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Morning Briefing for pub, restaurant and food wervice operators

Mon 25th Feb 2013 - Domino’s, Fireside Pubs and Whitbread

Story of the day:

Snow hits Domino’s sales in January with two-thirds of UK stores closed at some point: Snowy weather in January forced the closure of 498 stores at some point in the month, which meant that like-for-like sales rose only 1.6%. Chief executive Lance Batchelor said: “We have had a solid start to the first seven weeks of 2013 with like-for-like sales in the UK mature stores up by 1.6% (2012: 3.8%). Clearly the recent spell of poor weather and widespread snow in week three and week four has had an adverse impact on trading. During these two weeks, we had a total of 498 stores closed at some point - almost two-thirds of our UK store network was impacted. Excluding the days these stores were closed, the underlying like-for-like sales run rate was 2.6%, which is an encouraging early trend. Stores in the Republic of Ireland were not affected by the snow and are in positive territory with like-for-like sales in the mature stores up 3.9% over this first seven-week reporting period.” Meanwhile, Domino’s has begun another stadium trial at Saracens Rugby Club’s Allianz Park Stadium in north London. Fans can pre-order the delivery of pizza to their seats at half-time - Saracens chairman Nigel Wray is a director of Domino’s. Domino’s began trialing pizza delivery at the Leicester Tigers stadium last year. Domino’s is also targeting sales in the late afternoon with “an offer that will provide a bit of respite for people who always seem to be living life in a hurry”. The ‘Midweek Rescue Service’ is available between 4pm and 6pm – Monday to Friday – and will see a 50% discount on all orders placed over £15 on pizzas whether they are collected or delivered. Simon Wallis, sales and marketing director for Domino’s Pizza, said: “We all have those moments where there simply aren’t enough hours in the day. This deal provides great value for the whole family to eat at dinner time and will hopefully ease some of the stress surrounding a work life balance.” Profit before tax rose 10.8% to £46.7m in the 53 weeks to 30 December 2012, with a record of 69 sites opened in the year. Online sales now account for 55.7% of delivered sales.

Domino’s sets out advantages of digital as store removes phone number from menus: Chief executive Lance Batchelor has argued that Domino’s digital strength – 57% of orders online - provides the company with competitive advantage. He said: “Going digital is a real advantage for Domino’s. Customers who order online have a higher net promoter score - they recommend us more often. They themselves order more often, and spend more. Importantly a web transaction generates higher margins for our franchisees, because they do not need to incur labour costs to answer the phones. This has saved franchisees many millions of pounds, which can be invested into new store openings, for example. Finally a digital customer is a customer with whom we have a one-to-one relationship. This often allows us to market directly to them, and indeed by year-end we had over three million customers who had agreed to allow us to communicate with them via email etc. We believe Domino’s is far ahead of any of our UK competitors in this field; and we intend to continue exploiting this strategic advantage. How far can it go? About three quarters of our sales are delivery, and in theory all of these could eventually migrate. Currently many customers still use the phone to order, but the world is changing: some of our franchisees are now actually reducing the number of phone lines into their stores, as they see ever more web orders. One store has even removed the phone number from its menus and seen no decline in sales. An important and dynamic subset of our digital channel is mobile, which grew in 2012 by an extraordinary 195% to reach 19.7% (2011: 10.1%) of all digital sales. Coming from a mobile industry background myself, I can say that this is no accident, but a direct result of our time and energy in this area. We now have sales channels for all the major mobile operating systems (iPhone, iPad, Android and Windows 7) as well as recently refreshed apps which have scored significantly higher on customer ratings than our competitors.”

Industry news:

BMA – multi-pack ban should be extended to the on-trade: Government efforts to introduce minimum alcohol pricing and curb consumption in other ways are welcome but do not go far enough, the British Medical Association (BMA) has argued. The BMA would like to see the proposed minimum price increase from 45p to 50p per unit, a rise in excise duty, and drinks to be taxed according to their alcoholic strength. The association is also calling for any future ban on multi-buy promotions in shops and off-licences to be extended to pubs, bars, clubs and restaurants. And it urges promotions such as ‘happy hours’ to be restricted. BMA director of professional activities Vivienne Nathanson pointed out that alcohol-related harm costs an estimated £20bn in England each year, with £1.7bn of this being in healthcare. She said: “Our members witness first hand the damaging effects of alcohol, and have repeatedly called for stronger action to reduce (its) affordability and availability.”

ALMR calls on Croydon to step away from “disproportionate cumulative impact zone”: The Association of Licensed Multiple Retailers has called for Croydon Council to encourage partnership working and avoid penalising responsible operators in the wake of plans to impose 17 Cumulative Impact Zones. Strategic affairs director Kate Nicholls said: “Slapping a Cumulative Impact Policy across wide parts of the borough is disproportionate and unhelpful. Government guidance is clear - a CIP is supposed to be a weapon of last resort where an area is already saturated with licensed premises and clear evidence linking alcohol related harm or problems to the customers of premises in a specific and precisely defined area. It is difficult to see how a borough-wide policy can meet these tests and be justified. It may well be open to challenge and it certainly falls foul of national policy, which obliges local authorities to plan positively for a modern industry.” 

Tickets go on sale for ALMR Spring conference: Tickets have gone on sale for the ALMR Spring conference on Wednesday 24 April. The event explores the theme of ‘serving tomorrow’s customers today’. Financial commentator Justin Urquhart-Stewart will look at what the economy has in store. Sapient Corporate Finance partner Peter Hansen will chair a panel on unlocking funding needs with Luke Johnson of Risk Capital Partners, Crispin Tweddell of Piper Private Equity and Richard Clasby of Metro Bank. Stephen Minall, of Moving Food, will examine key future trends. PizzaExpress managing director James Spragg and Paul Madden, head of digital at Mitchells & Butlers, will discuss developments in digital marketing. In addition, Karen Forrester, managing director of TGI Friday’s, will also present on how employee engagement can be improved. Tickets are £149 each and can be booked on events@almr.org.uk or by calling (0208) 5792080 - one-third are already taken. The event takes place at BAFTA, 195 Piccadilly, London.

RBS swaps mis-selling bill likely to increase: The Royal Bank of Scotland’s bill for mis-selling interest rate swaps could increase by as much as 20-fold, The Sunday Telegraph has reported. The newspaper forecast that the bank will increase its provision from the current £50m to at least £500m – and, possibly, as much as £1bn.

Company news:

Ex-M&B chairman Lovering backs new company Fireside Pubs & Restaurants: Former chairman of Mitchells & Butlers John Lovering has backed an operational team that is looking to build a group of food-led pubs in the south of England. Lovering has made the investment through his vehicle, Echelon Partners, and his son, Nick, will join the board of the new company. The group, which will trade under the Fireside Pubs & Restaurants brand, is led by industry veterans Leo Murphy and Alan Moore. The first unit, which is in Chelmsford, Essex, has been re-furbished and will be re-launched under the new name The Admiral J McHardy (www.admiraljmchardy.co.uk) this month. The team plans to expand to around 20 units over a three to five year period. As part of the transaction, Echelon has taken a strategic stake in Moore and Murphy’s existing business, The Arizona Group, which provides management, advisory and consulting services to owners, operators and investors in the licensed retail and hospitality sector. Nick Lovering said: “We are delighted to have completed this investment with Leo and Alan. They are a well-respected and high quality team with a very exciting model, which matches our understanding of customers’ requirements. We look forward to continuing to support the team as they develop the Fireside Pubs & Restaurants brand and think that this first unit represents an excellent springboard from which to establish the concept and develop the group.” Murphy said: “It has long been part of our strategic plan to develop our own pub group and we believe that market conditions are now conducive to so doing. We are delighted to welcome John and Nick as backers and are already seeing the benefits of their involvement. The prospects for the first site are encouraging and we are confident that our model will deliver a premium experience combining a quality food offering and value for money, and that each Fireside Pub & Restaurant will be at the heart of the local community. In the meantime, our focus will be on the continued expansion of the Arizona Group, which provides high quality solutions for stakeholders in the licensed retail industry.”

Keith McNally – the London restaurant scene has an edge: New York restaurateur Keith McNally, who opened Balthazar in London last week, has praised the London restaurant scene. He told Bloomberg: “There seems to have been the equivalent explosion in food and restaurants here in the last five, six years that there was in New York ten to 15 years ago. It’s very vibrant here and there’s a newness, a rawness to it. Already in New York, the edges have been softened a bit, whereas here the edges are sharp.” On his business partnership with Richard Caring, he said: “I hate to use the word bonded because I don’t think I’ve bonded with anybody in my life - it’s an Americanism, I suppose. But I got to know Richard and to like him because we walked across Devon together. I walked from the south coast to the north coast and Richard came on part of that walk with me. It’s a sign of getting on with someone if you’re comfortable not talking with them. We had very good silences.” McNally also reported that he had thought about opening a pub in Notting Hill but now feels that getting Balthazar “up and running will take a long time”.

JD Wetherspoon confirms looking at nightclub site in Cleethorpes: JD Wetherspoon has confirmed it is looking at acquiring taking the Amishi nightclub in Cleethorpes High Street. Amishi is on the market for £400,000 and offers 8,400 square foot of trading space. The club has three bars, two dance floors, two DJ booths, an outdoor roof terrace and capacity for 1,000 people. A spokesperson from Wetherspoon said: “We are very keen to open a pub in the Cleethorpes resort. We can now confirm we are currently looking at the Amishi site.”

Britannia Hotels add second Scottish site: Britannia Hotels has increased the size of its hotel portfolio to 43 with the acquisition of its second Scottish site - The Waterside Inn in Peterhead — in a sale brokered by agent Christie + Co. The 105-room Waterside Inn is located in the north of Peterhead — some 35 miles from Aberdeen. It has extensive conference and leisure facilities and hosts a leisure club, encompassing a swimming pool, spa, steam room and gym, which enjoy good non-hotel-guest membership. Ken Sims, director of Christie + Co, said: “The Waterside Inn, which had operated under the Swallow Hotels flag, represents an excellent second foray into the Scottish hotel sector for Britannia Hotels. Its extensive array of facilities and very strong trade - drawn particularly from the local oil and fishing industries — means The Waterside Inn already enjoys excellent all-year-round commercial business.” Britannia Hotels acquired The Waterside Inn in an unencumbered freehold sale off an asking price of £2.25 million.

North west operator Font Bar takes fourth site: Font Bar has acquired its fourth site, the former Iguana Bar, Chorlton Cum Hardy, which is set to re-open its doors in the spring after a refurbishment. The site has been taken at nil premium on a new lease through agent Christie + Co - Font Bar has existing venues in the centre of Manchester behind Oxford Road train station, Fallowfield, Manchester and Liverpool.

Greene King snaps up Folkestone roadside pub for conversion to Hungry Horse: Greene King has bought The Black Bull pub in Folkestone, a large pub on an arterial road that has been on the market through Savills with price on application. The Black Bull Road site, which has stood empty for a number of months, will undergo renovation work before it re-opends. A Greene King spokesman said: “The Black Bull will be re-opening as a Hungry Horse in time for the summer season, creating around 30 jobs. The new and improved pub will have something for all the family to enjoy, with the bar and restaurant undergoing extensive changes to create a fantastic atmosphere and a contemporary look throughout.”

JD Wetherspoon chief executive – ‘we’re in the clear on horsemeat’: JD Wetherspoon chief executive John Hutson has written to the company’s customer database to report that tests have found no trace of horsemeat in company products. Hutson wrote: “Horsemeat continues to be in the news and is a concern for people. I thought you might appreciate an update on what we have been doing. As requested by the Food Standards Agency (FSA) our suppliers are undertaking independent DNA testing. In addition to this we commissioned an independent laboratory to complete tests for the presence of equine DNA in all beef and lamb products that we sell. Tests have been completed on 29 different menu items and all the results have been negative. At Wetherspoon, the quality of the food that we serve to our customers is important to us. Uniquely for the pub industry we have our own dedicated food distribution centre, which ensures that we have 100% control and traceability of all the food that is delivered to, and served in, our pubs. In conjunction with our suppliers we will continue regular DNA testing.”

Euro Garages lines up 30 Little Chefs for conversion to Starbucks: Petrol forecourt operator Euro Garages has taken over the leases of five Little Chefs for conversion to coffee shops under a licensing deal with Starbucks. The company is lining up a total of 30 former Little Chefs for conversion in the medium term. Agent Christie + Co, which is marketing a package of former Little Chef sites, has let a further five sites to independent restaurant and café owners.

Hotel de la Tour secures second site: Hotel de la Tour has secured its second site - a new hotel on the banks of the River Irwell in Salford. The 14-storey, four star hotel is being developed by Bruntwood, in New Bailey Street, close to the Lowry Hotel, and will be operated by Hotel La Tour. The 223-room hotel will also include conferencing facilities, a bar and restaurant. Hotel La Tour is a new group formed by the former management team of Hayley Conference Centres, which has a plan to open five UK hotels within five years. Managing director Jane Schofield was part of the ex-Hayley team that sold out to private equity investor Permira Funds in a £358m deal in 2007. The first Hotel La Tour opened in Birmingham city centre in March last year. Hotel de la Tour plans to create a portfolio of landmark buildings in city centre locations and is considering sites in greater London, Bristol, Bath, Newcastle, Glasgow and Edinburgh.

Cote secures Barbican site on £90,000 per annum rent: Cote has secured the a 20 year lease on the 5,000 square foot restaurant on Beech Street in the Barbican at an annual rent of £90,000. The premises are located adjacent to the new Barbican cinema and are currently being fitted out in advance of a May opening. The Barbican will be the 22nd Cote restaurant in the capital. Agent for Cote was Shelley Sandzer. The company is also opening in Chichester.

Villagers – “Chris Evans has turned our pub in an eyesore”: A public meeting of villagers in Lickfold have accused disc jockey Chris Evans of ruining their pub. The venue is boarded up and fenced off after closing a few years ago. Lodsworth parish clerk Helen Cruickshank condemned the closure, saying Evans had ‘taken a beautiful pub and turned it into an eyesore.” Attendees decided to set up a website to raise awareness and start a campaign to save the inn.

Pub and restaurant freeholds come to auction: The freehold of a pub in Potts Wood, to the south-east of Bromley, London let to JD Wetherspoon on a rent of £70,000 per annum is to auctioned by Allsop on 19 March. It is let for 40 years to Wetherspoon until 2034 and has a guide price of £975,000 to £1m. In Wrexham, a freehold in Regent Street majority let to JD Wetherspoon on a lease expiring in June 2033, with a rent roll of £96,000 per annum, is to be auctioned for £1.1m. Also to be auctioned by Allsop on the same day is a virtual freehold let to Ask in Brighton on a guaranteed rent of £178,811 per annum with a guide price of £2.6 to £2.7m. The freehold of a pub let to Bramwell Pub Company, The Pembroke in Coulsdon, until 2033 on a rent of £72,500 per annum is up for auction at the same event with a guide price of £675,000 to £700,000. 

Halifax restaurateur doubles up: Halifax restaurateur Michael Ricci has opened Ricci’s Tapas and Chicchetti at Dean Clough, Halifax - he already operates the Mediterranean restaurant Ricci’s Place. Ricci, who is a Michelin-trained chef, said he hopes his new restaurant will bring a taste of Venetian Italy and rustic Spain to city. Customers will have the option to relax at the bar with a drink, while tasting Venetian and Spanish Cicchetti or Tapas.

Amazing Leisure to invest £2m in Sunderland’s biggest nightspot: A new company, Amazing Leisure, is to invest £2m in Sunderland’s biggest nightspot in a bid to reinvigorate its four venues. The Point, in Holmeside, opened in September 2005 after a £5 million renovation of the former ABC cinema site. Now it has been taken over by Amazing Leisure, which promises to bring money, events and jobs to the four venues which make up The Point: Union nightclub and Arizona, Purple and Velvet Lounge bars. “We want to make The Point a destination venue, to regenerate, to reinvigorate and rejuvenate it to bring it back to its glory,” said Zed Malik, marketing, promotions and events manager. “I started here three weeks ago and people are shocked when I say I want people from Newcastle to come here instead of people from Sunderland going through there, but I think we can do it. This venue has massive potential.”

Houlton replaces Venters as head of Greene King’s brewing and brands division: The former sales and distribution director at Carlsberg Chris Houlton has replaced Euan Venters as managing director of Greene King’s brewing and brands division, it has emerged. Houlton was sales director at Carlsberg for two years before becoming sales and distribution director for a further four years. He left in October 2012 to set up Houlton Business Development, providing business advice to small businesses before joining Greene King at the start of this year. He has also worked for Cadbury and was a graduate trainee at Procter and Gamble. Venters became managing director at Greene King’s Scottish brewer Belhaven in 2008 before heading its brewing and brands arm in 2011 – he left at the end of December 2012.

Simon French – we’re cautious on Whitbread: Panmure Gordon analyst Simon French has issued a note of caution ahead of tomorrow’s trading update from Whitbread with a Target Price of 2500p. He said: “Hotel industry data indicated that December Revpar was fairly robust (+1.0% in the UK) and whilst we expect January to have been impacted by the weather, trading should have been stronger in February. The comparative is a relatively soft -0.9% and as such we expect positive like-for-like sales growth at Premier Inn for the 11-week trading period. In pub restaurants, the like-for-like sales comparative is a more demanding 2.2% and December and January data from the Coffer Peach Business Tracker indicates a negative trading performance. February should be stronger as the group laps last year’s snow but we expect only flat like-for-like sales growth. Costa’s current performance is harder to gauge. Momentum has been strong with circa 7% like-for-like sales growth in Quarter Three and year-to-date but the group faces a reasonably tough comparative of 6.2% and high street retail has been volatile. We anticipate the group will report a slowdown in like-for-like sales growth to circa 4% for the current period.”

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