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Morning Briefing for pub, restaurant and food wervice operators

Fri 12th Jul 2013 - Antic London, Ask, Coal Bar & Grill and Dhillon Hotels

Story of the day:

Mezze chooses debt option rather than private equity funding for expansion: Mezze, the fast-expanding West County operator of high quality restaurants in pub settings, has opted for debt funding to allow expansion rather than take private equity investment. The company, which has just opened the flagship £1.6m White Lion in Portishead, Somerset, has secured debt funding from First Merchant, the bespoke lender headed by Tony Hamlin. Mezze, founded by Alex Tryfonos in 2008, has an estate of six leasehold sites with Enterprise Inns and Greene King. Hamlin told Propel: “We are always very pleased to lend to businesses as high quality as Mezze. The company runs six top-flight restaurants in the Bristol area and is one of the best quality companies operating in the sector. Its latest development The White Lion had an extraordinary opening weekend, in line with its other sites. I had several discussions with Alex and explained the vast difference between the two main alternatives to funding expansion – debt versus selling equity. Although our facility is moderately expensive, it basically means that once it is repaid we are ‘out of his hair’, whereas private equity funding means a partner for life with that partner charging virtually the same percentage as a First Merchant loan. In my view, for any entrepreneur confident in their business model and who wants to retain their equity there should no contest between the two funding options. We will, hopefully, be funding his future expansion with successive repayment loans, at, in all likelihood, keener interest rates as his business model continues to prove itself. We are keen to lend to other multi-site operators with the same quality of operation as Mezze.”

Industry news:

Kate Nicholls – Government consultation is wrong because it is rent-setting that creates the abuse: Kate Nicholls, the strategic affairs director of the Association of Licensed Multiple Retailers (ALMR), has argued that it is opaque rent-setting that is the problem in the tenanted pub company model. In an article for Propel Friday Opinion, Nicholls states: “With over 7,000 submissions made to the government’s consultation on pub companies’ relations with their lessees, a cathartic resolution to the issue which has bedevilled the sector for the best part of the last decade seems once again elusive. The debate has now shifted into the media and inevitably polarised and over simplified. But that does not lessen the need for a swift, decisive and definitive resolution – and it is this that has driven the ALMR contribution to the debate. Time and time again, we have attempted to broker an honest compromise between the two extremes. From establishing a mediation process in 2008 to entering into detailed negotiations with the pub companies in 2012, we have sought consistently to ensure that the principles of fairness, flexibility and freedom to run a business are at the heart of the tied lease agreement. And they are principles that apply to both parties. This is, at its heart, a commercial relationship and both sides have to make a decent return on their investment. The key is balance and fairness. The recent problems faced by beleaguered lessees arose because the landlords took too much money out of the business and failed to invest sufficient back into their assets. It is this that distinguishes the saints and sinners in our industry, not size or scale or trading style. A fair share of the economic benefits arising from the operation of a tied lease is what ALMR has always sought and which we continue to believe must be delivered. And it can only be done through a tight and rigorous regulation of the rent-setting process. For too long, the way in which rents have been set has been opaque, relying too heavily on subjective assumptions and too little on robust, evidence based justification. The government consultation is wrong – it is this, and not the tie which creates the potential and provides the means for abuse.” (See separate Friday Opinion e-mail for the full article.)

Technomic – 2012 a good year for top 100 restaurant chains: Insights firm Technomic has described 2012 as a year of solid growth for the UK restaurant industry. The leading 100 UK restaurant chains posted combined domestic sales growth of 7.1% on unit growth of 7%. In 2011, in comparison, sales rose 5.6% on unit growth of 4.9%. Limited-service restaurants within the UK’s leading 100 achieved £8.1 billion in sales for 2012 – an increase of 6% over 2011. The full-service segment did even better, growing sales 8.6% to nearly £6.6 billion.
Wales pub name as third best beach bar in the world: The Ty Coch Inn, on the sands of Porthdinllaen, Wales has been named as the third best beach bar in the world in a list compiled by holiday company Cheapflights – only beaten by sites in Jamaica and on the River Spree, Berlin. The pub can only be reached by a mile walk across a golf course or by boat.

Minimum pricing to be dropped next week: David Cameron’s plans for a minimum alcohol price and a ban on multi-buy discounts will be formally killed off next week, according to The Daily Telegraph. Instead, Home Secretary Theresa May is expected to table plans to ban the selling of alcohol at below cost. Advocates of the below-cost scheme say it will target the small number of problem drinkers who consume the cheapest drink in large quantities.

Weather warning issued for scorching weekend: A ‘Level Two’ weather warning was issued yesterday by the Met Office for this weekend, which means unusually hot weather for at least two days running. London and the south east could see temperatures hitting 31C (88F) for the first time. The outlook for the rest of July remains mostly positive, with dry and sunny conditions expected until August.

US restaurant sales flat in June: Market survey companies Black Box Intelligence and People Report has reported that restaurants in the US saw flat sales in June - a disappointment after three straight months of positive sales. Flat like-for-likes in June compared to an 0.8% increase in May and 0.4% increase in April. Like-for-like traffic volumes declined 2.5%, increasing further from a decline in May’s of 1.6%.

Croydon Village Outlet with food hall to open in September: Minerva, the landlord of the former Allders building in Croydon, has let the entire floor space of the 530,000 square foot store to Croydon Village Outlet. The company, which is linked to Metro Outlet based in Newcastle, aims to bring more than 650 jobs to the town. Croydon Village will sell designer brands at discounted prices as well as host a large food hall.

Company news:

Christian Arden buys one of two final Butcher and Barrel pubs to be sold: Christian Arden, who heads Chicago Rib Shack, has bought one of the last two Butcher and Barrel pubs to be sold out of administration. He has acquired The George Shillibeer, a 5,000 square foot former warehouse located beneath the Pleasance Theatre, close to Caledonian Road Underground Station, for an undisclosed sum. Meanwhile, The Ravensbury Arms has been bought by Raj Patel, of Funky Brownz, for £55,000. Located in a prominent position on the edge of Mitcham Golf Course, the 7,000 square foot public house has a substantial beer garden. Charlotte Wild, of agent Davis Coffer Lyons, said: “Both these pubs have continued to trade successfully since Butcher and Barrel went into administration. Their size, extensive outdoor space and prominent well-connected locations made them highly appealing to pub operators.”

Freehold of site let to Ask fetches highest price at Allsop suction: A freehold let to Ask Central in Earls Court, London has raised the largest individual sum at an Allsop auction. The site, where Ask pays £124,000 per annum rent on a lease that expires in 2023, sold for £2,450,000, which was £100,000 above the top end of the guide price – the buyer earns a 4.78% yield. Meanwhile, a freehold let to Ask in Beckenham on a rent of £121,150 per annum sold for £1,380,000 – Ask’s lease expires in 2024. 

Antic London unveils two openings in July: Antic London, the company headed by Antony Thomas and backed by investment fund Downing, will open its next site on Thursday 18 July – The Old George in Bethnal Green. A week later, on Thursday 25 July, the company is opening Hagen & Hyde in Balham. The openings will bring the total Antic estate to 40 pubs.

Jamie Carragher and City Life Project to open Liverpool brasserie: Former Liverpool footballer Jamie Carragher is to launch a new brasserie in a joint venture with City Life Project, in Liverpool One. The new 200-seat venue, which will be called Moments, will be launched on 22 July and will specialise in coffee, cocktails and high-quality lunches. It replaces the current Cafe Sports Express bar and restaurant. A “wall of fame” will be unveiled at the launch in tribute to Liverpool’s most fashion-conscious women.

Coal Bar & Grill to open third site in Gloucester Docks: Coal Bar & Grill will open its third site in Gloucester Docks, occupying the former Pillar and Lucy Warehouse. Founder John Gater said: “We already trade really well in Exeter and Bristol so when the opportunity came along for Gloucester we thought it was ideal. It is extremely pretty there and has a certain unique appeal. We prefer character buildings and won’t have to do much to the warehouse to make it ready.”

Botanic Inns collapse linked to civil unrest in Northern Ireland: The collapse into administration of Botanic Inns has been linked to civil unrest in early 2013, following on from suffering problems with sustaining its capital payments and rental payment to its landlords the year before. The company owed creditors £4.4m with parent company Lisk owed £3m, HMRC owed £368,968 and Diageo owed a further £274,540. The administrator made no attempt to sell the company’s leases after it was advised by a property agent that there was no “value in the leases on their current terms”. The lease were assigned to a new company, Horatio, led by Botanic management, after landlords indicated they would consider assignments. 

Bitbuzz integrates Wi-Fi offer with Costa loyalty programme: Irish Wi-Fi provider Bitbuzz has integrated its offering with the Costa customer loyalty programme, the Coffee Club, in what the partners are saying is the first scheme of its kind in Ireland. Costa launched its first store in Ireland in 2004 at Belfast City Airport and now has 60 stores employing over 600 people in Ireland and Northern Ireland. Bitbuzz has been providing complimentary Wi-Fi to all Costa stores in Ireland since 2010. Registered Costa Coffee Club members can now avail themselves of complimentary Bitbuzz Wi-Fi without the need for vouchers. Bitbuzz has been working with its location partners, such as Costa, to introduce brand loyalty through Wi-Fi for some time.

Brasserie Zedel offers free lunch this Sunday to mark Bastille Day: Brasserie Zedel, the restaurant located off Piccadilly Circus owned by Rex Associates, is offering free lunch or dinner this Sunday (14 July), Bastille Day, to anyone who arrives wearing a blue or white hooped Breton shirt and a beret. The deal covers the menu formule including wine (or equivalent amount discounted off your bill). The restaurant states: “We look forward to seeing an entire room filled with blue and white stripes on Sunday!”

Wetherspoon – we are seeing success in towns with 8,000 residents: JD Wetherspoon has entered into negotiations for a site in Welshpool (population: 6,269). Company spokesman Eddie Gershon said: “Wetherspoon’s is looking at a site in Welshpool and are in negotiations to purchase a building. If we can agree a deal we would then put in for planning and licensing. We have enjoyed great success in the region, with profitable pubs in neighbouring towns such as Shrewsbury and Oswestry, so from a commercial point of view smaller towns such as Welshpool tend to make good business sense. Many years ago we would just be looking at the major towns and cities in the UK but in more recent times we have enjoyed great success in towns with a population of no more than 8,000 people.”

Kimbo Coffee joins VAT Club Jacques Borel: Kimbo Coffee, headed by Angus McKenzie, has pledged its support to Tax Parity Day on Wednesday 25 September. McKenzie said: “Kimbo have signed up because we see how hard the pub sector works against a sea of increasing taxation, legislation and bureaucracy. David Cameron speaks of the ‘big society’ but does nothing to support these ‘society social centres’ across our great nation, also known as pubs. To support the VAT club and its campaign to reduce VAT to 5% for foodservice is to stand up for community, job creation, to halt the demise of pubs and secure diversity, choice and value for future eating out generations.”

Clarkes moves to bigger premises and adds cookery school: Highly rated Peterborough restaurant Clarkes has moved to bigger premises in the city, taking over the former Grapevine pub overlooking St John’s Square. The move offers the Michelin “3 Fork and Spoon” rated restaurant the opportunity to offer new experiences for diners. Owner Dinesh Odedra also operates Cafe Clarkes at the Key Theatre in Peterborough. He said: “It is a shame to leave the old place, but we had simply just outgrown it. We can now cater for 80 covers, as opposed it 40, and can offer so much more including an innovative cookery school. We wanted to be able to provide private dining and we can with two function rooms. One will be a ‘chef’s table’ with exclusive access to the chef and kitchen.”

Best Western Hotels boss steps down: The managing director of Best Western Hotels in Britain has stepped down after 16 years with the company. Keith Pope became managing director in 2009 after 12 years as director of membership for hotels across the country, but is retiring at the age of 65, having worked in hotels for more than 40 years. Pope said: “It has been great although it is tinged with sadness because it is all about people in this business and here in York we have over 100 staff. I am leaving with the business in good health and with record trading sales.” Pope will remain a part time consultant, working a couple of days a month and occasionally representing them abroad.

Bramwell gives delivery contract to Tradeteam: Bramwell Pub Company has appointed DHL’s drinks logistics arm, Tradeteam, as its strategic logistics partner as the company looks to enhance the efficiency and effectiveness of drinks ordering and delivery to its 179-strong estate which includes the recently launched Wild Lime Bar & Kitchen. The newly formed partnership between the two companies follows a review of the business to ensure consistency across service, standards and delivery. Roger Moxham, chief executive of Bramwell, said: “Currently, the general managers receive multiple deliveries throughout the week. This appointment sees us take one step towards our goal of streamlining our business to make it more efficient and enabling our licensees to focus on delivering what matters most: compelling customer service and driving sales.”

Former Dhillon Hotels site bought out of administration: The Crown Inn in Amersham, Buckinghamshire – which appeared in the film Four Weddings and a Funeral – has been bought out of administration by Old Amersham Hotels. The hotel is one of four properties, previously operated by the Dhillon Group, which were taken over by administrators BDO in October last year. It featured in the 1990s romantic comedy as the location of a romantic assignation between characters played by Hugh Grant and Andie MacDowell. Aside from its 38 bedrooms, the 16th century, Grade-II-listed hotel also offers conference facilities with space for 90-seated delegates. It is the second site for Old Amersham Hotels, which also owns The Kings Arms hotel, pub and restaurant in Old Amersham. 

Britvic spurns fresh AG Barr merger plan: Britvic has rebuffed a new offer by AG Barr to combine the two companies following the final decision of the Competition Commission to clear the merger. This proposal was on more favourable terms for Britvic shareholders than the offer recommended by the respective boards and subsequently approved by the AG Barr and Britvic shareholders in January 2013. It would have given Britvic shareholders 65% of the new company rather than the original 63% that was agreed between the two companies, but was below the current Britvic share price. Britvic chairman Gerald Corbett, who was seeking 70% of any merger, insisted a new offer had to reflect Britvic’s improved prospects following the appointment of new chief executive Simon Litherland, who is cutting £30m of costs. “There would have been some raised eyebrows in the City if we had accepted a proposal below the market price,” he said. AG Barr has confirmed that it does not intend to make another offer for Britvic. AG Barr chairman Ronnie Hanna said: “While we are disappointed that the opportunity to create significant value for both sets of shareholders has been rejected, the board of AG Barr has every reason to be confident of its position as a stand-alone company. AG Barr continues to outperform the UK soft drinks market and will follow its successful long term strategy supported by a strong balance sheet, unique brands and a well invested asset base.”

Ex-Virgin marketing chief launches alcohol-free bar chain: Former Virgin marketer Catherine Salway has launched an alcohol-free “bar movement” called Redemption, aimed at consumers who want to go out but avoid drinking booze and eating meat. The concept will roll out next week, initially with a pop-up venue on the rooftop of Netil House in Hackney, East London. Netil 360 will open on ten consecutive Sundays from 21 July, while on 8 September Redemption will open a second, permanent venue in West London’s Trellick Tower, near Notting Hill. Salway, who was once described by Virgin founder Sir Richard Branson as the company’s “brand guru”, said that the concept came to her when she was looking to launch a socially responsible idea that would challenge convention. Redemption “gastrobars” will sell customers alcohol-free mocktails and locally-sourced, vegetarian food, with musical accompaniment from live sets by special-guest DJs. Virgin and Salway parted ways in early 2011. She spent 15 years at the firm, the last seven as group brand director with responsibility for the overarching Virgin brand and marketing strategy.

Great Northern set to be sold for £75m: The former owner of The Printworks is reported to be preparing a £75m bid to buy Manchester city centre leisure complex The Great Northern Warehouse. The Warehouse’s owner, London-based property fund Capital & Regional, put the Deansgate landmark up for sale in November last year. Now another London-based property investor Resolution Property has been named as a front runner to buy the 500,000 square feet building, which has 46 units and is home to an AMC Cinema, the Manchester 235 Casino and the All Star Lanes bowling alley. Resolution was previously the owner of Manchester leisure complex The Printworks, which it sold to Land Securities in November last year for £93.9m.

Marston’s pub to be acquired by the community after £203,000 collected: A Marston’s pub in Slaley, Northumberland, The Rose & Crown, is the second pub this week set to be acquired by its community. The group needed to raise a minimum of £130,000 but have surpassed the sum by collecting £203,000 from 85 investors in less than three months. Eileen Tuohy, who has lived in Slaley for three years, said: “The plan was to raise a minimum of £130,000 and we would have then borrowed the rest of the money from the bank to make up the £250,000. But the fact that we have collected £203,000 means we will have to borrow a lot less from the bank and we can put a lot more money back into the pub and other facilities.”

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