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Morning Briefing for pub, restaurant and food wervice operators

Mon 7th Oct 2013 - Burger King, Gondola, JDW, Luke Johnson and SSP

Story of the day:

Gondola sales rise by 4.2% to £604.2m: PizzaExpress operator Gondola Group, the 680-strong company owned by private equity firm Cinven, has reported sales rose by 4.2% to £604.2m in the 12 months to 1 July. Underlying earnings climbed by 6% to £112.2m as margins rose and amid “early signs of recovery in the trading backdrop”. Chief executive Harvey Smyth reported that underlying trading has been positive since the year-end. He said: “Momentum has been gradually building over the past 18 months. Trading patterns have become more predictable.” A total of 13 PizzaExpress outlets opened in the UK during the year and around 20 a year are planned. Ten Byron sites were opened in a “breakout year” for the brand. The company had placed Byron on the market in the year but withdrew it after offers did not meet price expectations. Cinven is expected to hire advisers at some point in the coming year to look at its strategic objectives. The company also saw 11 sites open internationally in the year, including two in Shanghai, two in Kuwait City, and one in Mumbai, to take the total to 56. Smyth said: “Our ambition is for PizzaExpress to become the Number one Western casual dining brand in our chosen international markets of the Middle East, India an the Far East.” Gondola serves more than 40 million meals a year and employs 15,000 people. PizzaExpress remains its biggest brand with 418 sites and sales of over 31 million pizzas in supermarkets annually. Chairman Chris Woodhouse reported earlier this year that the addition of calzone to the PizzaExpress menu just before Christmas ‘has been an overnight success’.

Industry news:

Sector investor Luke Johnson to launch entrepreneur think tank: Sector investor Luke Johnson is to launch a think tank for entrepreneurs this Thursday (10 October). The think tank will be called The Centre for Entrepreneurs and has been set up in partnership with the Legatum Institute, the public policy organisation set up by New Zealand billionaire Christopher Chandler. The new think tank has undertaken research through YouGov that has found TV shows like Dragon’s Den and The Apprentice have a ‘negative effect’. Johnson told The Sunday Times: “Government, the media and big business, despite all claiming to support entrepreneurs, can undermine entrepreneurship through unhelpful legislation, image stereotyping and monopolistic behaviour. With The Apprentice, the programme’s producers seem to be deliberately portraying young entrepreneurs as greedy, self-regarding and, frankly, a bit dim-witted.”

Popular London restaurants linked to above-average property price rises: The Financial Times has found links between popular restaurants and property price rises above market averages in London. Liam Bailey, global head of residential research at Knight Frank, has analysed the property price increases within a 250-metre radius of some of London’s finest restaurants from 2003 to 2013. Around central London, prices near Michelin establishments such as Marcus Wareing at the Berkeley, have increased by as much as 150%. “Many of those restaurants in the W1 and SW1 postcodes outperform our prime central London index, which over same period rose by about 129%,” said Bailey.

Burger King publicises reduced-calories ‘Satisfries’ with logo change: Burger King is to publicise the introduction of low calories French fries – its ‘Satisfries’ – with its logo changing in the US to “Fries King”. Restaurants in Los Angeles, Chicago and Miami will operate under that name for a limited time. Burger King’s website shows a redone company logo – an abstract, upright pouch of french fries replaces the familiar, stylised hamburger, and the words “Fries King” appear over the logo in place of “Burger King.” It’s all rendered in the same style, colours and roughly same dimensions as the “old” logo.

UK alcohol consumption falls to the lowest this century: UK alcohol consumption in 2012 fell to the lowest level this century, according to the latest annual edition of the British Beer & Pub Association’s (BBPA) Statistical Handbook 2013. There was a 3.3% fall in UK consumption per head in 2012, which the BBPA said supports government decisions to pursue a partnership approach on alcohol. Whilst alcohol consumption was falling, there was still growth in the numbers of breweries with 1,113 operational in Britain by the end of 2012, with the number of larger breweries stable. Other key facts about Britain’s drinking to emerge in the new handbook: drunkeness offences fell 12% in England and Wales during 2012; cask ale continued to increase its market share, despite a small fall (-1.1%) in overall volume; beer is the only category with the majority of sales made through the on-trade. BBPA chief executive Brigid Simmonds said: “The continuing fall in alcohol consumption challenges the inaccurate perception that Britain has a general issue with alcohol.”

Campaign against abolition of personal licences gains momentum: The campaign against government proposals for the abolition of the personal licence is gaining increasing momentum. Trade bodies, the BII, leading licensing lawyers and operators have all spoken out in recent days expressing their concerns that the proposal to replace the current system with so-called “targeted local alternatives” could lead the trade into a nightmare of increased cost and complexity – the opposite of what the government claims for its reforms. To read a critical synopsis of the reform proposals and to respond to the government’s consultation visit: A spokesman said: “It is important to make your views known to the Home Office before the 7 November when the government’s consultation closes.”

Company news:

Richard Caring’s Caprice Holdings to expand abroad: Richard Caring Caprice Holdings plans to open a Le Caprice in Dubai and is close to securing a site in New York. The company is also to open two new sites in London “with a bit of a twist” after identifying two major sites where it hoped terms can be agreed within a month. The company saw turnover rise 7.2% to £44.7m in the year to 1 January. Underlying earnings rose from £8.56m to £8.57m. Annabel, the private members club in Berkeley Square owned by Caring, saw turnover climb 1.4% to £8.4m. Pre-tax profit fell slightly to £3.2m after more investment in live performances. 

Jamie Rollo – Whitbread and JD Wetherspoon produced best ten-year returns: Morgan Stanley leisure analyst Jamie Rollo has produced a chart showing the best shareholder returns among companies listed continuously for the last ten years. Whitbread ranks highest with an 18% return with Wetherspoon showing a 14% return. He said: “Our chart shows the annual total shareholder returns for leisure stocks that have been listed continuously over the last ten years. The best performing stocks over the long run share four characteristics: structurally growing industries (Whitbread in branded hotels, JDW in eating out), growing market share, high FCF conversion, and strong balance sheets. At the other end of the scale, Rank (-3%), TUI (-2%) and Enterprise Inns (-1%) operate in structurally mature industries and have all had balance sheet or business model challenges.”

Simon French – we wonder whether £46m spent on new-builds by Marston’s is delivering unacceptably low returns: Panmure Gordon leisure analyst Simon French has issued an ‘Hold’ recommendation on Marston’s shares ahead of a pre-close update on Wednesday (9 October). He said: “We anticipate a relatively subdued announcement reflecting Mitchell’s & Butlers downbeat comments on recent trading. We therefore estimate full-year like-for-like sales growth of 1.5% in Premium & Destination pubs implying -1.0% in the last ten weeks. Accordingly, once again we trim our full year 2013 earnings estimates by circa 0.4% to £92.1m profit before tax (12.6p EPS). This is disappointing, and suggests that circa £46m of net capex spent over the last 24 months has delivered unacceptably low returns. Yet management is adamant that new-build managed pubs are delivering circa 17% EBITDA returns, so underlying taverns and leased pubs performance must be even more disappointing than the headline numbers suggest. We expect management will accelerate capital allocation into new-build managed pubs but we are unconvinced this is the right course of action, as it heightens executional risk. Therefore despite the valuation discount to Greene King, we reiterate our ‘Hold’ recommendation and 135p Target Price.”

JD Wetherspoon to hold food and drinks festival offering customers free tasters: JD Wetherspoon is to hold a food and drinks festival between Wednesday 23 October and Sunday 27 October in which customers will be offered free tasters of new food and drinks menu items. The company is advertising taster sessions on new menu items at ten different times across the five days for five new food menu items and five new drinks menu items. So, for example, customers are offered free Buffalo wings tasters at 6pm on Wednesday 9 October. Meanwhile, JD Wetherspoon starts work today on a new pub in the Rivergate Centre shopping centre in Irvine. The company has spent four years trying to find a site – the new pub is to be sited next to the escalators in the shopping centre.

Shepherd Neame to stock critically acclaimed sparkling wine: Faversham brewer and pub operator Shepherd Neame is due to stock the critically acclaimed English sparkling wine, Herbert Hall. Its first release in 2011 was described by the wine expert Matthew Jukes as “the finest debut English sparkling wine I have ever tasted”. Michael Prior, wine and spirits manager of Shepherd Neame’s wine company, Todd’s, said: “We are committed to working with small growers and independent wineries and we have been looking for a truly exceptional English sparkling wine for some time. In Herbert Hall we have found one that is not only grown and produced in Kent but is widely regarded as among the very best in the country.”

Leon to double site numbers by the end of 2014: Healthy eating chain Leon, founded by John Vincent, Henry Dimbleby and Allegra McEvedy, is to double the size of its estate to 24 units by the end of 2014, aided by a new £2m debt facility provided by Barclays. The new funding will allow an extra four sites to be opened by the end of this year and another eight next year. New sites will include locations in Holborn and Victoria plus the possibility of opening in the Midlands for the first time. Some locations will be opened in partnership with franchise partner HMSHost. Dimbleby told The Sunday Telegraph that he believes there is scope for as many as 100 sites in London. On Friday, Propel reported that Ebitda rose to £920,554 in 2012 compared to £361,694 the year before.

Square Pie to expand after £700,000 funding: Square Pie, the five-strong chain of pie shops, is set to expand after attracting £700,000 of investment from IW Capital, the private equity fund chaired by Nicola Horlick. The company plans to open two more sites, one of which will be in Birmingham’s New Street shopping centre. Founder Martin Dewey told The Sunday Times: “We’ll use this cash and then see how much the banks are lending.” Square Pie attended at Glastonbury and had three stands, taking more than £200,000 in five days.

Prestige Purchasing expands into drinks procurement: Prestige Purchasing, the leading specialist in procurement and supply chain management for the hospitality and catering industry, has recruited Phil Pothecary, Novus Leisure’s former head of procurement and Chris Donaldson, a Master of Wine (MW), to launch a new beverage procurement service. This new practice will launch in November 2013 and is aimed at the hospitality sector. Chief executive David Read said: “As the beverage market matures, operators need to become more sophisticated in the way they approach it, if they are to compete for customers and manage their costs.”

G1 Group reports turnover and profit up: G1 Group, the Scottish operator led by Stefan King, has reported pre-tax profit of £6,542,712 in the year to 31 March, a 38.9% increase from £4,709,095 the year before. Turnover was £59,333,75 up by 20% on £49,192,292 the year before. The company’s acquisition of Festival Group properties was the main part of a 22.7% increase in contribution from acquisitions during the year. Aside from buying the Festival Group in the year, G1 Group bought Cabaret Voltaire in Edinburgh and Sportsers in Perth. The company has 1,295 staff.

Marston’s wins consent for £3m Ravenscraig new-build: Marston’s has won full planning and licensing consent for a £3 million pub restaurant at Ravenscraig. To be called The Ravens’ Cliff, the venture is set to open early in 2015 and will be built immediately opposite the Ravenscraig Regional Sports Facility. Marston’s acquisitions manager Adrian Blackburn said: “This is part of our on-going strategy to build and open upwards of 25 new family pub restaurants across the UK every year, and a growing proportion of these will be in Scotland.”

Prawn price hikes see menu item withdrawn from menu at Jamie’s Italian: Jamie’s Italian has withdrawn its prawn linguine dish from the menu at its 33 sites after a disease, early mortality syndrome, affected prawn farms in Thailand, Vietnam, Malaysia and China and saw wholesale prices rise 25% in a month. A spokeswoman for Jamie’s Italian told The Mail on Sunday: “We’re still able to buy in smaller quantities for individual restaurants Barbecoa and Fifteen but, because of the high volume needed for Jamie’s Italian, we have taken them off the menu as availability across the market has dropped.”

Wellington Pub Company reports profit drop: Wellington Pub Company, the owner of the UK’s largest free-of-tie pub estate, has reported a decline in pre-tax profit in its most recent year – it made £6,734,000 pre-tax in the year to 31 March 2013 compared to £9,250,000 the year before. Turnover in the most recent year was £27,207,000 compared to £27,774,000 the year prior. Property disposals produced a new surplus of £600,000 in the year. An interim dividend of £3,565,000 was paid.

Lindley Heritage wins £12.5m Gateshead contract: Sage Gateshead, has appointed Lindley Heritage – the heritage, arts and leisure venue division of The Lindley Group – to manage and develop all aspects of the catering and hospitality services at the prestigious home of music and musical discovery located on the south bank of the river Tyne. Lindley Heritage clinched the five-year, £12.5 million catering contract after joining forces with award-winning north east based chef and restaurateur, Terry Laybourne, who will preside as consultant chef at the landmark venue.

Cobra sales rise: Sales of Cobra beer, owned by Molson Coors and Lord Bilimoria, rose 8.2% in the UK and Ireland last year. Turnover rose to £54m but pre-tax profit dipped to £3.6m from £4.5m in the previous year. The company paid a £3.5m dividend for the 12 months to 29 December 2012.

Travelodge lost £71m in 2012: Budget hotel chain Travelodge lost £71m in 2012, a reduction in the £148.1m in losses reported the year before. Turnover was £391.4m up from £369.5m. There were exceptional costs of £85m, including £41.1m relating to a financial restructuring in the year.

Be At One plans Brighton opening: Be At One, the cocktail bar brand that has investment from Piper private Equity, is planning its second opening outside of London in Brighton. The company has 16 sites in London and one in Reading. The company is currently advertising for staff. It states: “With decades of training experience we have designed what we consider to be a structured and thorough training program that is unrivalled in our industry. This will involve spending five weeks training in our bars in London. Our cocktail menu has over 200 cocktails and our bartenders are required to learn every one of them.”

Renowned Highgate tea shop goes on the market: A tea shop in Highgate Village, patronised by the likes of Victoria Wood, Alison Steadman, George Michael and Geri Halliwell, is for sale with agent Christie + Co. Stewart Harkness, of agent Christie + Co said: “High Tea of Highgate is a unique and proven business, based largely on Georgina Worthington’s bakery, design and business skills. While Georgina has moulded an exceptional business, there is enough further potential in it to provide jam tomorrow for a prospective buyer.” Christie + Co is inviting offers for the leasehold interest in High Tea of Highgate.

Britain’s biggest beer shop seeks to add ‘try before you buy’ bar: The biggest beer shop in Britain is looking to add a bar to its premises so that customers can try before they buy – and it has threatened to move away if it doesn’t get permission. Beers of Europe, based just south of King’s Lynn in Norfolk, has applied for permission to double the size of its showroom, putting in a bar at the same time. Beers of Europe stocks 2,000 different beers from more than 60 countries as well as 1,000 spirits, plus wines and home-brewing equipment. Although around half of the store’s trade comes from online orders the shop receives 50,000 visitors each year. However, Norfolk County Council highways officials say they fear the expansion would cause traffic problems at the T-junction where vehicles turn off the A10 to get to the shop, and planning officials are recommending councillors on West Norfolk’s planning committee to reject the scheme when they discuss it this week. If that happens, the owner of Beers of Europe, Derek Clark, told The Eastern Daily Press, he will move the operation to Cambridgeshire. He said: “If we are unable to expand we will have to shift. We would most likely go more towards Cambridge as we get a lot of traffic coming from that way. We would come straight out of King’s Lynn. A lot of our traffic comes from the south and we would gain a lot more footfall. It would be a shame because we bring people from all over the place to King’s Lynn.”

Beatbox site bought out of administration: A bar that was popular with students in Cardiff has been bought out of administration. Buffalo, which was owned by Beatbox Bars, has been acquired by bar management company 8 Bar Blue Limited in a deal which has safeguarded 22 jobs in the process. Nationwide insolvency practitioners was appointed administrator by the Board of Beatbox Bars Limited in July and traded the company for two months with existing staff while buyers were sought.

SSP airport site wins travel award: The Grain Loft at Manchester Airport Terminal 1, owned by SSP UK, has received a Commendation within the ‘Best Airport Bar’ category at the prestigious Airport Food & Beverage Awards (FAB), held in Dubai on 2 October 2013. The Grain Loft is the youngest bar brand in the SSP UK portfolio at just six months old. Since opening, sales have been impressive. Average transactions have increased by over 60% and sales are up by 45% compared with the outlet it replaced. The 330-cover pub and restaurant offers a food and drink menu that reflects the flavours of the Manchester region and champions the use of local produce. Customers can expect Cask Marque accredited beers, together with a menu that features many items with a guaranteed arrival time of just 13 minutes. High tech elements include self-service beer stations, where customers can simply set up a tab, choose a featured beer and pour their pints themselves. Each station also has an iPad so guests can see exactly how much they are consuming. Sound pods allow visitors to choose their own music, or plug in their own music device to create their chosen atmosphere.

Friends buy central London pub, plan more pub purchases: A group of friends who drank together in The Windsor Castle pub near Regents Park in Central London have got together to buy the place – and are now planning to buy more pubs to turn into an estate. The friends have formed a company called FGM Entertainment, with Vic Chhabria, the managing director of Rescorp Residential, a boutique estate agency in St Johns Wood, one of the directors. Chhabria said: “We first started to look at buying the pub back in 2011 and – having patronised the pub for many years – we are delighted to have finally completed the purchase. The phenomenal team of staff we inherited are working tirelessly to make the transition as seamless as possible. We plan to run this pub as we each do our other businesses and hope to make what is already a good pub, a great pub. We are already working up plans to buy additional pubs each year for the foreseeable future.” The friends, all experienced business people in a variety of fields, have purchased the remaining nine years of a leasehold interest on the Grade II listed Georgian building, which stands adjoining the London Business School. They plan to retain the pub’s existing ambiance and atmosphere, and expand the food offer to provide a menu that appeals to local residents while still offering affordable, quality dishes for the pub’s strong student clientele. Chris Bickle, associate director at Davis Coffer Lyons, which sold the pub to FGME, said: “This is a well-known free-of-tie and to have secured a premium for a short lease highlights what a fantastic opportunity this pub presents and the appeal of untied leases in the capital. It benefits from a strong student following from the London Business School opposite as well as an extremely affluent catchment and we have no doubt that the new owners will make it a success.” 

Tewkesbury operators buy second site for new concept: The operator of Theoc House in Tewskesbury have bought the freehold of The Barrel Inn off an asking price of £325,000 through agent Christie + Co. It will re-open as Hawkes House is due to open week beginning 28 October. Available from the bar will be a quality selection of artisan coffees and teas, quirky soft drinks, interesting mix of continental and local draught beers and a carefully crafted wine list. Nicholas Calfe, of agent Christie + Co in Bristol, said: “The opening of this new concept, The Hawkes House, will undoubtedly rejuvenate St Mary’s Centre and boost trade locally.”

Buccleuch hires Christie + Co on Glasgow scheme: UK property company Buccleuch Property has appointed agent Christie + Co to advise on a high-profile development opportunity in central Glasgow. Situated on Oswald Street, the site in question occupies a high profile location at the junction with Argyle Street, which is immediately adjacent to Glasgow Station. Buccleuch property director Sandy Smith said: “This is a landmark development opportunity providing the key ingredients for a successful mixed-use scheme. Whilst the current consent relates to hotel and licensed premises use, we consider the location is readily suited to a variety of hospitality concepts from Apart Hotel to some of the new boutique hostel concepts we’re seeing being developed, not to mention the thriving student residential market.”

Drinks consultancy opens pop-up cocktail bar with Diageo: The Manchester bar consultancy The Liquorists is opening a bar in conjunction with Diageo Reserve Brands in King Street in Manchester city centre that will run for just three months. Reserve by The Liquorists will be a mix of retail space on the ground floor where shoppers can taste and buy spirits and a cocktail and craft beer bar and events space on the first floor. From Tuesday to Saturday, the upstairs main bar area will host events including live music, “interactive” drinks master classes and food and drink tastings in the upstairs main bar area. The bar itself will sell “classic” cocktails and locally brewed craft beers. Anyone who buys a bottle in the shop downstairs will be able to pop upstairs to the bar to taste and learn how to make a cocktail by The Liquorists’ own master cocktail makers. They will also be given a recipe card with step-by-step instructions on cocktail making. The bar is believed to be the first ever on lower King Street, and the first in Manchester to combine a bar and retail space. 

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