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Morning Briefing for pub, restaurant and food wervice operators

Fri 11th May 2012 - Greene King, VAT and Friday Opinion

Story of the day:

Greene King highlights London estate strength: Suffolk-based brewer and retailer Greene King has highlighted the strong trading within the two London estates it acquired last year, Realpubs and Capital Pubs. The company told City analysts that Realpubs achieved an average weekly turnover of £24,800 per week per pub, with food mix of 34 per cent and EBITDA margin of 36.5 per cent producing £450,000 trading profit per pub. Its Capital pubs acquisition is producing an average of £20,100 of turnover per week per pub, with a food mix of 25 per cent and EBITDA margin of 34 per cent producing trading profit per pub of £310,000. Greene King reported that two pubs from its own estate had been converted to Realpubs trading style - The Maynard Arms is producing a 63 per cent Return on Investment. Overall, synergy capture is on track with the removal of one head office and drinks supply moved to Greene King. Like-for-like sales at its 266 pubs within the M25 was 6.7 per cent in the 50 weeks to 15 April, compared to 4.6 per cent in the rest of the estate. The 47 Realpubs and Capital Pub Company venues produce £52m of annual turnover and circa £19m of annual post synergy EBITDA. Analysts were told there are a further 20-30 Greene King sites that could be converted to the two formats.

Free Report: Paul Charity has written a 12,000-word report on key menu trends, emerging concepts, social media and other key areas of the US foodservice market and their significance to the UK market. The report, based on a visit to the National Restaurant Association show in Chicago, is produced in conjunction with the Association of Licensed Multiple Retailers and sponsored by CPL Training. It is free and is available by e-mailing Paul Charity on

Industry news:

Ireland retains lower VAT for hospitality until 2013: The Irish government has decided to retain a reduced rate of nine per cent VAT until 2013 after 30 per cent of restaurants in the country reported that it had allowed them to hire new staff. Tourism Minister Leo Varadkar said the measure had worked well, bringing an increase in employment to the sector and lowering prices. He said: “It is particularly good news for The Gathering Ireland 2013, the year-long festival of festivals taking place next year, as it will help to achieve our target of bringing an extra 325,000 visitors to Ireland.” The retention of the rate was indicative of the importance the government attached to the tourism industry, he added. 70 per cent of restaurants have said the reduction of the VAT rate in 2011 has helped business. Adrian Cummins, Restaurant Association of Ireland chief executive, said: “I am happy to see that the Minister and the rest of his colleagues in this government have noticed how much the tourism industry means to the country. With the reduction in VAT for restaurants and tourism services, operating costs can be lowered and more people could be employed in this sector.”

Gas meter readers spy on pubs: The York Press has reported that gas meter readers are being asked to spy on pubs that may be illegally screening football matches. Security company G4S has admitted asking its meter readers to work “out of uniform” while carrying out certain “non-utility data collection contracts”. The newspaper claims G4S staff have been sent into pubs in York and North Yorkshire to carry out undercover checks as part of a nationwide policy. A Sky spokesman said: “Sky's committed to protecting the interests of its legitimate commercial customers. Sky therefore employs a number of companies, including G4S, to visit pubs across the UK to help identify pubs who use residential viewing cards in breach of their Sky contract. Those premises found to be accessing Sky unlawfully may be subject to legal action - much in the same way as they would if they didn't have a TV licence.”

Poll show British public wants more support for pubs and restaurants: The majority of the British public want the government to do more to support pubs and restaurants by granting meaningful tax breaks, a new national study has found. More than two thirds of 2,000 people questioned in the research commissioned by Fourth Hospitality said the government should follow the example of France, which lowered VAT charged to bars and restaurants in 2009. The lowered rate currently stands at just seven per cent compared to the national standard VAT rate of 19.6 per cent. Nick Bish, chief executive of the Association of Licensed Multiple Retailers, said: “It is good to see that the great British public values the pub and sees it more than just a place to go – recognising that it has a part to play in solving some of the problems with the economy. Supporting the licensed hospitality and retail sector will bring positive results, especially in terms of pubs hiring more people which in turn helps the government’s books and will be money well spent.”

Burger King stems sales decline: Burger King has reported its best sales growth in two years. Like-for-like sales for the U.S. and Canada increased by 4.2 per cent for the first quarter, compared with a decline of six per cent in the year-earlier quarter. In Europe, it saw a 6.6 per cent increase. Last month, Burger King launched its biggest ever menu overhaul with 13 new menu items included premium salads, snack wrap sandwiches, fruit smoothies, chicken strips and frappe drinks.

Yum! Brand to open 150 sites in Chinese electrical stores: Yum! Brands will open KFC and Pizza Hut restaurants inside stores operated by Suning Appliance Co, one of the largest electrical appliance retailers in China. Openings will include KFC, Pizza Hut, Little Sheep and East Dawning brand restaurants.

Company news:

Antic Pub Company opens the Clapton Hart; acquires another site: Antic Pub Company, the London pub operator, re-opened the former White Hart pub in Hackney as the Clapton Hart last night. Closed since 2008, the project has been one of Antic’s most ambitious requiring “months of meticulous care and attention”. Dating back over 270 years, the former stagecoach inn once stood at the gateway to the marshes, offering patrons food, ale and some respite from the threats of marauding highway men. Meanwhile, Antic has also acquired The Redback Tavern in Acton, which was shut after police objections over anti-social behaviour. Antic has renamed the venue The Acton Arms and it is expected to open before the end of the year.

Whitbread wins planning consent in Glastonbury: Whitbread has won planning approval for a £5 million hotel and pub restaurant on the outskirts of Glastonbury, on the site of the former Morlands factory. A 60-bedroom 2,070 square metre, three-storey hotel, together with a two-storey pub restaurant, was given the nod of approval by Mendip planning officers this week.

Nicholson’s launches Pale Ale: Nicholson’s, the 90-strong city pub offer operated by Mitchells & Butlers launched its own Pale Ale last night, brewed by St Austell Brewery. The new beer, to be served across the estate, was unveiled at the White Swan in Covent Garden, a former O’Neill’s converted to the brand in a £650,000 investment.

JD Wetherspoon appoints new non-executive director: JD Wetherspoon has appointed Mark Reckitt as a non-executive director with immediate effect. Reckitt has been group strategy director at Smiths Group since February 2011. Prior to joining Smiths, he was chief strategy officer at Cadbury from 2004 to 2010 and held a range of strategy and finance roles at Cadbury since joining in 1989, including UK finance director.

Luminar plans to re-open Crawley nightclub: Luminar has submitted plans to re-open its Liquid Envy venue in Crawley – it closed six months ago after the company entered administration. The company has submitted a planning application to carry out external works on the club, installing new gates and timber fencing, while repainting a wall. The proposed works would create an external area on the ground floor, which will be accessible to customers and prevent people from having to leave the site if they wish to smoke. A spokesman for Luminar said: "We are looking at plans to come back to Crawley.” A decision on the planning application is due by 27 June.

Spirit Pub Company opens lease conversion site: Spirit Pub Company has re-opened The Windmill pub in York after spending £350,000 converting the venue from its leased estate to an Original Pub Company outlet. York Central MP Hugh Bayley re-opened the pub. He said: “Pubs contribute to the local economy, they are valued by local people, provide employment and help attract thousands of tourists to the city. The investment in The Windmill is good news for York and the pub industry.” Spirit operates 26 Original Pub Company sites, has identified 54 conversions within the estate and has a target of 150 plus eventually. Meanwhile, Spirit has re-opened The Woolpack pub in Norwich has a John Barras pub. 

Greene King opens Hungry Horse in Stoke-on-Trent: Pub retailer and brewer Greene King has opened a Hungry Horse at St Modwen's Trentham Lakes development in Stoke-on-Trent. Greene King has built a 200-cover pub and named it The Hem Heath."We have chosen Trentham Lakes as it presents us with a strong location in an established residential and business community near to a number of other busy retail outlets," said Ken Millbanks, group property director at Greene King.

Six pubs club together to pull in 20,000 visitors with unique beer festival: Six pubs in the village of Long Itchington, Warwickshire have joined forces to create a beer festival that attracts 20,000 visitors over a four-day period. The six pubs offer a combined 150 beers over the four-day beer festival, which took place last weekend. The idea was pioneered by Mark Carver-Smith, who runs The Green Man with his wife Sharon, a Punch Taverns pub. He decided five years ago he wanted to run a beer festival. But on a night out wandering around the other five pubs in the village, he realised that the festival would have much more appeal if it was held jointly with the other pubs in the village. Now coachloads of people travel from as far afield as Wales and Liverpool for the festival, which is held on the first weekend in May. Said Mark: “It is now a massive event and we see a month’s worth of takings in just four days. This year I took £22,600 in beer alone. It’s hard work to organise but we are unbelievably busy. CAMRA beer festivals in village halls are invariably very busy. But when you think about it, it’s often a struggle to purchase a bag of crisps at one.”

Isle of Wight licensee opens tapas bar: Businessman Matthew Parker has opened his second business on the Isle of Wight. His second business is a tapas bar called Browns, on the site of a former deli in Cowes High Street. Parker also runs the nearby Union Inn. He had faced opposition from some residents but when the plans finally made it in front of the town council and the Isle of Wight Council, both gave their support – although opposition meant a ten-month delay.

Friday Opinion:

Subjects: NRA Show Chicago, Service in the US and PPL

Authors: Nick Bish, Paul Charity and Paul Chase

A great study tour – not a pilgrimage by Nick Bish: I am not normally a great fan of trade shows; most hardware is reachable on the internet and most operators now expect suppliers to come calling. But the National Restaurant Association’s Show in Chicago is something else – it is vast, and rammed with exhibitors who were, with hardly an exception, keen to show their wares, proud of their product and engaging in their approach. On the trip last weekend to the Windy City I traversed the whole show, aisle by aisle, with the indefatigable and inquiring Ann Elliott who found something of interest round every turn – and photographed it! And in spite of the internet and virtual product sourcing there’s much to be said for weighing and feeling what you are buying. The Steelite stand was magnificently laid out and the company added imagination to quality by remembering that the tableware is, at the end of the day, a backdrop for the dishes served. On this stand the chef was serving food on to the plates so that you could see how the china complemented the cuisine – clever! The show was an impressive experience in a great city but the fact remained that retail is even more about places and people than about the products and pans, and we were able to research this side of things too – very diligently. It’s true that the Americans do focus on food and that solus bars are relatively unusual but we sought out beers and wines where we could and noted that product knowledge and service standards were high. In D4 – on East Ohio Street (but named after a Dublin postcode) we found ‘Delirium Tremens’, an 8.5 per cent Belgian champion beer that might however not get past the Portman Group strictures. We saw some casual dining brands such as Go Roma and Portillo’s where food quantity was at least as important as presentation and a very ambitious and slick food court operation at Food Life. In the same building at Macy’s was a branch of Freshii’s that is pioneering, or so it seemed, the healthy end of eating with consciously nutritious ingredients from a take-out menu. Obesity and unhealthy ingredients are on the political agenda in the US and beginning to engage public attention – but perhaps not so far down the track as we are here. The restaurant that most impressed me was Gage on St Michigan Avenue. The places on our ‘list’ were good, often excellent but Gage didn’t know we were coming. The menu was ambitious without being intimidating – brilliant chicken livers and a wonderful fondue served with French bread cut lengthwise and toasted. The waitress was outstanding – giving us time and attention without seeming to slow the pace of service to us and her other tables. I also liked the wine-by-the-glass service which involved a small carafe to take the 250ml [equivalent] serving and an elegant glass into which it was part poured – leaving the customer with control and the illusion of getting more than just a glass of wine. This was a study tour and with much to observe and learn from; it was a fantastic visit in great company but it was in no way a pilgrimage. I note from the Propel Morning Briefing earlier this week that Carlson Restaurants, owner of the TGI Friday’s brand, has commissioned UK design company Harrison to repatriate the success of the resurgent UK operation. Carlson will have noted, I hope, that it’s not just the decor but the energy and commitment of the people at Friday’s over here that has underpinned this success story. All in all I come away entirely confident that for every great place we saw in Chicago there are UK operations who could match or even exceed it in style, quality, innovation and yes – even in service standards. 
Nick Bish is chief executive of the Association of Licensed Multiple Retailers

The highs and lows of foodservice in Chicago by Paul Charity: Four days in Chicago for the National Restaurant Association annual jamboree is always a useful compare-and-contrast exercise. I still believe that there are marked differences between the US and UK markets. For a start the wet-led pub-style market is tiny in the US. And even those operators within the sub-segment have a surprisingly large amount of food content. Tilted Kilt, for example, the sports bar chain with comely waitresses, is 50 per cent food. There are other profound differences: the degree of predominance enjoyed by the franchised business model; the widespread use of television advertising; and the importance played by tipping in driving service in large parts of the market. On the last point, it was noteworthy how little the issue of service played in the seminars I attended. And there might be a slightly awkward reason for this from a UK perspective - US operators tend to have this one largely cracked. Almost without exception, each and every restaurant our party visited had knowledgeable, engaging staff who were pretty hard to fault. Even in the grab-and-go quick service parts of the market, where tipping does not feature, there was admirable eye contact, engagement and service effort. At times, it feels that the seeming lead the US had on service is a function of cultural differences – natural born optimism and bullishness are parts of the natural psyche that plays out well in a service context. On our party’s last night in Chicago, we dined at Joe Lewis’s stunning restaurant ZED 451. Chief marketing officer Jeff Carl of Tavistock Restaurants, Lewis’s US restaurant business, briefed us on the service style that’s trained into the staff at the restaurant – to treat customers like you were welcoming and then hosting them like they are guests in their own homes. (It’s also proof positive that Joe Lewis, who oversaw the design of the restaurant, knows a thing or two about foodservice). Try as we might at this and other restaurants it was impossible to catch waiting staff out on menu details and general attentiveness. On our study tour of Chicago restaurants we walked unannounced into a branch of six-strong Italian pizza and pasta chain Go Roma. Hospitality went into overdrive when we explained we were touring interesting Chicago concepts and staff insisted on cooking large swathes of the menu for us to try – and then wouldn’t take a penny in payment. And we saw extraordinary food quality in what amounted to the best food court I’ve ever come across. Food Life is at Water Tower Place on North Michigan Avenue and offers 14 food concepts under a single roof. It’s run by local operator Lettuce Entertain You and we found we were touring the venue, by coincidence, at the same time as a small group of senior foodservice executives from well-known UK operators. Although we saw a lot of impressive things, we also came across the less-than-brilliant. We visited a Five Guys branch at around 4pm and found low energy levels and a floor slippy with grease. The franchisor, who has built the fastest growing foodservice company in the US, charges a marketing fee but returns it to staff and branches that pass mystery customer audits. This particular branch would have failed. And last but not least I should mention a visit to Chicago Chop House, recommended to our party by a UK gastro-pub operator. At one time this was clearly a great steak house, but now it’s a somewhat scary place devoted to overcharging wildly. The great charisma we’d seen at other Chicago restaurants was turned over here to picking the pockets of customers. A charming waiter sold in two seafood platters before we’d been allowed to see the menus. Abusing our trust, the bill for eight came to $500 dollars for this part of the meal alone – and I won’t alarm you by detailing the total cost for nine of us. A check on Trip Advisor confirmed what we came to realise - it’s a restaurant devoted to clipping the unsuspecting. A horrible experience though it was, it couldn’t take the shine off what we’d seen consistently elsewhere – exemplary service standards.
Paul Charity is managing director of Propel Info and he toured Chicago as part of a group from the Association of Licensed Multiple Retailers 

PPL: If you don’t add value, you shouldn’t get paid by Paul Chase: I attended the ALMR’s 20th anniversary celebration on the 3 May, and what an enjoyable day it was; interesting too. One of the sessions, entitled “The Good, the Bad and the Ugly”, featured Punch Pub Company’s Roger Whiteside and Diageo’s Martjin van Buuren, both of whom acquitted themselves really well. The third participant was Peter Leathem, who represented Phonographic Performance Limited (PPL). Copyright organisation PPL is proposing a tenfold increase to its licence fees. I have a certain grudging admiration for Mr Leathem. He should be given a special ALMR award for Brass Neck. His attempt to defend the indefensible resembled a latter-day Fagin breaking-out in a chorus of “Got to pick a pocket or two boys…” in front of an audience of indignant victims! Currently PPL pick the pocket of the industry for a cool £140 million annually. In the light of that figure you can fully appreciate just what an audacious land-grab a tenfold increase in fees really is. And what is the justification? According to Mr Leathem PPL has always undervalued its “product”, but only discovered this after conducting a “robust piece of research” – and hence the need for a sudden, sharp increase in fees. Sorry about that! PPL was formed in 1934 by Decca Records and EMI; then called The Gramophone Company. Its formation followed a legal action in which they successfully sued a small coffee house in London for playing music to its customers without paying a fee to the copyright owners – them. So they established themselves in the first place by an act of corporate, legal bullying and the Copyright Acts of 1956 and 1988 then legally sanctified this licence to print money. Back when I started running licensed premises in 1979 music was recorded on circular pieces of black vinyl with grooves on them. These were called “records”, or if you were really cool you called them “grooves”. When my DJ went to our local record shop for the latest grooves, he paid for them with hard-earned cash, and in so-doing everybody else got paid; the record shop for retailing the product; the record company for producing and distributing it; and the author and performers for their creative effort. When the music was played at my venue the DJ got paid, and because the music attracted an audience, I got paid too! Not only that, but the DJ’s session gave free marketing and publicity to the music he’d purchased, and members of the audience were thereby encouraged to buy further copies of the record, so everyone got paid again! In this virtuous circle all of the above deserved to get paid, because they all did three things: they recruited customers; they supplied them with a product; and at every stage in the supply chain value was added to that product. PPL does none of these things. They don’t have customers, because customers are volunteers. They don’t morally own the product they charge for, because it has already been purchased. And they certainly don’t add value, unless you consider making mega-rich pop-stars even richer to be “adding value”. In Mario Puzo’s novel “The Godfather”, fictional mafioso Don Corleone explains the need to legitimise the rackets in the following words: “One lawyer with his briefcase can steal more money than a hundred armed robbers.” When PPL demand an extortionate increase in fees, by putting a legal gun to the head of a struggling sector, that point is proven. The problem with licensed retail is that too many people have found too many ways of screwing money out of it for nothing; it’s a big cake and everyone wants a slice. If Mr Cameron wants to turn his warm words of support for the pub trade into meaningful action, he could look at what might be done to stop PPL’s outrageous exploitation of their duopolistic market power. Time to revisit the copyright laws.
Paul Chase is director and head of UK Compliance at CPL Training

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