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Wed 15th Sep 2021 - The Restaurant Group re-states growth plans; strong like-for-likes since 17 May
The Restaurant Group re-states growth plans; strong like-for-likes since 17 May: The Restaurant Group has reported like-for-like sales have out-performed the market since dine-in began again on 17 May. The company has also stated its plans to double the size of its pub estate, add new delivery kitchens and on another 40 to 60 Wagamama site in the UK. Wagamama like-for-like sales have been up 21% in the 15 weeks since 17 May compared to 2019 whilst pubs like-for-like sales have been up 12% and leisure like-for-like sales have been up 18%. Concessions sales have continued to be weak with like-for-likes down 53%. Chief executive Andy Hornby said: “We have made good progress in the past six months, securing the refinancing and recapitalisation of the group in the first quarter before focusing our attention on the re-opening of the business and welcoming back dine-in customers as government restrictions eased. I am particularly proud of the way that our teams have pulled together to support one another, ensuring a great experience for our customers and delivering a strong like-for-like sales outperformance versus the market. Whilst there are some well documented sector challenges to navigate in the short-term, particularly around labour availability and supply chain, we believe the group is well positioned for the long-term.” Total sales in the 27 weeks ended 4 July were £216.8m (2020: £227.2m) and there was a statutory loss before tax of £58.8m (2020: loss of £234.7m).

On Wagamama, it stated: “At the beginning of the year in support of veganuary, we made a brand commitment to have a 50% plant-based menu by the end of 2021, giving our guests more vegan and vegetarian options, including the launch of ‘Sticky Vegan Ribs’ which has had the best feedback of any vegan dish on the menu. Given trading restrictions through H1 we have seen an acceleration of the structural shift of both new and existing customers enjoying delivery and takeaway. Like-for-like delivery sales were up 146% and like-for-like takeaway sales up 90% in the last eight weeks (period ending 29 August).”

On Pubs, the company stated: “We have seen continued strong trading with like-for-like sales growth of 12%, representing a 14% outperformance versus the market. The key operational initiatives driving the performance have been: Investment in external trading solutions: Development of more than 30 covered outside areas using stretch tents and marquees to facilitate external dining all year round; crew recruitment and retention: Introducing more flexible contracted hours, a four-day working week and clear development paths through the business to provide a better work / life balance and help to attract more talent into the business; introduction of a new online booking system: maximises the utilisation of covers within the pub up to the point of arrival. We are also looking at targeted investments in the existing estate to increase turnover and build on our current accommodation facilities, with four bedrooms being added to our “Haighton Manor” pub and plans under review for further investment in accommodation at three other pubs.”

On its Leisure sites business, the company stated: “The key customer initiatives driving the performance have been: Investment in food quality: Our focus has been on improving food quality with new menus launched across all of our brands in May. Customer feedback has been very positive, in particular the new and improved dishes added to the Frankie & Benny’s menu have been very well received. Improved customer insight tools: Our partnership with Yumpingo has provided greater customer insight on both customer service standards and dish feedback. This allows us to target further improvements on future menu launches in the autumn. Delivery and takeaway performance has been very strong with delivery & takeout sales accounting for 16% of sales compared to only 4% in 2019 (for the eight week period ending 29 August). Our virtual brands continue to grow and now account for circa 50% of off-trade sales.” 

On its Concessions segment, it stated: “The international travel sector remains incredibly challenging due to ongoing changes in government restrictions and the associated cost of PCR testing. We continue to focus on a measured re-opening programme, only opening in locations with sufficient passenger volumes to support positive Ebitda delivery. We have achieved more flexible terms with the vast majority of airport partners with regards to minimum guaranteed rents (MGRs) and mothballing fees. In addition, we have flexed our operating hours to match departing flight times to minimise costs whilst ensuring we offer a great service. We currently have 21 sites open with like-for-like sales declining by 53%, 21% ahead of the passenger volume decline. Sales have benefitted from a higher average spend per passenger (due to longer dwell times) and reduced competition as other food and beverage operators manage their re-opening profile. We are only planning on a gradual improvement in airport passenger volumes through 2022 and 2023 and are managing our re-opening profile accordingly.”

The company added: “The restructuring undertaken by TRG, primarily in our Leisure division (with over a 60% reduction in sites) positions the group well to benefit from the material reduction in supply across the UK hospitality market, presenting an opportunity to take carefully targeted market share. In the group’s current trading estate of 355 sites (excluding 42 Concession sites) there has been a 21% reduction in food and drink outlets in neighbouring locations (defined as within 0.5 miles of each Wagamama and Leisure site location, and within five miles of each TRG pub location). The delivery market has grown rapidly over the last few years and is forecast to be worth £10.5 billion in 2021, a 36% increase versus 2019. It is projected to increase by a further 20% over the next three years. TRG is well placed to benefit from this growth through its Wagamama, Leisure and virtual brands, which provide customers with a broad range of cuisine types. Our Wagamama and Pubs businesses have a track record of delivering strong returns on new site openings, with Wagamama (excluding delivery kitchens) having delivered over 40% returns on invested capital (based on new openings between 2015 and 2017) and pubs delivered returns on invested capital of over 25% (on an adjusted leasehold basis). Additionally the five Wagamama delivery kitchens (open for more than 12 months) have generated over 75% returns on invested capital. The strength of trading of these businesses since re-opening has reinforced our belief on the roll-out potential and we have made good progress on our expansion pipeline as follows: We are on track to open five new restaurants in FY21 including sites already trading at Paddington and the West Midlands Designer outlet. The group is targeting a roll-out of five to seven new sites per annum from FY22 onwards. Our market analysis and insight gives us confidence that we can expand the estate to between 180 and 200 Wagamama restaurants (from 144 today); we are on track to open up to five new delivery kitchens in FY21 including sites already trading at Walthamstow and Forest Hill. The group is targeting a roll- out of five to seven new delivery kitchens per annum from FY22 onwards. We continue to believe the roll-out potential for delivery kitchens is in the region of 20 to 30 (from seven today). In FY22 we expect to open three new pubs and invest in our existing pubs to develop accommodation opportunities. From FY23 we expect to open approximately five new pubs a year as we develop our property pipeline. Our long-term ambition remains to double the size of our existing estate to 140-160 pubs (from 78 today). We expect to open three to four new US sites in FY22 under our JV partnership with the first two sites expected to be in Atlanta and Tampa. We also expect to open at least five new international franchise sites in FY22 predominately in Italy and the Middle-East. We remain disciplined in the way that we grow the estate, focusing on delivering good sustainable returns for our shareholders.”


Wetherspoon to cut food and drink prices by 7.5% on Tax Equality Day: JD Wetherspoon is to cut the price of all food and drink in its pubs by 7.5% on Thursday 23 September – to highlight the benefit of a permanent VAT reduction in the hospitality industry. Prices at the company’s 862 pubs (not including Republic of Ireland) will be reduced for one day only to mark Tax Equality Day. At present all food and drink in pubs is subject to 5% VAT as a result of the VAT cut by the chancellor in July 2020. This will change on Friday 1 October, when the VAT rate will rise to 12.5%, with the government’s aim of returning VAT to 20%, in stages, in 2022. By comparison, supermarkets pay zero VAT on food, and are able to use that saving to sell alcohol to its customers at a discounted price. Wetherspoon chairman, Tim Martin, said: “Taxes should be fair and equitable. However, it is unfair that supermarkets pay zero VAT on food, but pubs and restaurants, in normal circumstances, pay 20%. Pubs have been under fantastic pressure for decades due to the tax disadvantages that they have with supermarkets. Customers in our pubs will find the price of their food and drink will be lower than normal on Tax Equality Day. However, as a result of the VAT increase to 12.5% on 1 October, we will have to increase food prices. Therefore, on Wednesday 29 September, we will increase prices on our meals by 50p. We urge the chancellor to create tax equality between pubs and supermarkets by making the current VAT regime for pubs permanent. He should note that the main impact of tax inequality is on high streets and town and city centres, which heavily depend on a diversity of prosperous hospitality businesses for economic, social and employment success.” In Scotland, prices will be reduced on meals and non-alcoholic drinks only due to licensing restrictions.

Sadiq Khan calls for ‘Covid Recovery Visas’ to tackle labour shortages: Sadiq Khan has called on the government to introduce emergency visas to solve labour shortages in London. A combination of factors including post-Brexit immigration rules, the covid-19 pandemic and an ageing workforce has put “a huge strain” on certain industries, the Mayor of London said. Speaking at a Bloomberg event, he called on the government to introduce a new time limited ‘Covid Recovery Visa’ to “help attract international workers into key roles to support our economic recovery”. The Evening Standard reported he said: “Many sectors that are important to our economic recovery, from hospitality to haulage, construction to culture, are now under huge strain due the lack of EU workers and the government’s immigration rules. We know there are countless struggling businesses across London that are working hard to get back on their feet, but are now simply unable to hire the staff they need. Given the urgency and the scale of the challenge, I’m calling on the government to change its immigration system so that it meets our economic needs and helps our businesses. This must include introducing a ‘Covid Recovery Visa’ to help attract international workers into key roles to support our economic recovery. London has unique needs when it comes to attracting workers from around the world – and so a more tailored, dynamic approach is urgently required.” Khan added a “flexible” migration system “will always be crucial to London’s competitiveness and our ongoing success”.

Vaccine passports imposed with a week’s notice under crisis plan: Vaccine passports for nightclubs, music venues, festivals, business conferences and football stadiums will be introduced with only a week’s notice under contingency plans to deal with a surge in coronavirus infections, the government has said. Vaccine passports will be introduced for all large venues, indoors and outdoors. They will be required for entry to all nightclubs, indoor venues with 500 or more people, outdoor settings with more than 4,000 people and all settings with more than 10,000 people. There will be a limited number of exemptions for churches and other religious settings, wedding ceremonies, funerals, protests and “mass participation” sporting events such as marathons. The government says it will give businesses as little as one week’s notice before introducing vaccine passports, arguing that it needs to be able to respond at short notice to increases in infections. Ministers argue that vaccine passports will allow venues to remain open that would otherwise have been forced to close and that there is “good evidence” that they will reduce transmission.

Brewhouse & Kitchen reports 16% sales growth: Brewhouse & Kitchen, the 23-strong brewpub brand, has reported sales up 16% compared to 2019 for the last eight weeks, with strong performance across the estate despite the challenges of operating in their London sites. Group operations director Mark McFadyen, said: “I’m very pleased with this performance, which also includes a period of development closure, as we continue to invest in our estate. We’re really proud of our recent team performance, though it has been challenging as we, like everyone else, have seen some challenge on recruitment, in particular in our kitchens. We worked hard throughout the lockdown periods to get good overall retention of team and continue to maintain a strong culture of developing our people. Our web-shop and experience business has bounced back well and guests have come back from lockdowns ‘well versed’ in craft beer and clearly want a premium and informative pub experience. What has been pleasing this year is to also see this translate into strong guest satisfaction metrics, as we are seeing consistent improvements with our average recent review ratings up at an average of 4.5/5. We have challenged ourselves to be the highest performing managed house pub business, in a trading environment where the guest has never been more demanding.”

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