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Morning Briefing for pub, restaurant and food wervice operators

Mon 23rd Jul 2012 - Domino’s, Spirit and Fat Cat Bars

Story of the day:

Rooney Anand – minimum pricing should be “monitored, refined and reworked if necessary”: Greene King chief executive Rooney Anand has called on the government to ensure minimum pricing for alcohol is “monitored, refined and reworked if necessary”. Speaking after last Thursday’s Health Select Committee's support for minimum pricing, Anand said: “We have supported, and advocated, a wide ranging and serious discussion into the effects of alcohol consumption on British society. We particularly welcome the committee’s support for minimum unit pricing for alcohol, an important policy initiative in the fight against irresponsible retailing and consumption of alcohol. We believe that 50p per unit will go some way to addressing alcohol misuse problems, without unfairly prejudicing responsible drinkers. We would like to see the level of 50p per unit set for a significant period of time, in order that a proper impact assessment can be made and absolutely agree with the Health Committee that this should be monitored, refined, and reworked if necessary to ensure it remains effective.” He added: “In addition to minimum pricing, we also support the reports’ recommendations for a clearer set of objectives and measures that all stakeholders can work towards and welcome a review of alcohol guidelines; in particular we would support further work to make the understanding of alcohol units clearer to consumers. We recognise the drinks industry has an inherent responsibility to assist in tackling the UK’s binge drinking culture and we are keen to play our part. As an industry, we need to work more closely with other stakeholders to determine why alcohol related illness and crime is rising despite overall consumption falling, and jointly do something about it.” 

Industry news:

Restaurants look to introduce variable pricing: Restaurants are to trial a new airline-style online reservation system called Bookingrid. Under the scheme, customers would pay in advance for a table, spending more the closer they book to the time they want to turn up. Restaurants would “sell” tables with a minimum non-refundable spend per head — for instance £100 for a table for two - with customers paying by credit or debit card at the time of booking. Tables would could cost more at more popular times — such as weekends — than at quieter times with venues setting prices. Customers who can’t make their reservation will not be able to get a refund but could “sell” their table to a third party via the system, negotiating the price at which it is passed on. The idea is that “variable pricing” would boost profits at peak times while ending losses caused by “no shows”. The system has been devised by businessman Surgey Dugaev, who said he created it after becoming frustrated with trying to book popular restaurants at the last minute. A spokesman for Bookingrid said: “It’s good for both customers and restaurants and is no different from the way we now buy airline tickets.”

Alcohol consumption in the off-trade takes a plunge: Figures produced by The Grocer magazine show alcohol consumption in the UK off-trade sector has taken a steep dive in the past year. Based on Neilsen figures the magazine estimates that beer volumes have fallen 164 million pints, 27 million fewer bottles of wine were sold and there was a reduction of six million in the number of bottles of spirits sold. A total of 59 of the top 100 drinks brands saw reduced volumes year-on-year. Six of the top ten brands in the UK have shown value increases, but only one has increased volume in the past 12 months. Overall, volumes reduced by four per cent in the off-trade over the past year. “The prolonged period of poor weather has accounted for almost half of the year-on-year volume decline,” AB InBev UK off-trade director Simon Harrison told the magazine. Tax hikes and rising costs have pushed prices up by seven per cent on average, according to Nielsen, with category hikes ranging from four per cent for sparkling wine to ten per cent for cider.

Local newspaper throws weight behind e-petition: The Norwich Evening News regional newspaper, which is running a “Love Your Local” campaign, has thrown its weight behind the e-petition aimed at forcing a re-think on the beer duty escalator. The move comes after local MP Chloe Smith backed the beer duty escalator as a way of re-balancing the government’s finances. David Wilson, director of public affairs at the BBPA and a Norfolk resident, told the newspaper: “We know that Norwich and Norfolk folk love their pubs and want to keep them. Cutting beer tax is the best way the government can help our pubs to thrive. Norwich North MP and Treasury Minister Chloe Smith needs to see the scale of the public opposition to year-on-year above-inflation beer tax increases. Let’s see the City of Ale lead the way in opposing the beer tax escalator.”

Starbucks opens second Evolution Fresh juice concept site: Starbucks has opened its second Evolution Fresh juice bar site in Seattle, four months after the first one opened. Sites offer a juice tap wall where customers can order hand-made smoothies or blended juice drinks. The new site has more “grab-and-go” options. Starbucks head of global development Arthur Rubinfeld said: “The juice trend on the West Coast is rising, and in Seattle particularly.”

Pub and restaurant operator makes VAT point: Nigel Oddy, who owns the four-strong Oxfordshire Hotels country hotels and country inns business with his wife Susan, has had a letter printed in The Sunday Times making the point that VAT levels on food in the on-trade versus the off-trade are unfair. Oddy, who had his letter printed in the business section, wrote: “As an owner of four restaurants, I welcome good competition from fellow restaurateurs. But recent supermarket advertising that, in appearance, is aimed directly at restaurants – the £10 dinner for two – is not fair competition. Why should I have to charge my customers 20 per cent VAT for their freshly prepared dinner when Marks and Spencer appear to offer similar food but need not charge VAT? Solution: impose VAT at eight per cent on packaged foods in retail, and reduce VAT on food in restaurants to eight per cent. The VAT on retail food would also provide sufficient revenue for the government to consider reducing VAT to eight per cent on drinks in pubs and restaurants and to eight per cent on bedrooms - a great boost for UK tourism and for employment in the hospitality industry.”

Luke Johnson – keep head offices small and delegate: Luke Johnson, who has multiple investments in the sector, has warned of the danger of top-heavy head offices that become out-of-touch with the coal face. In a Management Today article he states: “The answer is to have a tiny HQ building and never expand beyond that single central structure. Delegate authority to the regions and empower local managers. Outsource where you can and avoid creating an organisation with personnel charts showing dozens of highly qualified bigwigs who don’t work in the field. They are rarely essential, and the resentment and office politics they cause often outweigh any possible advantage they bring to the enterprise.”

Company News:

Domino’s Pizza reports 5.7 per cent like-for-like growth in UK: Domino’s Pizza, which has 748 stores, has this morning reported 5.7 per cent sales growth in the UK in 26 weeks ended 24 June. System sales grew 11 per cent to £286.9m and profit before tax rose 15.2 per cent to £23.3m. Chief executive officer Lance Batchelor said:“We have delivered like-for-like sales growth of 5.2 per cent across the system in the first half (2011: 2.4 per cent). In addition, it has been a very busy and successful first half for our emerging German business with four new stores opened. Our franchisees have made the most of the opportunities presented by a combination of rain, sport and national celebrations and delivered some great figures during the second quarter. The coming months should provide a real opportunity for our business. We have great new locations coming into play in the UK, our 1-2-1 marketing programme is showing encouraging returns and the opportunity in Germany is looking better by the day. Add to this the best franchisees in the business and the future looks bright. Trading since the half year end has continued in line with our expectations. While the consumer backdrop remains tough we are confident about the future and our expectations for the year as a whole remain unchanged.”

Forbes names Gordon Ramsay as highest-paid chef: Forbes magazine has named Gordon Ramsay as the world’s highest-paid chef with estimated annual earnings of $38m. He operates 23 restaurants around the world but his US TV work is the main source of his income. His latest series, Hotel Hell, will show Ramsay helping small hotel owners turn their struggling businesses around. The show debuts on Fox in the US next month. US TV chef Rachel Rey is second on the Forbes list with $25m of earnings – she is the only person in the top ten who doesn’t operate a restaurant.

Fat Cat Café Bars dragged down by one site: Fat Cat Café Bars, the operator of nine high street bars and two gastro-pubs led by Matt Saunders, has reported a 6.6 per cent increase in turnover for the year to 29 February 2012 to £8,195,247 with pre-tax losses narrowing to £116,688 from £141,714 the year before. The company stated: “This year saw a welcome return to like-for-like growth for Fat Cat Café Bars, as it appeared that after two years of frantic belt tightening and subsequent declining sales for the company, the consumer started to venture out again onto the High Street. Whilst turnover was consistently up all year, Christmas was a particular success story with like-for-like sales running at some 18 per cent up, albeit against some fairly soft comparables due to the extreme weather the year before. Unfortunately our investment in The Sir Henry Morgan (SHM) just outside Cardiff did not work out. After 14 months of losses we agreed a deal with Punch to hand the outlet back to them at a nil premium as the directors felt that the SHM's trading performance was unlikely to improve in the short to medium term. The SHM was handed back to Punch on 31 January 2012. Total losses for the year for the SHM amounted to £133,837 and are included in these accounts. On 2 January 2012, disaster struck at Fat Cat Northampton. The site caught fire and despite the best efforts of the emergency services, was totally destroyed with just the outer structure remaining in place. Fat Cat Northampton was a very busy and profitable outlet for the company and so this will be a big loss to the company going forward. However, we expect the site to reopen in the second half of 2013. Site level EBITDA for the year, excluding The Sir Henry Morgan, was £856,480. Site level profit before tax for the year, excluding The Sir Henry Morgan, was £607,781. Sales for the first four months of the new financial year continue to be positive on a like-for-like basis. However, it remains to be seen whether the Olympic Games will have a positive or a negative impact on trade.”

Johnson looking at £9m investment in Ramsay company: Serial sector investor Luke Johnson is considering a £8-9m investment in Gordon Ramsay’s restaurant company Kavalake, according to The Sunday Telegraph. No final decision has been made. The news comes shortly after accounts filed at Companies Houses revealed that the company made a pre-tax lose of £4.4m. However, the company made Ebitda of £3.3m in its UK restaurants on turnover of £38.05m in the most recent year, up from £37.90m the year before. The company lost £800,000 on its Australian operation which saw turnover climb to £7.8m in the year to 31 August 2011, up from £3.57m the year before and there were a number of exceptional items, including £2.4m of re-organisation costs linked to the departure of Ramsay’s father-in-law Chris Hutcheson from the business.

Coventry nightclub loaded up a dozen extra conditions: A nightclub in Coventry has been allowed to keep its licence but subject to a dozen new conditions. Iglu in Spon Street had been the subject of a licence review last week after concerns were raised about excessive noise late at night while several incidents of violence at the venue were reported to Coventry Police. New conditions include carrying out full searches of all customers and handbags, staff to be trained on dealing with conflicts and pouring all drinks into plastic cups after 1am.

Former Luminar nightclub will be turned to homes: A derelict former Luminar nightclub will be replaced with flats and retail space after councillors gave the scheme the green light. Redhill's former Liquid and Envy, on Station Corner, will retain its locally-listed facade, but the rest of the building will be demolished and transformed into 47 homes, with the ground floor becoming a shop or other retail use such as a bank.

Le Bistro Pierre reports turnover and profits boost: Le Bistrot Pierre has reported an 18 per cent increase in turnover to £10,092,685 and a 228 per cent rise in pre-tax profit to £425,452 in the year to 31 December 2011. Two new sites opened, one in Stockton Heath and one in lkley, during the year. The company saw a 4.2 per cent increase in like-for-like sales. The company stated: “The apparent large increase in profit arose because of the low profit in 2010, a year in which two new sites were opened and two existing sites underwent major refurbishments.”

Louth couple take on second site: Entrepreneur Wendy Johnson has taken on her second site in Louth, Lincolnshire. Wendy Johnson has converted Ye Olde Whyte Swanne, a coaching house dating back to 1612, to a pub focused on seafood. She said: “Lobsters, mussels, barracuda - these are just a few fresh seafood dishes we will have on our new menu. We will get it fresh from the Grimsby Docks, and the reason why we chose this is because no one else has a fish restaurant around here.” Johnson also owns Smokey Joe's American Diner in the town, with her partner John Shields.

Spirit leased launched cask ale package: The leased division of Spirit, which runs around 500 pubs, has launched an “unparalleled cask ale package” to help their licensees tap into the increase in consumer demand for a variety of real ales. Alongside the 88 ales always available to licensees, Spirit Leased Brew Master’s Choice now provides 12 independent seasonal ales available on a six week rotation. Managing director for Spirit leased Chris Welham said: “Our Brew Master’s Choice allows our licensees to enhance what is already a very extensive selection of major real ale brands in their pubs by providing seasonal brews by different breweries from up and down the country.” To participate in the Brew Master’s Choice, Spirit licensees must be accredited by Cask Marque to ensure quality is maintained. All new licensees are required to participate in the BIIAB Level 2 Award in Beer and Cellar Quality training or equivalent.

Pure to open third site: Healthy eating chain Pure is set to open its third site. Pure already has two sites on Beak Street and Goodge Street in London. Its latest site is on Shaftesbury Avenue will open on Monday 30 July, and will offer salads, stews, soups, toasties and flatbreads.

Owner of upmarket Birmingham venue collapses: DBT Bars, the operator of upmarket Birmingham venue The Vaults, has been placed in creditors’ voluntary liquidation. The venue fell into administration three years ago, co-owned by digital entrepreneur Russell Townsend at the time, with debts of £506,376.

Pierre White site to open in Nottingham: Celebrity chef Marco Pierre White is to see another restaurant bear his name. This time, a Marco Pierre White Steakhouse Bar & Grill will be opening at the city's Alea casino. Last month, he opened a Marco Pierre White Steakhouse Bar & Grill at the £20m Hotel Indigo Newcastle. 

Chameleon Bar and Dining reports turnover and profit rise: Chameleon Bar and Dining, the six-strong company led by Phil Strong and chaired by Alastair Arkley, has reported turnover rose to £4,481,817 in the year to 31 March, up from £4,363,588 the year before. Pre-tax profit rose to £109,721 from £75,313 the year before. The company stated: “(We have) recognised that there is a significant benefit in offering good quality food with ingredients sourced locally and have successfully moved the business emphasis away from bar trade towards other sources of income, in particular food. In the year, the gross profit from those other sources of income now represents over 50 per cent of total gross profit. Within the estate freeholds continue to perform well and the company’s intention is continue to acquire freeholds.” The company decided not to renew the lease on Enterprise Inns’ Grey Hen during the year because of the company’s strategic plan to move towards food and accommodation. Chameleon has taken a lease on Thwaites Boatyard pub because it is “more closely aligned with the strategy of destination food”.

Kentucky Fried Chicken launches degree course: KFC, which has 840 sites in the UK, has teamed up with De Montford University to offer a BA Honours degree in business management. The company is spending £800,000 on the initiative, which will see 60 restaurant managers earn an honours degree by 2017. KFC funds half the £9,000 three-year cost, with managers themselves paying the rest. Managers will have to attend 12 to 14 sessions at De Montford University, with KFC’s own training courses counting toward the degree. Meanwhile, the company is investing £24m this year opening 35 sites – it has posted 24 consecutive quarters of like-for-like sales growth in the UK.

Paul Hickman goes undercover in Birmingham: Peel Hunt analyst Paul Hickman has spent a day in Birmingham assessing the health of the pub industry in a market away from the south-east, and comparing the positioning of different operations in their respective markets. He was struck by the “competitiveness of Wetherspoon in its city centre setting (although Marston’s is equally competitive in some areas), while Greene King offers outstanding value in the community”. He added: “Mitchells & Butlers in the three settings we visited were generally upmarket from there. The pricing of the Harvester was radically different. There was a shortage of value offers, and instead the menu appeared structured to encourage volume for price. Main courses themselves were priced over an enormous range (burger at £7.49 to fillet steak at £16.99) and all came with a choice of additional sauce, rice/potato, and unlimited salad, plus additional side dishes priced £1.49-3.99. Birmingham offered us a shortage of direct price comparisons. Instead we were able to observe the effectiveness of local market strategy. From the customer volumes we were able to observe a critical daypart, it was clear that Wetherspoon (Buy, TP 490p) was hitting all the right buttons in the city centre market. Equally we were impressed with Greene King’s (Buy, TP 617p) clear success in its community market, with convincingly high seat occupancy during the late lunchtime period. Both companies demonstrated a model that appeared robust and replicable in a large range of locations. Mitchells & Butlers (Hold, 250p) on the other hand, despite being well represented in the city, was in locations that were somewhat specialist and seemed to us generally positioned upmarket as a whole.”

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