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Morning Briefing for pub, restaurant and food wervice operators

Tue 26th Feb 2013 - So India, Marston’s and Whitbread

Story of the day:

Whitbread reports Costa like-for-likes climb 5.5%: promises new measures over horsemeat scandal: Whitbread has reported that Costa Coffee sales climbed 5.5% in the 11 weeks to 14 February but its pub restaurants were ahead by just 0.2% in like-for-like terms – overall like-for-likes were up 3.7%. Total sales rose by 14.8% in the 50 weeks to 14 February. Chief executive Andy Harrison said: “Our strong brands continue to win market share, supported by our highest ever guest satisfaction scores and rapid expansion of our network. Good like-for-like sales growth of 3.7% demonstrates the consumer appeal of our brands and also enables us to reinvest in our people and facilities and to grow our estate. During the fourth quarter, we maintained our strong momentum with total sales growth of 16.9%, although the headline like-for-like sales growth of 2.7% was slightly suppressed by adverse weather conditions in January, particularly affecting the restaurants business. Premier Inn continued to outperform its competitive set and delivered total sales growth of 14.1% together with like-for-like sales growth of 2.9%. Our restaurant business continued to improve, outperforming the Coffer Peach industry benchmark, with like-for-like sales growth of 0.2%. Costa continued to excel with total sales up 32.2% and UK like-for-like equity store sales up 5.5%. We see no change to market conditions, although we expect a more competitive environment. We shall continue to deliver good organic growth and are on track to achieve our 2016 growth milestones.” On the horsemeat scandal, Whitbread said it was taking new measures. These include: extending independent batch testing of processed meats to ensure that supplies meet demanding product specifications; requiring certification from suppliers for all processed meat products; planning a completely new system of traceability to include a clear tracking of ingredients from ‘field to fork’. It added: “Our customers have reacted positively to the actions that we’ve taken and our restaurants continue to trade well. We expect to have newly sourced and certified beef burgers back on our menus this week. It has become clear that this is a Europe-wide issue of quality control within parts of the processed meat supply chain, supplying many restaurants and retailers. The situation is totally unacceptable and we are determined to play our part in repairing a flawed system. We believe that a wholesale change is required to the way the supply chain is regulated and a tougher regime needs to be put in place.”
 

Industry news:

McDonald’s picks Rosinter as first Russian franchisee; Rosinter signs a deal to open at five train stations: McDonald’s has chosen Rosinter, headed by former Mitchells & Butlers executive Kevin Todd, as its first Russian franchisee. The company is broadening its franchise operations in Russia to drive expansion deeper into provincial areas. However, Rosinter will open its first restaurants in Moscow and St Petersburg before year-end. McDonald’s also plans to open at least 150 self-operated restaurants in Russia over the next three years. McDonald’s has 357 restaurants in more than 85 Russian towns and cities, of which 46 were opened last year. Meanwhile, Rosinter announced a deal with state rail monopoly Russian Railways to open 13 outlets of its restaurant brands in five Moscow train stations. As part of plans to renovate its facilities, Russian Railways awarded a contract for Belorussky, Kazansky, Leningradsky, Paveletsky and Yaroslavsky stations to the restaurant company. “When you go to the railway stations, there’s some stunning architecture, but I think over the years, they’ve become a bit tired,” Kevin Todd told The Moscow News. “I was at Belorussky last week, and they’ve started to invest quite a lot of money in sorting these places out.” The value of the agreement, Todd said, is between $10 million and $12 million. Business at transportation hubs grew by 25% in 2012 for Rosinter. See the next edition of Propel Quarterly – the Spring edition is out next week – for Kevin Todd’s latest ‘Postcard from Moscow’ column.

Winship – pubs losing out to cafes: Around 29% of pubs across the UK have closed in the past 25 years while the café sector grew by 7.5% in 2011 alone. Jim Winship, director of the Café Society said: “The pub is seen as more traditional, which is less attractive to the young, while the café has changed completely. I remember when cafés were Formica-based, greasy, unkempt or somewhere you’d buy a sandwich to eat elsewhere. Now they’ve turned themselves into a place to meet and socialise. Our membership keeps growing. The high street has become based around the café as they have taken over empty shops. In fact, the café could be the saviour of the high street, making it a social hub rather than just a place to shop.”

New York ban on ‘large’ soft drinks to start on 12 March: The New York ban on soft drinks larger than 16oz will come into force on 12 March. Among items not subject to the ban are alcoholic drinks, diet soft drinks, fruit smoothies if they don’t have added sweetener, or coffee drinks and milkshakes if made with 50% milk. Businesses must ensure there are no more than 3.125 calories per ounce in drinks larger than 16oz to escape the ban. Mayor Michael Bloomberg says consumption of over-sized sugary drinks is resulting in obesity problems - especially for low-income New Yorkers and children.

Company news:

Loungers invests £100,000 in Training Academy: Loungers, the café bar group led by Alex Reilley and Jake Bishop, will be investing £100,000 a year in a staff development program that starts in March this year. The group, which currently employs 700 staff across its 25 Lounge café bars and five Cosy Club sites and is targeting 70 sites by 2016, have created a two-and-half year rolling training program covering all management positions. In addition to existing internal training Loungers have teamed up with training company Watershed and developed a training program that will be offered to all management positions from supervisor level upwards. The training provided by Watershed will comprise of up to eight day courses a year, dependant on position, which will focus on mechanical and emotive skills such as influencing and behavioural skills to profit performance and leadership development. The externally sourced training has been designed to complement Loungers’ existing internal training days which covers all departments of Loungers’ multi-faceted operation, from creating top baristas trained by award winning Clifton Coffee Company, to WSET and licensing courses, to food based NVQs for front-of-house staff and chefs. Jake Bishop, Loungers operations director, said: “Clearly committing to invest £100,000 a year represents a huge investment for any business. However, we firmly believe that by investing in our people and in particular helping them to develop their personal skills the business will grow ever stronger and that strength in depth will help the business to meet the demands of rapid expansion. We don’t just want our people to be good we want them to be the best.” Loungers’ next opening will be Impero Lounge in Portishead on 6 March. This will be followed by the opening of its sixth Cosy Club in Exeter on 15 April 15. A further nine sites are planned in for 2013.

Marston’s sells Islington freehold: Midlands based Marston’s has sold the freehold of a site in Islington tenanted by Wahaca to Leonoscar Properties, which will see a 6.25% yield on its acquisition. Leisure property agent Shelley Sandzer acquired the 4,000 square foot ground floor premises for Wahaca in January. The site is a prime location on Islington Green and was previously a Pitcher & Piano. Wahaca Islington is expected to be open after April this year. Wahaca currently operates from eight locations across London, including Canary Wharf, Soho and Covent Garden. Leonoscar Properties own a string of restaurant investments throughout London and the South East. Nick Weir, director at Shelley Sandzer, said: “Wahaca’s growth has been a real success story. We acquired this latest site for them in January and moved fast to secure the freehold investment for Leonoscar Properties given the strength of the location and the real prospects for rental and capital growth. Mexican restaurants are doing extremely well across London and this is a good investment for them reflecting a strong yield.”

Byron opens on Fulham Broadway today: Byron, the better burger concept owned by Gondola Holdings that is currently up for sale, opens a new site on Fulham Broadway today. The brand, headed by Tom Byng, is reported to have a price tag of around £120m. The valuation is based on ten times its current run-rate Ebitda of £10m to £12m. A sale process began in November last year after the brand’s owner Gondola received a number of unsolicited approaches. The most likely buyer is thought to be a private equity firm looking to continue its roll-out – it currently trades at 25 sites. Average spend per head at Byron is £16.

Fireside Pubs and Restaurants plans five openings this year: Fireside Pubs and Restaurants, the new company headed by Leo Murphy and Alan Moore that has seen investment from John Lovering’s Echelon Partners, hopes to open five sites in 2013 as it heads to towards a target of 20 sites. Murphy told Propel Morning Briefing that the company’s first site, The Admiral J McHardy in Chelmsford (www.admiraljmchardy.co.uk), which is open now, was acquired for around £500,000 with an additional six figure refurbishment. The company is focused on acquiring sites in the south east and currently is looking at a “couple of sites” where it would like to proceed to buying them. Of the first pub, Murphy said: “It’s a premium offer – the top end of Vintage Inns at Harvester prices. Consumers want to go to the pub but they want a better offer.” The venue has been acquired from the former Close Imperial Pub Company. Murphy said the company would look at freehold and long leasehold pubs but would also look at acquiring packages where vendors were looking for an exit.

Christie + Co provides more detail on Starbucks Little Chef plan: Agent Christie + Co has revealed more detail on the Little Chef sites that petrol forecourt operator EuroGarages plans to converts to Starbucks. The sites are: Hailsham in East Sussex, Wirral, Wansford in Cheshire, Wrexham and Worksop. The sites form part of a plan by EuroGarages to convert up to 30 former Little Chefs to trade as Starbucks. In addition to the EuroGarages deal, Christie + Co has successfully let a further five former Little Chef sites — one in Liphook, Hampshire to 23.5 Degrees for another Starbucks franchisee, and the others to independent operators for continued use as roadside restaurants or cafes. These sites are in: Oldbury, West Midlands, Dundee, Cambridge and; Five Oaks, West Sussex. Simon Chaplin, director and head of restaurants for Christie + Co, said: “EuroGarages’ letting of these, and probably further, former Little Chef sites for licensing as Starbucks indicates just how popular these sites have been to the market. It is interesting to note that roadside sites are apparently integral to Starbucks’ strategy to extend its presence. It is also an indication of just how well situated the Little Chef sites were that we have received such tremendous interest in them. As well as the lettings concluded, the majority of the remaining sites are subject to agreed deals, with both corporate and independent operators across a variety of sectors and potential uses. We expect to conclude more deals in the coming weeks.”

TCG launches new “platters, pies and puddings” menu at refurbished site; re-positions pubs: Managed pub and bar group TCG has this month reopened pubs in St Helens and Bristol after a total investment of £200,000 in substantial refurbishments at both sites, marking the start of its capex programme for 2013. The Sefton Arms in St Helens has been given a complete makeover aimed at increasing daytime food trade, improving the experience for customers watching live sport and upgrading late night entertainment. The investment has seen the installation of a new dance floor, sound system, LED lighting and big screens as well as a redecoration throughout the pub. The refurbishment has doubled the number of food covers and introduced a broader all day menu, while still providing value for money with offers such as ‘two meals for £8’. The Sefton Arms has also started serving breakfast, opening at 8.00am to compete with local coffee shops. The Greenhouse has reopened after a refurbishment that will enhance the pub’s appeal to Bristol’s more aspirational customers. Taking inspiration from the pub name, designers created an airy, garden-like feel with quirky features such as trees etched onto metal pillars and artificial lawn on the walls. The Greenhouse is the first TCG site to trial a British based ‘Platters, Pies and Puddings’ menu with dishes served on wooden platters such as fish and chips, whitebait and shell-on prawns for the Fisherman’s platter, for example. TCG chief operating officer Nigel Wright said: “We’re delighted with these refurbishments, which are already delivering impressive sales uplifts at both pubs.”

Brewdog plans £5m expansion as new brewery runs out of capacity: Scottish brewer and retailer Brewdog is planning a £5m expansion at its new Ellon Brewery after running out of brewing capacity. A spokesman said: “Despite the big investment we recently made in our new brewery we are still struggling to keep up with the demand for our hardcore craft beers. Luckily we bought the site next to our current one over a year ago so we already have space we can expand into. Furthermore, all the new equipment at the brewery was bought with expansion in mind. All we need to expand our capacity are more fermentation tanks, which we can plug into our system and more floor space to operate in. We are now at the final stages of planning for our new 4,000 square metre building complete with pilot brewery, visitor centre and a rock ‘n roll Brewdog shop to boot. We will hopefully have the project complete by the end of 2013. A separate part of the project will also see an initial addition of 8x600HL fermentation tanks in Summer 2013 with eight further fermentation tanks arriving later in the year further expanding our production capabilities. This phase of our development will see us invest a further £5m in north east Scotland over the next 36 months and employ over 30 more people. The new building will host a Brewdog visitor centre offering tours of the new brewery whilst also promoting education and better understanding of beer. In addition, we will open a Brewdog shop as part of the visitor centre offering growler fills, a range of Brewdog and guest bottles and merchandise. The pilot plant will be used for new recipe development and also interactive and open brewing sessions.”

Lance Batchelor – new product development is key at Domino’s: Domino’s chief executive Lance Batchelor has described new product development has a key area for the company. He said: (New product development) has formed an important part of our 2012 story in the UK, with 14% (2011: 11.4%) of all sales coming from items we had not sold a year earlier. We innovated heavily on our Domino’s Stuffed Crust base, launching BBQ, Mexican and other variants through the year. We also launched several new cookie variants, such as triple choc and toffee apple, a pork bites side dish, as well as twisted dough balls - using our own dough as the main ingredient - and new chicken wings in conjunction with Franks’ Hot Sauce. We also saw the return of garlic mozzarella sticks in response to demand from our customers through social media. Excellent new products such as these create news and interest among the current Domino’s customer base. They give customers a reason to visit us more often and allow new users to try us. They also give lapsed users a reason to come back and they keep our competitors guessing.” Batchelor also revealed that franchisees now operate an average of 6.3 stores each, up from 5.7 the year before. He said: “Our 124 UK franchisees are at the very heart of this business. We work with them every day, hand in hand. They now have an average of about 6.3 (2011: 5.7) stores each. Stores are showing improving sales, operating efficiencies and in turn improving profitability faster than the rate of sales growth.”

Spirit to start premium trial at London pub: Managed operator Spirit is to start a trial of a new premium pub brand at the George in Haverstock Hill in the north west of London. The venue will offer “outstanding food, drink and service, in an independent and stylish pub environment” – it has been a Taylor Walker site. Propel Morning Briefing reported earlier this month chief executive Mike Tye had told a Barclays Capital seminar that the company would continue to evolve brand concepts with the new brand more premium than its Taylor Walker and Chef & Brewer brands. The company has five brands in its managed portfolio after taking the decision in January to combine its 69 Original Pub Company sites with its John Barras brand. The development of a premium pub brand comes after similar developments at other managed operators such as Marston’s and Greene King – Mitchells & Butlers already operates 81 Premium Country Dining Group sites. Spirit began a small trial with a handful of gastro-pubs about four years ago but did not continue the trial.

TGI Friday’s strengthens partnership with Springboard: TGI Friday’s has unveiled a formal partnership with the charity Springboard by making it its charity of choice for 2013. Responsible for helping young people start careers in the hospitality sector, Springboard will also work with the American restaurant to help recruit new team members, apprentices, work experience placements, as well as being part of Springboard’s ambassador programme. Karen Forrester, chief executive of TGI Friday’s in the UK, last year walked the Inca Trail along with a previously unemployed Friday’s team member from its Westfield Stratford restaurant - raising over £5,000 for Springboard.

So India set to open sixth site: So India restaurant chain is to open its sixth site at the former Felpham Tavern in Felpham, east of Bognor Regis, West Sussex. So India project manager Michael Noor said: “This is an ideal site for us. The property is quite big and it’s in the middle of a large residential area, which is very affluent. It will take us about two months before we open because the building needs a total refurbishment.” The finished restaurant will seat 60 diners and boast a separate bar. “We are doing so well because Indian food is value for money, which is important in a recession,” added Noor. “There is also a lot of choice compared to other cuisines and new ideas to try.”

Three job losses at Robinson’s administrative centre: Three members of staff are set to lose their jobs as part of a streamlining operation by north west brewer and operator Robinson’s. The brewer has confirmed three members of clerical staff at the firm’s Backbarrow administrative centre are due to lose their jobs in April as part of a cost cutting exercise. The company, which employs around 24 members of staff at the site, has said all those affected were offered the chance to relocate to Stockport but due to the distances involved, none of the staff concerned took up the offer.

Andy Murray confirmed as owner of Scottish hotel: Tennis champion Andy Murray has been confirmed as the new owner of the 15-bedroom Cromlix House hotel, near Dunblane and will convert the property into a five-star destination. It re-opens in spring 2014 for the Ryder Cup, which is being held at nearby Gleneagles, after a refurbishment. The Cromlix closed a year ago in February 2012. “By re-establishing Cromlix as a leading luxury hotel at the heart of the Dunblane community we will be able to attract new visitors to the area, create a number of new jobs and focus on supporting other local businesses,” said Murray.

Spirit makes managed staff available to leased operators: Spirit leased division licensees are being given access to the company’s managed trainers to improve the retail offer in their sports and community pubs. The one-day blitz training takes place in the licensee’s own pub with his team and includes an initial three hour training session, followed by individual coaching sessions with the team members. The pub is then merchandised correctly to show how sales and margin can really be maximised. Real focus is on the guest being at the heart of their pub, how behaviours can stipulate guest loyalty and improve sales and, the perfect serve. Speaking about the initiative, managing director of Spirit leased Chris Welham said: “Having access to a training team experienced in delivering guest focused training throughout our managed brands is a real benefit to our licensees and their pubs. All too often, training takes a back seat especially if a licensee has to cover staff absences for it, so offering this on- site, one day blitz, is a real plus when you are running your own business.” Five trainers are working with the leased licensees delivering the training which also focuses on Spirit’s initiative, “how to sell not serve” which helps teams serve with a purpose, keeping the guest happy and improving sales in the process. Each pub involved is left with a training plan so that the licensee can build on what they have learnt and focus on the elements over the following month. A total of 14 sites are participating in the programme in February and different options may be rolled out following an assessment of the results in the spring.

Oakman Inns boss reunites with former chairman of Grand Met Bob Williams; aims to create farm-to-fork beef supply: Oakman Inns and Restaurants, the award-winning operator led by Peter Borg-Neal, has added The Cook and Fillet, Kingswood, Buckinghamshire to its estate. The deal involves Borg-Neal reuniting with the former chairman and managing director of Grand Metropolitan Estates Bob Williams who was also his boss at Mill House Inns in the 1990s. The Cook and Fillet was formerly named The Crooked Billet and has been developed at a cost of £650,000 with design by Concorde BGW. The Cook and Fillet combines a destination, edge of town eatery with a farm shop specialising in locally sourced produce. Borg-Neal said: “I’m delighted to be doing business with Bob once again. He is probably the most energising person I’ve ever worked with and we both appreciate each other’s direct approach to business. Bob, and his daughter Hannah, have done a brilliant job developing The Cook and Fillet and I am honoured to have been approached to operate the premises. The farm shop element fits in with our ethos of sourcing only the best ingredients and adds another string to our bow. It is also our intention to add a farm shop to our Red Lion in Water End.” Williams and Borg-Neal had been in discussion for some time. Indeed, during the development, Oakman personnel provided technical advice to support the vision of the Williams family. Williams said: “Peter is a hugely talented operator and I am delighted to be working with him once again. I have the utmost confidence that the Oakman concept will flourish on this site.” In addition to his wide and varied property interests Williams raises beef cattle at his nearby Yeat Wood Farm and it is hoped that his produce will be available at The Cook and Fillet. Borg-Neal said: “The Yeat Wood beef is of the highest quality and we are keen to have it. There are some minor supply chain issues to solve but we will soon be serving the ultimate ‘local’ produce farmed only a stone’s throw away!” The company will now have six fully operating Oakman Inns with number seven opening in Beaconsfield in April to be swiftly followed by the re-development of The Crown and Thistle, Abingdon-upon-Thames. The Beconsfield site will be called The Beech House. The site was previously a retail unit but Oakman acquired planning permission for a change of use and for an extension. It is undergoing an £800,000 fit-out before opening.

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