzaExpress experience can still be enjoyed wherever you are.”
Shake Shack launches ‘Hot Menu’ for a limited time: Shake Shack has launched a “Hot Menu” that includes the return of its Hot Chick’n sandwich. The menu, which is available across all UK sites now and for deliveries too, has taken two years to perfect. The Hot Chick’n is a crispy, 100% chicken breast, dusted with Shack spice mix and topped with cherry pepper slaw and pickles inside a toasted potato roll. It can be customised by ordering either Hot or Extra Hot. The 100% chicken breast is slow-cooked sous vide in a buttermilk marinade. After that, it is dredged and fried. Also on the menu is Hot Chick’n Bites – hand-breaded pieces of chicken, dusted with a spice mix and served with BBQ or Honey Mustard sauce; and Hot Spicy Cheese Fries – crinkle cuts topped with cheese sauce and dusted with Shack spice mix. 

Urbanista Hotel in Liverpool on sale for £1.5m: Urbanista Hotel, owned by Evolve Property Group, is being marketed off a £1.5m price as coronavirus continue to affect the sector. The Bold Street hotel in Liverpool is made up of 17 different rooms and suites including doubles, quads and larger suites that sleep up to eight people. The owner has put the hotel up for sale as it “re-evaluates its operational and development criteria due to covid-19”. Up to 58 customers can stay at the hotel at any one time, which also has a top floor events space, terrace and staffing areas. The pandemic forced Urbanista to close in March 2020, with owners working tirelessly to reopen the hotel in July. The addition of the top floor events space hosted some gatherings and parties before restrictions put a stop to it. The hotel has been placed on the market with Christie & Co and offers are welcome by 29 January.

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