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Tue 3rd Dec 2013 - Propel Tuesday News Briefing

Story of the Day:

Simon Emeny – smoking ban a positive for the pub industry: Fuller’s chief executive Simon Emeny has told the Arena Christmas lunch that he believes the smoking ban of 2007 was a positive for the industry. “We open at 8am in the morning at most of our redevelopments when 60% of the customers are women. It wouldn’t have happened before the smoking ban.” Emeny said that the company’s 175-strong managed division now has an average turnover of £1m per pub, with 50% of the estate outside the M25. “One lesson of the past five years is that big is not necessarily beautiful,” he said. The Fuller’s pub offer is based on four pillars – great cask ale, fresh food, great wine “not available elsewhere” and engaging service. On fresh food, he said: “In 2006 we decided to ban all microwaves and move entirely to fresh food – none of our dishes are bought in. Does fresh food work for us? It’s very expensive to produce – when we take over a pub staff costs rise and energy costs increase. But food sales are an ever more important part of our business and were up, in like-for-like terms, by just short of 12% at our last results.” Emeny said there was a current focus on engaging service at the company, adding: “I think it’s an area where we are going to win over the next year. Customers increasingly want something very special that they can’t get at home or in a restaurant. The hardest thing to get right is a great atmosphere and an experience.” Asked about the blurred distinctions between pubs and restaurants, Emeny said: “In a pub, you get draught beer – it’s an important difference. But one of the things pubs need to learn from restaurants is the ability to serve food consistently.”

Industry News:

Senior executives pay tribute to Tony Hughes’ influence: A straw poll by Propel Quarterly magazine has revealed the ongoing influence of former Mitchells & Butlers Restaurant Division boss Tony Hughes. The magazine, published this week, asked a dozen senior industry executives which individual they would describe as their mentor – and five named Hughes, who currently serves as a non-executive director at The Restaurant Group. Simon Emeny, chief executive at Fuller’s, said: “I was fortunate enough to have worked with what’s now M&B in the mid-1990s and spent a lot of my time working with Tony Hughes. One of the many things I picked up from Tony was his obsession with attention to detail, from a customer perspective. I’ve kept in touch with Tony and he has helped me shape the way that I do things at Fuller’s.” Of Hughes, Karen Forrester, chief executive of TGI Friday’s, said: “He taught me about brands; what brands are, what they stand for, and that they must stand for something and be true to themselves, that you must operate to the highest standards of excellence, and always believe it’s all about people. Tony is the personification of emotional intelligence.” David McHattie, chief executive of the Association of Licensed Multiple Retailers, reveals that Tony Hughes was, and still is, his mentor, too. “It’s got to be Tony for so many reasons, not least of which are his people skills – how to motivate, develop, reward and recognise people; and his knowledge, because he is just so knowledgeable. I have all the time in the world for the man. He is a great mentor, a great leader and is someone who leads by example. He understands how to make people feel they are important. He’d send me a book through the post, with an inscription, or do something special to say ‘thank you’. He makes you feel valued, and he makes you understand about service and excellence too – not accepting anything less than world class.” (See this week’s Propel Quarterly magazine for the full article. Les Murphy, trading director at Heineken, said: “Issue Four of The Propel Quarterly is probably the most informative and insightful piece of Trade Press I have read in the last five years.”)

Goulash Co-operative aims to save The Gay Hussar: A “Goulash Co-operative” is making a last ditch attempt to secure the future of Soho’s Gay Hussar restaurant this week. The consortium, which includes the former Labour leader Lord Kinnock and Tory donor Lord Ashcroft, is bidding for the restaurant when it goes on sale on Thursday. The Goulash Co-operative Ltd, made up of a group of journalists, politicians and lawyers, aims to allow the Hungarian restaurant to remain open. The co-operative is aiming to raise “at least” £200,000 to secure the Hungarian restaurant’s lease for eight years, with investments offered in units of £500. The leasehold of The Gay Hussar is being marketed for sale by agent Christie + Co off a guide price of £500,000.

German brewers seek Unesco status for beer purity law: German brewers are seeking Unesco status for the Bavarian beer purity law, known as the Reinheitsgebot, formulated by dukes Wilhelm IV and Ludwig X on 23 April 1516 – in time for its 500th birthday. If it wins a place on the Unesco list, the purity law will find itself in company that includes the Argentine tango, the Spanish flamenco, the French gastronomic meal and Turkey’s Kirkpinar oil-wrestling festival.

BBC to go Inside KFC: BBC One will air a documentary series next year that will go ‘Inside KFC’. The series will follow the lives of workers at the chain from managers to cooks and is claiming “unprecedented access” to the brand.

Krispy Kreme reports 20th consecutive quarter of like-for-like rises: Doughnut firm Krispy Kreme has reported its 20th consecutive quarter of like-for-like sales increases in the US, posting a rise of 3.7%. International franchise revenues increased 3% to $6.2 million from $6.0 million, driven by higher royalties. Sales by international franchise stores rose 4.1%.

UK’s largest nightclub tests innovative approach to drugs: The UK’s largest nightclub, the 5,000 capacity Warehouse Project in Manchester is trialing a new approach to drugs. The scheme involves testing drugs that are circulating among clubbers in real time so that they can be warned on the night about potentially dangerous batches – including PMA, a nasty, newish drug sometimes mis-sold as ecstasy. PMA can kill at lower doses than ecstasy (especially when mixed with other drugs) and can rapidly cause a fatal rise in body temperature.

Taco Bell embarks on franchise push: Taco Bell in the US has embarked on its most aggressive franchisee recruitment push in 15 years. With plans to add 2,000 new restaurants to its domestic store count by 2023, Taco Bell is looking to attract “new blood” with a particular focus on more female and minority franchisees. Taco Bell has circa 6,000 units in the US, and its goal is to reach 8,000 domestic locations over the next decade, with about 25% of growth coming from franchisees new to the system. 

Company News:

Patisserie Valerie trials lunchtime delivery service in Leeds: Patisserie Valerie is trialing a lunchtime sandwich delivery service in Leeds with expansion across the UK promised soon. The Leeds offer has launched with an offer of 30% off the first order. There will be free delivery on orders over £15. Orders for breakfast delivery must be placed before 4pm the previous day and orders for lunch delivery must be placed before 10am on the day of your lunch delivery. Last month, Propel broke the news that Patisserie Valerie has signed a deal to open within Next stores in a trial involving three sites. It is the first time that Patisserie Valerie has taken a concession within a retail environment, but if successful could lead to another route of expansion for the brand, which is owned by Luke Johnson’s Risk Capital Partners.

Quilvest rumoured to be exploring YO! Sushi sale: Quilvest Private Equity is in talks with advisers about the potential sale of YO! Sushi, which could fetch over £100 million, according to two people familiar with the matter, The Financial News has claimed. A few months ago, YO! Sushi chief executive Robin Rowland described 2012 as a watershed year with the company selling five sites and reinvesting in two other key venues. The company saw flat Ebitda of £8 million, down £800,000, on turnover up 9% to £62,628,343. Pre-tax profit for YO! Sushi UK was £2.19 million, down from £3.88 million the year before, with like-for-like sales flat. Rowland told Propel: “2012 was essentially a flat year in Ebitda terms, but a watershed year. This year is proving one our best years for many years with good like-for-like sales and profit growth.”

JD Wetherspoon buys back shares: JD Wetherspoon has bought back 97,538 of its own shares. The highest price paid was and 714p and the lowest price paid was 709.5p, with an average price of 713.9257p per share. The purchased shares will be cancelled. Following this purchase, the total number of voting rights in JD Wetherspoon is 125,715,739.

BrewDog to open five sites in the next six months: Scottish brewer and retailer BrewDog is to open five more sites in the next six months after opening its 13th site at the weekend in Shepherd’s Bush. The Shepherd’s Bush site, its third opening of 2013, will not only showcase BrewDog’s core range and limited edition beers, but also serve around 20 guest draught beers from breweries all over the world, including Mikkeller, Kernal, Magic Rock, Beavertown, Buxton, and Green Flash. BrewDog plans to open at least another five bars in the next six months, including international bars in Tokyo, Sao Paulo, and Berlin.

All Our Bars adds Star Pubs & Bars site: All Our Bars, the multi-site pub company led by Paul Wigham, has re-opened a Star Pubs & Bars site, The Royal Oak in Bookham, Surrey, after a full internal and external refurbishment. The pub is renowned for an excellent offering of cask ales, which has now been enhanced by the introduction of premium spirits including gins from emerging distillers such as Sippsmiths or Old Tom and a range of malt whiskies from small Scottish distillers. Wigham said: “The guys have done a great job in the sympathetic renovation of a lovely site which is important in Bookham. We hope the customers will enjoy the ambience and the range of innovative products that we now offer to compliment our local product menu.”

Cote to open one more before Christmas: French brasserie chain Cote is to open one more site before Christmas after opening in Reigate yesterday. The Reigate opening coincided with a refurbishment of Cafe Rouge in the town. Cote’s pre-Christmas opening will be in Devonshire Street, just off Marylebone High Street, on Monday 9 December.

Franchised Franco Manca has opened: Investment firm Fulham Shore, led by David Page, has announced a new franchised Franco Manca restaurant on Tottenham Court Road, London, has opened. The company stated: “The directors of Fulham Shore continue to review and explore other investment opportunities in and around the London area.” The company expects to announce its interim results for the six months to 30 September 2013 later this month. Franco Manca intends to open five more sites in London. Giuseppe Mascoli founded the pizza chain, in Brixton in 2008. Last month, it opened its sixth branch and released a recipe book.

Geof Collyer – Marston’s depreciation doesn’t look right: Deutsche Bank analyst Geof Collyer has questioned Marston’s depreciation figures. He said: “Over the past five years, Marston’s has invested £380m of net capex, including £290m in new big managed pubs, and circa £20-25m in the franchise estate (where Marston’s owns the FF&E), driving total pub sales by +26% and brewing sales by +39%, yet the depreciation charge has fallen by -17% or £7.2m. Last year’s asset revaluation might have helped this – though most of the assets written down would have been property not FF&E. Yes, the new builds are more efficient, causing depreciation to rise more slowly, but we cannot see how the charge can go down on the back of such significant capex.”

Tesco converts Costa Coffee to Harris + Hoole: Tesco has converted the Costa Coffee concession at its superstore site in Horsham to a Harris + Hoole. The opening follows openings in Cheshunt last Thursday and on the Caledonian Road near King’s Cross on 25 November.

Real China restaurant in Highcross, Leicester, fined £12,000 over food hygiene breaches: The 24-strong Real China buffet restaurant chain has been fined £12,000 after its Leicester site breached food hygiene regulations. The Real China in Highcross, admitted 12 charges at Leicester Magistrates’ Court, after environmental health officers found dirty, greasy equipment, fridge seals that did not close properly and food being stored at the wrong temperature. Wenbing Liang, director of The Real China (Leicester) Ltd, which runs the restaurant, pleaded guilty to the charges. Liang, who represented himself at the hearing, said he had asked the head chef to make sure the notices were complied with. He said: “On behalf of the company and all my colleagues, I want to say sorry. We have undertaken a deep clean and have spent tens of thousands on a new floor and new equipment.” The company was fined £1,000 for each of the 12 offences.

HMRC urge appeal court to throw out Greene King tax appeal: Lawyers for HM Revenue and Customs have urged an appeal court to throw out an attempt by Greene King to use a tax avoidance scheme involving a £300m internal loan between its companies. David Milne QC, for HMRC, told the upper-tier tax tribunal on Friday that Greene King had entered into a “contrived transaction”, and that attempts to argue the scheme is legal should be dismissed. “It is blindingly obvious that the primary purpose of the scheme was the avoidance of tax,” he said. At a parliamentary hearing in January the scheme was also criticised by Margaret Hodge, chair of the Commons public accounts committee, as an egregious example of an avoidance scheme marketed by tax experts at Ernst & Young.

Receiver appointed to Nando’s New Zealand: Receivers have been appointed to run franchisee Shivram, operator of Nando’s restaurant chain in New Zealand. All the 31 Nando’s stores in New Zealand will continue to run as usual. A spokesman for the receiver said: “Our objective is to work constructively with Shivram’s key stakeholders over the coming days to stabilise operations in order to facilitate a thorough assessment of the company’s financial position and prepare the business for sale and transition to a new owner.” The first Nando’s restaurant opened in Glenfield in Auckland in 2000.

Subway ramps up real-time loyalty features on app: Subway is set to introduce real-time promotional features to its revamped loyalty app to boost customer loyalty. The sandwich chain will move into phase two of its “Subcard” loyalty strategy early next year after updating its mobile app at the start of November to reward customers for their feedback. It will introduce an opt-in service for users to receive geo-targeted messages and in-app notifications about its latest offers and campaigns. The company is planning to test the frequency of messages diners can cope with in the coming weeks so they are not lost amid the growing number of targeted promotions from retailers. Data gathered from the Subway app will be used to shape future promotions for the brand’s entire range as it looks to back its lesser-known offerings such as its breakfast menu and salads. The loyalty programme attempts not only to increase customer frequency across the UK and Ireland, but also drive same-store sales and generate higher revenue, according to the business. Shetal Bhatt, European Subcard programme manager for Subway’s franchise holders, told Marketing Week the business is creating a “loyalty proposition” around mobile that ties to its plans to use the platform to push “brand information” too. While the app has been created to function as a digital loyalty card, Subway does plan on using it as a central hub for its mobile marketing moving forward.

Topland Group buys Menzies Hotels portfolio: One of Europe’s largest private property companies, The Topland Group, has acquired the Menzies Hotels portfolio brought to the market in the summer, and sold, by agent Christie + Co. Following a fast-track sales process and against strong competition, Topland Group acquired the hotels for a price in excess of the £80 million being sought for the portfolio. The hotels within the group have a combined bedroom count of over 1,500 in locations, which stretch from Aberdeen to Bournemouth, and the portfolio includes high profile assets such as the Welcombe Hotel Spa and Golf Club in Stratford-upon-Avon. Bespoke Hotels will take over management of the hotels under Vision Asset Management. Jeremy Hill, director and head of hotels at Christie + Co, said: “We launched the sales process in the summer of this year, and the huge interest we received saw us undertake a substantial number of asset tours for interested parties. The response to the sale of this 4-Star collection is evidence that the UK hotel market is gathering strength as trading levels improve.”

Alistair Darby – new EPoS will make a big difference: Mitchells & Butlers chief executive Alistair Darby has told City analysts that its current investment in new EPoS across the estate will make a big difference to the company. He reported that M&B’s former incarnation Bass was a first mover on EPoS but some pubs still had the original system, now 27 years old. He said: “There are two things that the new system does – one it means we can transact business much quicker, either at the table or at the bar in any number of ways. Also, it means that when it comes to starting up the system at the beginning of the day and closing down the system at the end of the day, the whole thing just runs infinitely faster. So, historically it would be pretty normal for a manager to have to take an hour in the morning to warm up the valves and get the system going, and probably another hour to close it down at the end of day. Opening and closing now is instantaneous. So the effect of putting those new systems in is freeing up management time. And that is really important, because it frees up management time that can be spent developing people and the guest offer. And so those will be the most immediate effects. But that is not all, there are some deeper, longer term effects, not least of which I think, is how we use the wealth of data we have got about customers to interact on a much more personalised basis as people visit our outlets. And that can be very exciting. But that is further down the track.” 

Comic coffee shop opens in Durham: A couple, Dan Pye and Lindsey Brown, have opened a venue in Durham, The Dark Matter Comic Café, that combines a coffee shop with a comic store. Pye, formerly a web consultant, said: “We both always wanted to run a coffee shop, but we wanted something a bit different. We are both geeks as well, and came up with the idea of mashing the two together.” The comic cafe also has an area for playing computer games. Pye and his business partner spent months researching the idea and discovered that comic cafes are thriving ventures in Asia.

La Tasca wins restaurant of the year award in Durham: La Tasca has won Restaurant of the Year at the ninth annual City of Durham Retail Awards. La Tasca chief executive Simon Wilkinson said: “This is a fantastic accolade to have under our belt and it’s great to see the staff recognised and celebrated for all their hard work. We aim to provide the most authentic Spanish dining experience we can and (we have) further investment planned across a number of sites nationwide in the New Year.”

Subway moves ahead of McDonald’s as the largest quick service restaurant chain in South Yorkshire and Derbyshire: Subway has claimed it has moved ahead of McDonald’s as the largest quick service restaurant brand in South Yorkshire and Derbyshire. This follows recent store openings at the Kingsway Retail Park in Derby and Barnsley Trade Park, the 45th store in the South Yorkshire and Derbyshire territory. The new Barnsley store takes the total to 31 Subway stores in South Yorkshire and 14 in Derbyshire. In January and February 2014 three new stores will be opening in Doncaster, at Baxtergate, Dunsville and at Lakeside. There will also be two new Sheffield stores at Markham Vale (off the M1 at Junction 29a) and Commercial Street. Having opened 14 stores since taking over last year as Development Agents for the region, husband and wife team Rachana and Kiran Pancholi are on course to open a further 35 stores by 2017, creating over 400 new jobs across Derbyshire and South Yorkshire.

Wagamama launches Christmas charity campaign: Wagamama has launched its charitable Christmas outreach for 2013, continuing its relationship with the leading national youth charity, UK Youth. ‘The wishing tree’ campaign will see consumers submitting their wishes virtually online and in Wagamama restaurants around the UK. For every wish made, Wagamama will donate 50p to UK youth, with the aim of raising £20,000 by 31 December. A spokesman said: “Customers in the UK will be encouraged to make a wish throughout December, be it for a white Christmas or a weekend away. Wagamama will then grant a selection of wishes in the New Year as well as donating money to UK Youth to help make others’ dreams come true.”

TCG launches new cocktail menu: Managed pub and bar group TCG is claiming to be the first mainstream operator to offer US cocktail sensation the Pickleback, when it launches its new cocktail menu at the start of December. The Pickleback – a shot of Jameson whiskey with the same of pickle juice – is one of the drinks on the new menu’s ‘experimental’ section, alongside a Mojito shot, a selection of Oddkas and a Lightning Bolt – a spoon of popping candy followed by a shot of Oddka Electricity. Elsewhere, the menu showcases ‘three Ms’: Mojitos, Martinis – including the Porn Star Martini – and alcoholic Milkshakes. It also features three beer cocktails, a range of perennial favourites such as the Cosmopolitan and Zombie, and a selection of pitchers. Prices remain competitive to ensure the cocktails’ mainstream appeal. ‘Experimental’ shots start at £1.95, while deals such as a ‘2 for £6.50’ on classic cocktails, or pitchers for £8.95, offer good value. TCG director of operations Ben Levick said: “We set out to create a cocktail menu that broke our usual mould, and the result is, we think, the most innovative offer currently available in the mainstream pub and bar sector. The main target audience for cocktails in our pubs and bars are ‘weekend millionaires’. These young – or young at heart – drinkers are looking for excitement, glamour, and something different. So this list, which offers the latest trends as well as some serious ‘glitz’ with our Prosecco-based cocktails, has plenty to delight our customers and we’re confident it will help us to increase our share of the mainstream cocktail market.”

Pring and Heap launch Urban Pubs and Bars: Nick Pring and Malcolm Heap, who founded and sold Realpubs to Greene King for £53.1m in 2011, have launched a new company, Urban Pubs and Bars. Urban plans to build a 20-strong London estate over the next three to four years by targeting urban areas within the capital that have pent-up consumer demand for a premium local with an appealing food offer. Pring told Propel: “Urban will be an evolution of Realpubs. Many parts of that successful formula will be retained and evolved, but, in addition to this, Urban plans to develop casual dining offers within certain pubs that may, in time, be spun off into dining offers in their own right. We’d like to grow to 15 sites within three years.” With an ambitious rollout plan, Urban is planning to attract and retain key personnel through a company share option scheme whereby they share financially in the overall success of the company. Heap told Propel: “It is a hugely exciting time for an acquisitive company in the London market as customers, outside the more tried and tested postcodes, embrace a more diverse range of food offerings. We want our managers to be at the heart of developing our brand and share financially in the company’s success. We believe that by doing this we will attract the best pool of talent that London has to offer. The biggest hurdle to achieving our expansion targets will be recruiting the right quality of manager so we are already actively searching for managers for the first sites.” Picking the right site in terms of location and demographics will be key to site selection rather than whether it is a freehold, free-of-tie or tied lease, Heap said. Propel understands the company is currently looking at five sites, a mixture of assignments and pubco leases, with a view to opening the first in March or April 2014. A website has been launched to collect CVs, www.urbanpubsandbars.com. The website states: “Urban has an aggressive growth strategy to acquire and operate some of the best sites in London with some new spins on some old formats that keep its people and service delivery at the heart of the operation. Urban is currently looking to recruit an operations manager, general managers and chefs to deliver the ambitious growth strategy in key locations within the capital. Anybody who knew Realpubs will know that those involved had a real sense of ownership, a lot of autonomy and a real input in helping to shape the strategy of a young, rapidly expanding company.”

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