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Morning Briefing Strap Line
Mon 18th Feb 2013 - Armani, Balthazar and Krispy Kreme

Story of the day:

Jamie Rollo – Whitbread’s competition has intensified: Morgan Stanley analyst Jamie Rollo has argued that Whitbread’s competition has intensified. He said: “Whitbread remains a high quality investment, but we raise some medium-term concerns over growth, as competition intensifies and more capacity enters UK budget hotels and coffee shops. Costa may also need to reconsider its overseas expansion strategy towards Continental Europe, which could add risk. We think a demerger (for Costa) is unlikely as there is no longer a conglomerate discount in the share price, and Costa is looking to prove itself overseas. International expansion via franchise/JV is not really moving the profit dial. UK growth looks harder given Costa’s sheer ubiquity, a UK coffee shop density already above the US, and Tesco and Greggs entering the market. If Costa wants to get the UK to less than 90% of its EBIT, it may need to expand via equity in Europe, likely starting with France. The UK hotel market has been weak for a while. We put this down mostly to the high level of supply growth, with UK budget hotel penetration quickly gaining on other more mature markets. Premier Inn has benefitted from Travelodge’s underinvestment, but Travelodge is fighting back under new ownership. We are not changing forecasts or our £25 Price Target, and still think Whitbread is an attractive business that can generate 10-12% earnings per share Compound Annual Growth Rate. But the valuation might have run too hard, with little discussion of the risks, and we would rather wait for clarity on some of these medium-term issues before putting fresh money to work.”

Industry news:

Cold weather and sushi the key to long life: Researchers have claimed that the combination of cold weather and wasabi could be the secret to a long life. They found that the ageing process in roundworms was slowed by cooler temperatures and the vegetable wasabi, often used in sushi. University of Michigan life Sciences researcher Shawn Xu suggested that if the prices was the same in humans “we should be going to sushi restaurants more often”.

Price rise will not affect binge drinkers: Two reports have both argued that the proposed introduction of minimum pricing will not affect binge drinkers. A report by Centre for Economics and Business Research, commissioned by the Wine and Spirit Trade Association, has argued that education and locally targeted intervention has already led to fall in consumption and a 15.2% drop in alcohol-related crimes between 2007 and 2011. A separate report by the Scottish Whisky Association found that drink sales have already been declining for the past four years, along with a fall in drink-driving, alcohol-related deaths and public order offences. Rosemary Gallagher, communications manager for the association, said: “This trend further questions the need to introduce minimum pricing, a measure that is likely to be illegal and won’t reduce the number of harmful drinkers.” 

Iceland boss – I wouldn’t eat value supermarket products: Malcolm Walker, chief executive of Iceland, has warned that he wouldn’t eat supermarket value products because they don’t contain much meat. He said: “There will other things in there, whether its rusk or filler or whatever it is.” He added: “Supermarkets are on the high street, they’re very visible and they’ve taken all the blame for this and that’s not right.”

ALMR - take action on mobile phone thefts: The Association of Licensed Multiple Retailers (ALMR) has warned operators to be wary of mobile phone thefts on their premises. The trade body stated: “With violent crime decreasing, police are reported to be using petty incidents as part of a case they might be building against premises – leading to a review of the licence. The rising rate of mobile phone thefts gives them an easy target. Not only do criminal gangs target busy venues but there is also anecdotal evidence that thefts from bars are reported when customers may have lost their phone elsewhere, in order to get a crime number for insurance purposes.”

Fast-casual bakery café chains drove growth in France in 2012: Fast-casual bakery café chains drove 2012 sales growth (up 15%) for the 2013 Technomic Top 100 chains in France, which was higher than the overall Top 100 chains in France (up 4%). All but one of the five bakery café chains within the Top 100 experienced double-digit sales growth last year. The largest of these was Paul, which had over 300 locations in France at the end of 2012. Last year, Paul focused on seeking out nontraditional locations in France, such as on the high-speed rail, TGV.

Robbie Tchenguiz to lodge £100m claim against the Serious Fraud Office: Property magnate Robbie Tchenguiz is suing the Serious Fraud Office for £100m for damage caused to his reputation and business interests in the wake of his bodged arrest by the SFO in March 2011 for fraud. 

Company news:

Douglas Jack – European could provide a surge in growth for Domino’s UK: Numis Securities analyst Douglas Jack has forecast that European expansion could provide a surge in growth for Domino’s UK. He said: “Although Domino’s has already reported that system sales rose 12.7%, it is well placed to have beaten our flat UK margin forecasts and we believe margins should grow even more quickly in 2013. Results (on 25 February) should provide more information on Europe, which we believe could drive a surge in growth, closer to circa 20% per annum, in 2014 and 2015. From a higher average sales base, UK like-for-like sales have normalised in a 3-5% range, but this is being compensated by accelerating expansion, which, against a relatively stable cost base, should drive margins up. If this scenario delivers circa 20% annual earnings growth from 2014, it would imply a material under-valuation, in our view, of a company with almost zero debt and capex.”

Keith McNally – that I’m living in London will make a difference to Balthazar in Covent Garden: New York restaurateur Keith McNally has argued that living in London will mean a big difference to the Covent Garden site of Balthazar that he is opening in partnership with Richard Caring this evening. He told GQ magazine: “I am English, I was born in London and I’m living here. My children are in school here, so there’s a distinction between what some other people have done in reproducing something abroad. And I don’t think I could ever conceive of opening a restaurant in a place where I wasn’t living because, for me, it has to somehow be an extension of my life.” Jeremy King, co-director, Rex Restaurant Associates, said: “I don’t think there are ever enough good restaurants and, in many ways, when you’re creating the sort of magic that Keith is, the interior and the offer - as long as they’re well-executed - are almost incidental. The thing is, he’s a restaurateur, he works his restaurants, he knows his staff as well as he knows his customers, and that’s always the hallmark of someone who’s not just in it for the money.”

First Krispy Kreme in Scotland takes £60,000 on the first day: The first Krispy Kreme to open in Scotland, a drive-thru at a retail park on the outskirts of Edinburgh, took £60,000 on its first day of opening last Wednesday. The previous highest first day takings in the UK were £20,000. The opening of the drive-thru has led to many consecutive days of heavy traffic congestion with traffic tailbacks from the retail park to the city bypass and M8. 

Armani plans £100m hotel in London: Italian fashion design house Armani is planning to open a £100m hotel in central London. The fashion hotel is close to buying Admiralty House – and hopes to have its hotel open by December 2015. Armani has already opened hotels in Dubai and Milan and wants to create between 80 and 100 suites at the renovated Admiralty House.

Another London pub smashes guide price as developers pile in: The Florence Tavern in Islington’s Florence Street has smashed its £1.5m guide price amid a bidding war from developers. More than 30 prospective buyers made formal inspections, which resulted in 11 firm bids, mainly from cash buyers, said agent AG&G’s James Grimes. “The winning bid comfortably exceeded the guide price of £1.5 million. The new owner is a developer who aims to convert the property into self-contained flats,” said Grimes. The buyer is gaining a substantial property with a gross internal area of more than 5,000 square feet (more than 470 square metres). It is in prime residential territory only 50 metres off Upper Street and within ten minutes walking distance of Essex Road overground station, Angel and Highbury & Islington underground stations.

Luminar chief executive – ‘no question’ of increased police pressure: Luminar chief executive Peter Marks has reported that there is ‘no question’ that operators are facing increased pressure from police. Marks told Propel Morning Briefing: “The police are under their own financial pressure and are moving from to a far more ‘enforcing’ position from an ‘engaging’ position.”

No Saints faces licence review on Sutton nightclub: No Saints, the company headed by nightclub veteran Stephen Thomas, is facing a licence review on its Sutton nightclub 14 months after it opened. Police have asked for a review of Wonderland’s premises licence following concerns about irresponsible drinks promotions and drug use. The club, in Cheam Road, which has a capacity of more than 1,000 people, was opened in December 2011. But an application for licence review has been submitted by Sutton Police based on what it sees as six major problems. Police have complained about the excessive intoxication of customers, irresponsible drinks promotions, drug use, large scale disorder and violence in the vicinity of the premises, a public nuisance caused by customers and a failure to promote all four of its licensing objectives. A spokesman for the club, Lucy Herlihy, said: “We are working closely with the police and are happy to help them. We have not seen the evidence but we will dispute it when it goes in front of the licensing committee in March.”

Yau considers high-end opening in London: Wagamana founder Alan Yau has held talks about opening a high-end restaurant in London, The Sunday Telegraph has reported. He said: “I have indeed had exploratory discussions with some people in London. But it is only exploratory as I am in the midst of a few consulting arrangements.” Yau sold Hakkasan for £30.5m to the Abu Dhabi Investment Authority in 2008. He currently holds a stake in Busabi Eathai and the Princi Italian bakery. He has claimed that a “fast food concept or a hotel” would be a “nice way” to finish his career. Yau has been working with Russian restaurant company Rosinter, led by Kevin Todd, on a new prototype for its Planeta Sushi chain.

Pizza Hut UK hit one million Facebook likes: Pizza Hut has reached a milestone one million ‘likes’ on its Pizza Hut UK Facebook page, making it the most engaged UK pizza brand on Facebook. The milestone achievement, which follows Pizza Hut Delivery’s recent Mobile Marketing award for most Effective Mobile Site, places the brand well ahead of similar casual dining brands on Facebook and above all other pizza brands in the UK. The past year in particular has seen a significant surge in ‘likes’, with the number of fans doubling from 500,000 to one million in just over a year – which is more fans in the last year than most other UK pizza brands have in total. Pizza Hut is also in the top ten most popular social media brands in the UK, according to a SocialBakers 2012 report.

Spur moves franchised site to managed: Spur has taken its one UK franchised branch, Arapaho Spur Steak & Grill in Staines and relaunched the restaurant as Two Rivers Spur, bringing the total number of UK restaurants to seven. The restaurant has been run as a franchise operation at the Two Rivers Centre in Staines for ten years. The franchise agreement has now run its term and a new corporate management team is in place under Spur UK director David Maich. As part of the second phase of the refurbishment, regional offices will be installed on the first floor, incorporating boardroom facilities and training centre, making Two Rivers Spur the operational hub of Spur UK. 

Subway expands forecourt offer: Subway will be opening stores at Applegreen’s service station locations in Uckfield, East Sussex and Gorey in the Republic of Ireland next month, with plans to open further sites later this year. Trevor Haynes, area development manager, Subway UK and Ireland, said: “We are delighted to be working with Applegreen across its UK and Irish retail portfolio. It’s a great opportunity for the brand to continue its expansion into key forecourt locations and to offer customers calling in at the forecourt a choice of Subway subs, wraps and salads. We are seeing a great deal of demand for Subway stores on forecourts and within convenience stores at the moment, due to the simple operations, alongside minimal space and equipment requirements - it means our stores are uniquely suited to non-traditional sites.”

Dabbous looks to double up: The owner of one of West End ‘s most popular new openings is keen to open a second site for the hundreds of diners who can’t get a table. Ollie Dabbous, who opened Dabbous in Fitzrovia to glowing reviews in January 2012, plans to install his head chef Ross Gibbens to run the new venture. The operator is discussing terms with a number of landlords but talks are at an early stage. He said: “We have hundreds of people on our waiting list, so if we don’t have space at Dabbous, it would be nice to be able to offer them an alternative.” The restaurant, which only has space for 35 diners, is famously hard to book with tables booked many months in advance.

Social enterprise that runs a restaurant chalks up big losses: An award-winning social enterprise, Create, that run a restaurant in Leeds chalked up losses of nearly £1m in the space of less than 18 months, The Yorkshire Evening Post has reported. Create has shut down its acclaimed King Street restaurant in the middle of Leeds. But is expected to re-open in a modified form. The company says the closure has been forced upon it by “tough commercial realities”. During the 16 months to the end of January 2012, however, the Leeds-based company posted a loss of just over £950,000. Chef Richard Walton-Allen left his job of 12 years at department store Harvey Nichols to oversee its Leeds restaurant, which opened in the summer of 2011. It has been giving trainees the chance to enroll on a 12-week course and work alongside Walton-Allen and other industry professionals.

Maclay Inns opens fourth Glasgow site – a craft beer bar: Maclay Inns has opened its fourth site in Glasgow’s west end – a craft beer bar called Munro’s, which has opened after a £400,000 refurbishment of a site formerly called Captain’s Rest. The new look venue will sell more than 40 bottled beers, lagers and ciders including American imports like Brooklyn Lager and Blue Moon. Steve Mallon, the managing director of Maclay Inns, said: “We have been looking for a fourth property in the west end for quite some time - when the opportunity to take over The Captain’s Rest came up, it seemed like the perfect fit. As a company we have always differentiated ourselves through our focus on offering quality beer. This is particularly evident in Munro’s sister venues in the west end – The Lansdowne Bar and Kitchen, The Three Judges and Dram. Munro’s is very much the next step forward in our journey. We are confident that the bar will become popular with craft beer lovers but we have also added a great wine and premium spirit list to ensure there is something for every taste.”

Fifth Costa Coffee site to open in Lincoln city centre: A fifth Costa Coffee shop will open in Lincoln in April, in the former Milletts premises on the High Street, employing around 20 people. The cafe is billed as a flagship coffee store, and some staff from the existing Costas in Lincoln will work at the new shop. The other four Costa cafes in Lincoln are in Waterstones on the High Street, in St Mark’s, in the Odeon cinema on the Brayford, and a Costa Express at the University of Lincoln shop.

Michelin-starred restaurant get one-star hygiene rating: The Michelin-starred La Trompette in Chiswick has been given a one-star rating out of five by inspectors - one-star status means “major improvement necessary”. The report, following an inspection by a Hounslow council food safety officer in October, said the restaurant had struggled to reach safety standards over several years and had “still not got to grips” with them. The officer was concerned that the head chef “demonstrated little knowledge of the location and content” of the food safety manual. Other shortfalls were in systems to prevent rodent contamination and cross-contamination of E.coli 0157. La Trompette is due to reopen after a major refurbishment at the end of the month.

Marston’s applies to turn pub into store: Midlands based Marston’s has lodged a planning application to turn a pub in Willenhall, The British Oak, into a convenience store. Alterations would be made at the High Road pub, including an extension at the rear, while the car park would be realigned to provide 19 spaces. A spokesman for Marston’s confirmed that if the planning request is granted, the pub would close in May.

Wagamama appeals refusal decision in Chichester: Wagamama has lodged an appeal against a decision to refuse planning permission in Chichester. The company’s application was turned down by the district council in December – the brand wanted to move into a building on South Street currently occupied by Store Twenty One. The plan was refused on the basis it would mean more than the permitted 15m of non-retail frontage in the city centre. A petition was launched to bring the noodle bar to Chichester, which now has more than 700 signatures. “We are delighted with the support and enthusiasm local residents of Chichester have given towards a new Wagamama restaurant and we would like to extend our thanks for this,” said Sharon Cawthorne, director of property at Wagamama.

Prezzo applies to double the size of Farnham Chimichanga: Prezzo has applied for planning consent take over the empty shop next door to its site in Farnham and create a larger Chimichanga restaurant. The vacant Espirit Wines in Castle Street will become part of the adjacent Chimichanga restaurant if the application for planning permission is approved. The wine store has been empty for the past three months. Manager Magda Wesola, who has run the restaurant since it first opened in March last year, said: “If I have more space, I can bring in more customers. At the moment we only have 25 tables and we are hoping to increase that to 65.”

New ribs concept opens in Lincoln: A new ribs concept Ribs ‘n’ Bibs has opened in The Strait, Lincoln, operated by business partners Adam Morgan and Charles Patrick. Morgan said: “We came up with the business idea four or five months ago and it was just a case of finding the right venue. The property just lends itself to this kind of restaurant. Lincoln has not got anything like it. I’ve been in the trade for 20 years and there are a lot of restaurants that try to be too many different things. But this is going to be a completely authentic American restaurant.”

Domino’s UK appoints new company secretary: Domino’s UK has appointed Mark Millar as its new general counsel and company secretary with effect from today when he takes over from Adam Batty who is leaving the company after five years to join Selfridges Group. A qualified solicitor, Millar joins from Future where he was general counsel and company secretary for over ten years. A Domino’s statement said: “Mark brings a wealth of commercial and legal expertise including ten years as a City solicitor, having joined Future from Allen & Overy.”

Fuller’s rolls out healthy children’s menu: London brewer and retailer Fuller’s has rolled out a healthy children’s menu to half of its estate. Priced from £5.95 for two courses and a drink, 30 pence from each meal will be donated to Shooting Star Chase, a children’s hospice charity based in London, Surrey and West Sussex. Each meal will also be served with an interactive and informative placemat, designed to keep children young and old occupied with colouring-in games, word searches and conundrums. Parents will also be able to find out more about the ingredients in their child’s food, and details of the charity benefitting from the donation. Paul Dickinson, Fuller’s head of food, said: “We have listened closely to what our customers have been saying and a couple of the most important things for parents right now are good quality ingredients and excellent value for money. We have taken great care to source the best possible ingredients for our children’s menu and have tried extremely hard to ensure they are low in salt too. I’m delighted with the results and hope that Shooting Star Chase will be just as delighted with the donation.”

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