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Morning Briefing for pub, restaurant and food wervice operators

Fri 16th Mar 2012 - Admiral, Jamie Oliver and Bath Ales

Story of the day:

Admiral Taverns completes first few freehold option leases: Admiral Taverns, the 1,200-strong operator of tenanted pubs, has completed its first handful of freehold option leases. The scheme, which the company launched last November at the SIBA Pub Retail Conference, is aimed at micro brewers. It allows a micro brewer to tenant a pub from the disposal estate with an “option” to buy the freehold of the pub at the end of the third year at a fixed price in the region of ten to 15 per cent above book value. Director of property at Admiral Andy Clifford said the scheme was similar to Project William – the Everards scheme for micro brewers - but with “bells and whistles”. The lease allows a micro brewer tenant, who is free-of-tie on their own products, to invest in the pub in the knowledge that the freehold is buyable for a confirmed price. For Admiral, the scheme creates better returns once the pub has seen investment and the likelihood of a sale above its book price. Clifford told Morning Briefing: “It’s clearly an incentive for a tenant to invest in one of our pubs and the more successful the tenant is, the more likely they are to buy the pub freehold for the agreed price. In the meantime, Admiral gets a better return and the prospect of a sale above book value.” The scheme has already been trialed at a small number of pubs within the existing estate. “It’s been a very soft launch so far but we’re already receiving interest from SIBA members,” added Clifford.

Industry news:

Council spends £23,000 unsuccessfully defending Cardiff saturation zone: Cardiff’s saturation zone policy has been overturned seven times by magistrates in the past three years. This week, the council’s licensing sub-committee itself overturned the policy to grant a new restaurant an alcohol licence. The restaurant, Double Super Happy, will emphasise the theatre of food by preparing dishes in front of diners. The owners, David Griffiths and Matthew Dalley, also run tapas bar Pica Pica on Westgate Street. 

ALMR urges government to bring in tax reform: Pub and bar operators are urging the government to give the sector greater stability so it can boost its role as a major job creator and attractive career path for Britain’s young people. New research released by the Association of Licensed Multiple Retailers (ALMR) shows the licensed hospitality sector was responsible for generating one in six of all new jobs among 18-24 year-olds last year, with figures continuing to improve. Strategic affairs director Kate Nicholls said: “Ultimately, we want investment from the Chancellor to help us grow – if we can deliver these numbers of new jobs without it, just think what we could do with support.”

BBPA reports income drop: Trade body the British Beer & Pub Association has reported a drop of £246,000 in its income to £2,213,133 for its most recent year to 30 September 2011. It had an operating loss of £653,270 but has cash reserves of £8,483,236.

Company news:

Tragus agrees new lending terms: The owner of Café Rouge and Strada, Tragus, has agreed new lending terms with its banks ahead of a possible covenant breach, according to the Daily Telegraph. Tragus, which is owned by private equity firm Blackstone, has been given more headroom on its £230m of debts in exchange for a one-off fee of £10m and increased interest payments. Blackstone will inject a further £15m to bring down the overall debt figure. Tragus runs 125 Café Rouge restaurants, 75 Strada sites and 85 Bella Italia restaurants. 

Spirit ups tenanted sale number: Spirit Pub Company has added another 30 pubs to the 50 tenanted pubs it had already planned to sell - the company, which runs 550 tenanted pubs, will dispose of 80 tenanted pubs now. Spirit chief executive Mike Tye told The Financial Times: "Our principle is prune once, prune hard." Panmure analyst Simon French said: "Rebasing some of the rents, selective investment and more pro-active management of the estate should provide the foundations of a turnaround over 18-24 months."

JD Wetherspoon secures landmark Bury building: JD Wetherspoon has signed a 30-year lease with the local authority in Bury St Edmunds to occupy the landmark Corn Exchange building. JD Wetherspoon will be spending about £1.4million refurbishing the Grade II listed building. Work on the upper floor will start this month. Council leader John Griffiths told fellow council members: “Taxpayers will get around £80,000 a year and Wetherspoon will be spending well over £1million refurbishing the building. This beautiful building will be widely accessible to the public.” The new Wetherspoon venue is expected to open this summer.

Greene Room to close in Milton Keynes: Greene Room, the cabaret bar venue in Milton Keynes opened by No Saints, is expected to close this weekend. The venue opened last May and sources close to No Saints, headed by former Luminar boss Stephen Thomas, have indicated to Morning Briefing that the venue will be moved elsewhere in Milton Keynes. The current Milton Keynes site holds 200 and it is thought No Saints has decided venues need more capacity - the proposed Cardiff site holds 500.

Mitchells & Butlers IT director leaves: Mitchells & Butlers (M&B) IT change and technology director Mike Sackman has left the company to take on an executive board level role at Argos. M&B has brought in an interim head of IT, Tony Bentham, to oversee a restructure of the IT department.

St Austell Brewery teams up with Rick Stein for beer and mussels event: Cornish brewer St Austell has joined forces with Rick Stein for a Beer and Mussels Festival. Of the event, taking place at Stein’s St Austell tenancy, the Cornish Arms in St Merryn, next weekend (24 and 25 March), Stein said: “March is the best month in the year for mussels – any time is good for proper beer brewed by people who love what they are doing.” 

Wolseley boss Jeremy King hits out at “mendacious” Westminster regime: Jeremy King, owner of the Wolseley in Piccadilly and the Delauney in Aldwych, has told his customers that a victory over Westminster council over parking charges in the evening had been “pyrrhic” because the authority had subsequently set about converting single yellow lines to double lines. In a newsletter to customers he said: “We have avoided paying charges but now the parking has been rendered more difficult by what can only be described as an act of mendacity and obfuscation worthy of much more fascistic and feared regimes around the world.”

British Airways to open “pop-up” restaurant: British Airways (BA) is to open a pop-up restaurant in Shoreditch that will be set out like a plane cabin. Visitors will be able to taste the airline’s new in-flight menu before it’s rolled out on flights during the Olympics. The venue will also feature an art gallery where customers can view artwork planned to be added to a number of jets for the games. There’s also a small cinema showing BA’s new in-flight entertainment. The venue, called BA2012, will open between 4 and 17 April.

Jamie Oliver’s Gatwick opening to combine Union Jacks with Jamie’s Italian: A new Jamie Oliver restaurant at Gatwick airport will combine elements of his two restaurant chains – Jamie’s Italian and Union Jacks. The site will include a Jamie's Italian Restaurant, a bakery, and a Union Jacks Bar, with a traditional British menu and beers. He said: “I've worked with my team to take the best bits from Jamie's Italian and Union Jacks and build them into something beautiful and exciting just for Gatwick."

Bath Ales opens Oxford site: Bath Ales, which runs seven pubs in Bath and Bristol, has re-opened the Grapes in Oxford’s George Street. The pub was previously run by Greene King, on a lease from Oxford City Council. Retail director Robin Couling said: “We’re growing bigger and thought it was time to look further afield.”

Scott & Quaff to open seventh pub next week: Scott & Quaff, the high quality multiple with six pubs in the Midlands, will open their seventh site next Monday (19 March). The pub, Crown and Sandys in Ombersley, closed in January after the company running it went under. 

City Pub Company paid £2.7m for Bath site: City Pub Company, the new Enterprise Investment Scheme (EIS) company set up by David Bruce and Clive Watson, paid £2.7m for its Bath acquisition – one of three pubs it bought this week for a total of £3.5m. The Cork in Westgate, which includes two bars and an outside terrace, was acquired in 2009 by local entrepreneurs Kingsley Webb and Joe Baio from Mitchells & Butlers - they invested £250,000 in it. 

Baa Bar set for third Liverpool site: Baa Bar, the bar operator headed by Elaine Clarke, will open its third site in Liverpool, on Victoria Street, early next month. Baa Bar also operates three venues in Manchester and one in Nottingham.

McDonald’s trialing baked goods through the day: Fast food giant McDonald’s is trialing the sale of baked goods throughout the day at 600 sites in the New England area. The items include a cheese Danish, banana bread and a vanilla scone. A Fruit & Maple Oatmeal has been added to the breakfast menu, which accounts for 25 per cent of sales in the US. Eric Giandelone, director of food service research at Chicago-based Mintel, said: “These items aren’t traditional McDonald’s items, but they’re what you see at a Starbucks - places that McDonald’s increasingly competes with.”

Friday opinion:

Subject: Coffee challenge, the alcohol “problem” and tenanted sector standards
Authors: Paul Charity, Paul Chase and Andy Slee

Wake up and small the coffee by Paul Charity: I have a morning ritual that I’m happy to tell you about. I drive down to our local petrol station, open 24 hours a day, to buy a newspaper and coffee. When I arrive at around 7am I normally have to join the end of a queue of people – invariably builders making an early start – to buy my Coffee Nation cappuccino. The sight of half a dozen people waiting to spend £2.25 to buy a coffee still strikes me as slightly surreal. It is a phenomenon that has a relatively short history. Good coffee has been widely available in a retail context for little more than a decade after all. It’s an area of the market in exponential growth. The UK branded coffee chain market grew sales by 10 per cent last year to hit an estimated turnover of £2.1bn, with the market doubling since 2005. A remarkable 600 new coffee outlets opened last year, around a dozen a week. One in ten people visit coffee shops daily and 39 per cent of people surveyed by market specialists Allegra Strategies stated that they visited coffee shops more often than 12 months ago. To put this total spend in context, coffee shops now achieve a full 10 per cent of the total annual spend of the entire 50,000-strong pub market. There’s an obvious need for the pub sector to up its game on the coffee front. It’s an area where even the biggest players have struggled to get their offer right. A board director of a major managed pub company once told me that the main problem is one of finding the right degree of focus. With so many other moving parts in the mainstream pub offer, it’s an obvious challenge to provide the appropriate amount of training and development to ensure quality coffee is served every time. And then there’s the considerable cost, many thousands of pounds, involved in acquiring a decent coffee machine. To be fair, there is a lot of progress being made. The boss of a Midlands operator of community pubs told me recently that the company has made real inroads on the quality coffee front. One unlikely site, for example, racks up £1,000-a-week in coffee sales after the company invested heavily in equipment and Barista training. But it’s still worth reminding ourselves of the size of the prize here. Overall sales in the branded coffee market are forecast to jump by a further £1.1bn in the next three years. At my local petrol station, a helpful employee tells me they sell more than 200 coffees a day during the week, producing £400 of turnover per day. Whitbread’s Costa Coffee arm was advertising just recently in magazines like Forecourt Trader and Convenience Stores, trumpeting the profit potential of one of its Coffee Nation/Costa machines. Stockists, Whitbread reported, could earn £40,000 a year in profit from renting one of its machines. Coffee, like beer, is a product for which consumers will pay a premium, assuming it’s of the right quality. Like draught beer, good quality coffee isn’t available in the majority of UK homes. But the two products fall into the affordable treat category that consumers are loathe to give up even in the toughest of times. Makes you wonder whether the time has arrived for a quality accreditation body, like Cask Marque, for coffee in UK pubs – Coffee Marque.
COMING NEXT WEEK: Propel visits the Starbucks concept store in Amsterdam
Paul Charity is managing director of Propel Info

When did alcohol become a social problem by Paul Chase: At what point does a social phenomenon become a “social problem” and who decides? This question has intrigued me ever since the spectacular return of “alcohol as a social problem” in the wake of the Licensing Act 2003. As we await with baited breath the government’s new Alcohol Strategy, it is worth just reflecting on this. In the research and reading that I’ve undertaken in preparation for my forthcoming book - snappily entitled “Culture Wars and Moral Panic, the story of alcohol and society” - what has struck me is that the vast volume of words written about alcohol, and its relationship to society can basically be divided into two categories: Problem Drinking and Pathological Drinking. Serious research into normal, everyday social drinking is conspicuous by its absence. This is curious – not least because some 25 million people in this country drink alcohol at least once a week. Wouldn’t you think that social scientists and social anthropologists would be asking why? Instead, the narrative about alcohol has been dominated by clerics and medics for over 150 years. The “industry perception” – of the public, the media, the politicians – is seen through the frame of reference of those for whom alcohol is a source of problems and illnesses. And in the current troubled debate about alcohol and society it is Medical Temperance that “owns” the industry perception; medical scientists who speak with cultural authority about the social phenomenon of alcohol use, and who invite us to accept that the “meanings” they attach to alcohol use is the consensus view. And they have the ear of government. The ALMR campaign on “Industry Perception” is a timely attempt to change the narrative about alcohol; to contest the remorselessly negative narrative of the moral entrepreneurs of Medical Temperance; to highlight the social benefits of the pub, and the economic benefits in terms of jobs, skills development, and opportunities for young workers that a vibrant licensed retail sector has to offer. Our fragmented industry ought to be able to unite around these positive social and economic messages at a time when government is desperate to find ways of generating growth and addressing youth unemployment. We need to engage with our detractors, with the public and with government in what Professor Joseph R. Gusfield would describe as a “contest of meanings”. All of this brings me back to the government’s Alcohol Strategy, and specifically to the thorny question of minimum pricing. Minimum pricing is a Medical Temperance measure that should be seen as but one element in their strategy to suppress the mass market in alcohol. And they seek to split the trade by offering a false prospectus. “Levelling the playing field” between the supermarket and the pub is a divide and rule strategy. It would take a very high minimum price to really do that – which is what they really want. Introduce a minimum price at a low level, thereby establishing the principle; then raise it each year by more than inflation – sound familiar? We haven’t had government-sponsored minimum pricing in this country since it was outlawed by the Conservative government of Sir Alec Douglas-Home in 1964. The one exception to this was something called the Net Book Agreement, which was an attempt to protect small booksellers from the predatory pricing of large booksellers. It didn’t work, but the unintended consequence was to deny affordable literature to an entire generation. You can see where I’m going with this! The way forward is not to reach back nearly half a century to some failed piece of market intervention. Instead we need to end the duty escalator, ramp up the campaign for 5 per cent VAT and differentiate alcohol duty levels between the ‘on’ and ‘off’ trades so as to nudge people in the right direction. This is what a progressive alcohol strategy should do. But to persuade government we need to change the industry perception.
Paul Chase is director and head of UK compliance at CPL Training

Why Punch has launched a mystery shopper programme by Andy Slee: Consumer confidence appears to have hit a real low, not helped by the British media who revel in talking us all down into a spiral of despair. Times are tough – but you don’t need me to tell you that! Without question, and by miles, the best pubs in the UK are independently run - whether they be freehouses or leased pubs. I am inspired every week on my travels by just how good they can be. In every town there are beacons of light that defy the trends and continue to perform well despite all the wailing and gnashing of teeth going on around them. It’s difficult to pinpoint what makes these pubs stand out because every one is different. But one common theme is good standards throughout the pub, helping to give a value-for-money experience. Value-for-money, though, does not mean cheap. There is a difference. For example, people pay silly money for coffee in Starbucks every day because they think the whole experience provides value-for-money. Remember, the cost of a coffee at home is a fraction of the cost of a can of supermarket-subsidised lager! Our Punch Buying Club was set up 18 months ago to help benefit Punch Partners nationwide. We have just passed our 2,000th online member and this year will turn over £100 million. But we are always looking for ways to improve and help our partners. That’s why we have teamed up with Cask Marque to launch what is in effect the Punch Mystery Shopper programme. It’s open to any Punch pub in the UK, costs nothing and, assuming a basic standard of line cleaning, involves a Cask Marque auditor visiting the outlet unannounced to look at the standards of the pub. The auditor gives an on-the-spot objective review of what’s going well and what could be improved from a customer’s perspective. This involves the Cask Marque auditor making himself or herself known once they have done the checks and start the feedback there and then - if it’s timely. Either way, they will leave a copy of their thoughts on site and send a copy to our local business relationship manager. We’re not looking for Savoy Hotel standards and every question focuses on things that are directly in the control of the partner to do or improve. The whole scheme has been designed so that it’s within every pub’s direct control as to whether they pass or fail. These items include: cleanliness of car park, bar staff service standards, toilets, drinks and food service (where applicable). They are the key area that will decide whether customers make a return visit rather than staying at home in front of X Factor - or visit a competitor’s pub. Punch and our partner suppliers are making a major investment in this scheme and are anticipating 1,000 Cask Marque visits in 2012 with the aim of helping to improve retail standards in our outlets and, in turn, value-for-money to our customers. Those licensees who achieve the right standard will be awarded prizes to help build their business. More significantly, we’ll help them Press Release their award locally to help them stand out from the ever-increasing competition. This could be the most ambitious mystery customer programme ever mounted in the sector - we’d like to help 1,000 partners improve their offer. The audit will be done by Cask Marque, a widely respected body throughout the on-trade that provides a real stamp of authenticity. This vital retail audit is free for our licensees. They say that if things are too good to be true there must be a catch. On this occasion there isn’t one.
Andy Slee is director of central operations at Punch Taverns and director of its Buying Club

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