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Morning Briefing for pub, restaurant and food wervice operators

Thu 1st May 2014 - Propel Thursday News Briefing

Story of the Day:

Easter like-for-like sales down 3.8% on Easter 2013: Britain’s leading pub and restaurant groups, which had just recorded 12 consecutive months of sales growth, saw sales dip over the Easter weekend, with collective like-for-like sales down 3.8% on the corresponding four-day holiday last year, according to latest figures from the Coffer Peach Business Tracker. “The results will be a little disappointing, but need to be put in context. Last Easter saw bumper trading after a terrible winter, and this year the holiday was later and also came during a generally more buoyant period for the eating and drinking-out market,” said Peter Martin of CGA Peach, the business insight consultancy that produces the Tracker, in partnership with Coffer Group, Baker Tilly and UBS. “However, they are also a reminder that sales growth, and the recovery, cannot be guaranteed and competition for the consumer pound remains fierce,” Martin added. Total sales, including the impact of new openings, were 1.1% below Easter 2013. For this special Easter survey, the Coffer Peach Business Tracker collected sales data from 25 restaurant, pub and bar groups across the UK. “Easter last year saw like-for-like sales up 7% on the year before, with better weather after a bleak March bringing consumers out of their homes, with restaurants the main beneficiaries then. So we perhaps shouldn’t have expected to match that this time. However, 2014 was still up on 2012,” said Martin, who noted that pub groups had generally seen a smaller Easter decline than restaurant chains. “The better weather this year has meant the market generally has been trading up on last year – with collective like-for-like sales up 4.6% in March, for example, making it the 12th month in succession to record positive growth. Looking at the long-term year-on-year trend, like-for-like sales at the end of March were running 2.4% up of the previous 12 months, and with all of Easter trading, even if a little down on last year, going into April’s numbers, unlike last year, we should be optimistic that the underlying upward trend will continue,” said Martin. Mark Sheehan, managing director of Coffer Corporate Leisure, said: “Weaker like-for-likes this year highlight that Easter 2013 saw better weather, after the miserable snow-hit winter, and that the pent up demand this caused resulted in a bumper trading period for operators. However, these figures don’t reflect what we have been seeing generally and it is, therefore important that they are considered in the wider context of the market. Consumer spending on food and drink is in long-term growth. This reflects the changing habits of consumers as well as a country’s wider economy and we expect spectacular growth for the remainder of this year.”

Industry News:

Simon Wilkinson to present at Propel 3 July Multi Club Conference: Simon Wilkinson, chief executive of La Tasca, will present at the Propel Multi Club Conference on 3 July. He will explain how service, food quality and customer satisfaction levels have been transformed at the tapas brand. The Propel Multi Club Conference will be followed by the Propel summer party in the evening, is now open for bookings – operators can claim two free places each. A full-day conference will be followed by the summer party, to include go-karting, a BBQ, the top live covers band the All Stars (which includes Simply Red’s guitarist and Rod Stewart’s bass player) and karaoke. To secure places or get more information, email Jo Charity on
Peter Hansen – “the clearing banks are still cautious”: Peter Hansen, principal of leading sector mergers and acquisitions advisory Sapient Corporate Finance, has reported clearing banks are picking and choosing, willing to support existing clients, but less willing to support new clients. Hansen, speaking at the Association of Licensed Multiple Retailers Spring Conference, said: “For those companies or investors that rely on the clearers, it is still a very difficult market. The good news is that there is lots of interest from direct lenders and investment banks, who are filling a gap in the market.” Private equity investors active at the smaller to medium end of the investment range look for growth and a good management team, he said. “Investors are always focused on the quality of the management team – that hasn’t really changed,” he added.
A total of 185 UK Subway sites offer halal meat only: Subway has removed ham and bacon at 185 outlets, and switched to halal meat alternatives in an attempt to please its Muslim customers. It has confirmed turkey ham and turkey rashers will be used instead at the stores, where all the meat will now be prepared according to halal rules. The company, which has around 1,500 outlets across the UK, said it wanted to balance animal welfare concerns with ‘the views of religious communities’.
CGA Peach – we’re seeing a democratisation of premiumisation: The UK eating and drinking out market is seeing a “democratisation of premiumisation”, CGA Peach chief operating officer Phil Tate has told the Association of Licensed Multiple Retailers Spring Conference. He described an influx of premiumisation trends, with growth in soft drinks, wine and spirits categories – and most notably a 64% growth in craft beer in the last year. “There’s more (for operators) to think about than ever before – consumers are demanding more.” 
Sky launches free online training course: Sky has launched a free online training course called “Making the Most of Sport”. Developed in association with leading sector training provider CPL Training, the interactive course is available online at It aims to help Sky Sports subscribers maximise customer spend and increase dwell time. The course is split into three modules – On Your Marks (how to plan events), Get Set (how to effectively market events) and Go (how to execute well on the day). Sky Business managing director David Rey said: “Live sport is a key profit driver for pubs and clubs and licensees who get it right can turn their venue into THE place to watch live sports to drive big returns. ‘Making the Most of Sport’ joins our unrivalled range of free products and support tools that drive value for licensees.” 
Retail Week – CACI research shows consumers who eat at restaurants spend 48% more: Retail Week has reported CACI research that shows consumers who have eaten at restaurants in a retail centre spend 48% more than those who haven’t. Retail Week stated: “Retail just can’t get enough of leisure. For landlords, it’s the sector’s vitality during the downturn and the raft of expansionist operators that are springing up; for retailers, leisure potentially extends trading hours, increases footfall and improves dwell times. It’s a trend firmly established in out-of-town parks and the increasingly complementary nature of retail and leisure was underlined in the latest analysis by data intelligence specialist CACI. Based on 170,000 exit interviews with shoppers in more than 100 retail centres across the UK as part of its annual Shopper Dimensions report, CACI’s research showed that consumers who use the catering facilities spend approximately 48% more on retail goods than those who do not. The findings also indicated a positive shift upwards – the average spend on catering increased 9% between 2012 and 2013. Plus, the growth in restaurant spend outpaced the outlay in cafes and fast-food restaurants. ‘This change in behaviour is indicative of a wider shift in the way that people behave and what they expect of a retail activity,” said Alex McCulloch, principal consultant of CACI. “We see shoppers split into two camps – convenience and leisure.”
Akbar’s named as Scotland best Indian restaurant – and Glasgow’s best restaurant: An Indian restaurant in Glasgow has been named restaurant of the year at the Scottish Curry Awards. Akbar’s in Sauchiehall Street beat off venues from across the country at a ceremony at the city’s Thistle Hotel. The prize, sponsored by the Bank of Scotland, was one of two awards for the curry house, which was also named the best restaurant in Glasgow. More than 9,000 nominations were made for Indian restaurants all over Scotland.
MatchPint research uncovers World Cup opportunities for pubs: MatchPint, the UK’s leading sports content management platform – which recently welcomed its one millionth unique user – has analysed user data to uncover their football viewing habits and favourite teams in time for the 2014 FIFA World Cup, with France, Spain and Belgium among others, presenting real opportunities for the operator keen to encourage additional footfall. Seven per cent listed France as their favourite team, six per cent Australia and five per cent Italy, with Spain and Argentina close behind. MatchPint director Dominic Collingwood said: “While it is no surprise that the majority of the country’s football supporters are England fans, our multi-cultural nation ensures that there are real opportunities throughout the World Cup for all those operators who are open to screening different teams.”
ONS finds more zero-hours contracts than first thought: The number of UK jobs offered on zero-hours contracts is 1.4m, according to the latest government figures, a far higher number than expected. A snapshot survey of employers by the Office for National Statistics (ONS), taken from a two-week period between late January and early February, shows the trend for hiring staff without guaranteeing a minimum number of hours is more prevalent than initially thought. Following an earlier survey of employees, the ONS had previously estimated that 583,000 people were employed on zero-hours, suggesting that some people have more than one job on a zero-hours basis.
Late Easter and wet weather hits beer sales: The late Easter and the extreme weather at the start of the year hit quarterly beer sales say the British Beer & Pub Association (BBPA). The latest figures, released in the BBPA Quarterly Beer Barometer, show sales falling by 3.1% in the first quarter of 2014 compared to the same period in 2013. Beer sales in pubs fell by 4.2%, an improvement on the 5.4% fall in the same period in 2013. Sales in supermarkets and off-licences fell by 1.8%, compared to slight growth in 2013. After two quarters of growth in beer sales, these figures indicate the continuing challenge for the beer and pub sector. It is hoped that the further cut in Beer Duty announced by the Chancellor in his March budget and effective from April will provide a much-needed boost to brewers. Chief executive Brigid Simmonds said: “A late Easter break and the impact of severe flooding early in the year has affected beer sales, although sales did not fall as much as they did this time last year. The outlook ahead is certainly more positive with the Easter sales, an expected World Cup uplift and the further boost from a cut in Beer Duty from the Chancellor.”
Deutsche Bank leisure analyst Geof Collyer – “We have used the Propel Info Blue Book data for much of our sector break down analysis”: Leisure analyst Geof Collyer, of Deutsche bank, has produced a note that examines the market share of the UK’s largest sector companies. He said: “Propel Info produces a detailed list of the top 200 or so companies that make up the pub and restaurant space. It is a movable feast year on year, as more groups achieve critical mass or just appear on the radar through publicity in the media. We have used the Propel Info Blue Book data for much of our sector break down analysis.” The Propel Info Blue Book provide turnover and profit figures for the UK’s 200 largest companies, looks at profit conversion percentages and provide information on directors salaries over five years. To buy a copy, e-mail

Company News:

City Pub Company buys second Norwich site: City Pub Company, the EIS-backed company headed by Clive Watson, has bought its second site in the Norfolk city of Norwich. The site, which is thought to have cost around £1.8m, is situated on St Andrews Street in the centre of Norwich’s busy social area. It is currently trading as Delaneys, an Irish-themed pub that will be refurbished over the next few months and will reopen later in 2014. This is the second acquisition by City Pub Company (East) in Norwich following the purchase of The Georgian Townhouse in 2013 – the venue is currently going through extensive refurbishment and is due to open in June 2014. The Delaneys site will trade as wet-led venue when its refurbishment is complete while the Georgian Town House will focus more on food trade. The new Norwich site will join the company’s City Pub Company (East) subsidiary, headed by Rupert Clark and now operating seven sites outside Norwich, including The Phene in Chelsea and the Cambridge Brew House. Watson told Propel: “Norwich has got a fantastic beer heritage and it’s the hub of East Anglia – a real magnet. The Georgian Townhouse will be a fabulous food and beverage place and the Delaneys will be a good up-market boozer – although it won’t be called Delaneys eventually. We also like to double up – we have two sites in Cambridge. This acquisition brings us to 18 sites and I’d be disappointed if we weren’t close to 25 by the end of the 2014 – although there’s no rush, it’s a long journey. Looking back, I wish I’d gone outside of London in the Capital Pub Company days!” Agent Everard Cole acted for City Pub Company on Delaneys.
Red Hot World Buffet decides not to rebuild Northampton site: Red Hot World Buffet, led by James Horler and backed by Risk Capital Partners, has decided against re-building its Northampton site, which was destroyed in a fire in December. Horler told Propel: “We have exchanged to surrender the lease at Northampton as there was not sufficient years left on the original lease to justify the rebuild and we wish to open new Red Hot World Buffet sites in higher footfall cities.” Yesterday, Propel reported that the company will open a new 400-cover, £1.5m site in Leicester that will employ 24 chefs and create around 100 jobs.
Tim Bacon – ‘partnering the Restaurant Group was a lesson’: Living Ventures chief executive Tim Bacon has described a business partnership with The Restaurant Group as the sharpest lesson he has learned in the sector. The Restaurant Group’s received £7m as a result of the management buy-out at Gusto Restaurant and Bar last month and TRG’s only remaining interest in Living Ventures is a £4m loan note in the Blackhouse Grill Group. Bacon told the ALMR Spring conference the lesson learned from partnering the Restaurant Group had been around ensuring both parties’ goals were the same before a deal is done. “Going in with the Restaurant Group became a… legal bun fight.” Bacon also reported that private equity company Palatine, which funded the management buy-out at Gusto, had undertaken exceptionally thorough due diligence, going a “long way down” in talking to key staff at bar level to ensure it understood the company. 
Bill’s picks up Epsom site as it targets 25 openings this year: Bill’s is to open its latest outlet in Epsom after agent Davis Coffer Lyons acquired a 3,000 sq ft ground floor unit near the intersection of South Street and High Street in the heart of the Surrey town. Bill’s has taken a new 25-year lease at a rent of £40,000 and a £120,000 premium. The Epsom restaurant will be the latest in a string of openings for the brand as it targets opening 25 restaurants this year. Restaurants in Tunbridge Wells and Bury St Edmonds – both also acquired through DCL – are due to open shortly. Jake Bernstone, restaurant agent at DCL said: “In the past, some operators have overlooked Epsom in favour of some of the more picturesque villages in the area. However, this sentiment is changing and it now appears that the town is blossoming. There are many operators viewing the area with great interest when they are deciding on their expansion strategies. Bill’s is an incredibly well-organised operation and it is no surprise that they are ahead of the pack although I have no doubt that others will follow.”
Barworks to open eighth site in Islington: Innovative London operator Barworks is to open its eighth site, the Three Johns in Islington’s White Lion Street on 8 May. The venue closed last year was previously branded a Hobgoblin. Barworks opened its seventh site on Farringdon Street, between Ludgate Circus and Holborn Viaduct, in February. Harrild & Sons, a 5,200 square foot site, underwent a £500,000 refurbishment and offers a contemporary pub on the ground floor with a hand-picked craft beer and ale list. The basement houses the third 5CC cocktail site. Barworks sold its Hoxton Bar and Kitchen site in East London last year for £1.88m, but produced turnover of £8.45m in the year to 30 June 2013, although Hoxton Bar and Kitchen was sold 15 weeks short of the year-end. Turnover was £7.96m the year before. Pre-tax profit was £1.81m, up from £434,000 the year before. Interim dividends amount to £683,000.
Greene King results show growing importance of big calendar occasions: Greene King’s results yesterday reinforced the growing importance for consumers in celebrating big calendar occasions out-of-home. Deutsche Bank analyst Geof Collyer said: “Greene King had already announced that it had served 62,000 meals on Christmas Day and that like-for-likes for this day and New Year’s Eve were +12% and +10% respectively. Quarter Four contained Valentine’s Day, Easter and Mother’s Day, on which the group served a Greene King-record 262,000 meals, generating +17% like-for-likes, reinforcing the importance to the group of the February-April period.”
Advertising Age – Burger King chooses global agency: Burger King Worldwide has named David, an advertising firm with offices in Brazil and Argentina, as its lead global agency, settling a review that began this past January, according to a report. The brand’s global chief marketing officer, Axel Schwan, told Advertising Age that David’s appointment as lead global agency was meant to establish a creative strategy for consistent messaging and advertising not only throughout the North American system but also around the world.
Nick Batram – we recommend holding Domino’s shares after new permanent chief executive confirmed: Peel Hunt leisure analyst Nick Batram has issued a hold note on Domino’s shares after the company made David Wild its permanent chief executive. Batram said: “The Group has announced the appointment of David Wild as chief executive. David stepped into the role (from his non-executive position) as temporary CEO when Lance Batchelor announced his resignation at the end of last year. David has considerable retail and consumer experience and has clearly impressed the board, which launched an extensive search for an external candidate. We were encouraged by what we heard at the final results with the company addressing many of the issues we raised in our January note.” Douglas Jack, of Numis Securities, issued a buy note with a 710p price target. He said: “The 2015E P/E is 16x if one excludes Europe, a potentially valuable long-term option that could be stopped if necessary. The discount to the 23x historical average P/E is too large, in our view, for a high-quality, digital company with a strong brand and balance sheet, a clear strategy as well as strong UK trading, returns and growth prospects.”
Spirit Pub Company introduces new training initiatives for 450-strong leased estate: Spirit Pub Company has introduced a range of new training initiatives as part of its ongoing commitment to unlocking the potential of its leased estate. The initiatives, known as the ‘medal’ training plans, are available in three tiers: Gold, Silver and Bronze. The Bronze plan covers hot topics such as guest interaction and the Challenge 21 scheme, while the Gold extends to cover issues such as delivering the best guest experience and the role of sport and entertainment in pubs. Following a successful trial at 16 pubs last year, the initiative is being made available across the whole of Spirit Leased Pubs’ 450-strong leased pub estate. Of particular value to licensees is that all three plans see Spirit Leased trainers hold the training sessions on site at the licensees’ own pubs for the full duration. What makes the scheme so unique is that the training is not limited to purely the licensee attending; the licensee’s entire team can participate in the sessions.
Stonegate investment programme continues in Leamington Spa: Stonegate Pub Company’s investment programme is continuing with a £175,000 refurbishment of The Tiller pin in Leamington Spa, now called The Waterside Inn, which re-opens tomorrow (Friday 2 May). It will have a new food and drinks menu. “We’ll be increasing our cask ale selection giving choice of national and locally brewed beers,” said manager Katy Morrissey.
Locals Club founders aim to build portfolio of local pubs: Locals Club, a new company that has acquired its first site through agent AG&G, has unveiled ambitions to build a portfolio of local pubs in London. The new company has taken a 15-year lease on the Gun in Well Street, Hackney. It has been set up by Nick Stephens, who has more than 15 years’ experience running pubs, and Oliver Dixon, who runs a creative agency and was marketing manager for 580 Ltd/Lock Tavern Group. “We’ve been looking for two-and-a-half years for the right pub in North and East London and we’ve fallen for the Gun and the area it’s in. Well Street is a great little street and we think it could well be the next Broadway Market,” said Dixon. “It’s become a passion project – though obviously we’d like it and its successors to earn their keep.” Michael Penfold, of AG&G, said: “It’s great that people with so much enthusiasm and know-how are breathing new life into such an established pub. Once again, the Gun is going to be a terrific local asset.”
Starbucks to open 100 new sites in the UK this year: Starbucks plans to open 100 new sites in the UK this year after experiencing a drop in turnover in its most recent financial year as unprofitable sites closed. A spokesman for Starbucks said: “The accounts reflect the fact that we have closed a number of unprofitable stores. The UK business is moving in the right direction: the loss before tax fell by more than 30% and we are confident this performance will continue as we continue to reduce costs. The UK is our fastest growing market in Europe. We are on schedule to open 100 new stores this year and expect the business to continue to grow as economic growth picks up.”
Marketing magazine – McDonald’s has signed e-book deal: McDonald’s UK has signed a deal with e-reading provider Kobo to offer its Happy Meal buyers access to free digital books, as part of its plan to deliver a “fun, enriched experience” for customers, Marketing magazine has reported. The magazine reported: “Launching yesterday (30 April) in conjunction with the new ‘Secret Seven’ Happy Meal book promotion, an e-book voucher will feature on every Happy Meal box enabling parents to download a free children’s e-book compatible with a wide range of electronic devices and operating systems. The e-book voucher partnership with Kobo was negotiated by The Marketing Store. The new e-book voucher is part of the fast-food giant’s ‘Happy Readers’ campaign, which has seen two annual books promotions giving away millions of popular children’s books.”
Geof Collyer – why are JD Wetherspoon and the Restaurant Group so highly rated?: Deutsche Bank Geof Collyer has given his views on why the shares of Restaurant Group (RTN) and JD Wetherspoon are so highly rated by the market. He said: “Why are JDW and RTN so highly rated? Both have benefited from a roll-out story, though in RTN’s case few remember that this was a major turnaround story when the chairman, outgoing CEO and incoming CEO first arrived at what was then City Centre Restaurants back in 2001. And some prefer to forget that JDW’s track record on average unit sales (+67%) is outstanding but it has delivered no growth in unit EBITA for 15 years. Both have low on-balance sheet net debt, RTN almost none; JDW, around 20% less than its off-balance sheet debt (grossed up leases), so in a sector where most groups have a lot of debt, there is a perception that they are much safer. But consider this. (i) JDW and Greene King are the two most successful pub groups of the past five years; total returns of +128% for JDW, +159% for GNK. (ii) The only two groups whose EBITA and EPS are above the previous 2007 sector peak. (iii) GNK operating margin in its retail business is more than JDW’s. (iv) Its group EBITA is 133% higher than JDW’s. (v) JDW’s lease- adjusted net debt is around 90% of GNK’s. (vi) EPS growth is similar, although around 25% of JDW’s is a new swap contract. (vii) GNK’s fixed charge cover is 2.8x, vs. JDW on 1.8x. (viii) JDW is on 16x FY’15E P/E, GNK is on 13x. The market likes a roll out story, and both groups have been very successful in expanding on a single site basis; JDW from one to nearly 1,000, without making an acquisition; RTN has made a few small ones. And both trade successfully all over the country. RTN has increased its average sales per site by 40% over the last ten years, JDW by +26%, yet RTN’s EBITA per site has risen by 83% whereas JDW’s has barely risen (+3%). Does this tell you that JDW was affected by the ‘Perfect Storm’ more than RTN? Both stocks fell 75% to 80% as the sector approached the recession, but RTN’s profit growth has been 70% higher since 2007. Being predominantly new build, neither group is perceived to have a legacy problem with its estate – though we don’t really know, and at the start of an economic upswing, the market seems to be prepared to look through the current high ratings.” 
May opening for new Rugby Hungry Horse: Greene King has announced 12 May as the opening day for its new Hungry Horse outlet in Leicester Road, Rugby, next to the Junction 1 Retail Park. The pub, the Steam Turbine, will be officially opened by Rugby mayor Tony Gillias. Hundreds of applicants were interviewed for the more than 80 jobs created at the new pub-restaurant. General manager Jez Fisher was “amazed” by the response and had to organise additional recruitment days so everyone could be accommodated. Fisher, who has more than 15 years’ trade experience, said: “We had an incredible response, with 90% of the staff recruited from Rugby. I am extremely pleased to be to announce that. This will help in creating that local community pub feel.”
Record turn-out by licensees for Enterprise Live: The number of publicans attending the six Enterprise Live roadshows across the country increased 25% on the previous year. Enterprise reports that the response from publicans out-stripped previous events with more than 3,250 visitors to the shows, which were staged at Olympia, London, the NEC, Birmingham; Bolton Arena; Elland Road, Leeds; Sandown Park and the UWE Exhibition Centre in Bristol. More than 130 suppliers across the beer wine, cider, spirit, soft drinks, food and snack categories were showcased during the events. Publicans were also able to take away valuable business building tips with Enterprise offering retail advice around gaming, social media, in-pub entertainment and accountancy. “We were encouraged by the response and will be looking to build on this in the future by attracting even more of our publicans to the event,” said marketing director James Armitage. “As well as show-casing supplier offers, Enterpriselive also gave us an opportunity to highlight how as a company we support our publicans through a range of services including business planning, property and marketing.”
Trio of brands line up for Tamworth: Nando’s is one of a trio of brands set to open in Tamworth later this year. The company said it hopes to open its new Tamworth outlet at the beginning of September. A spokesman for the chain told the Herald this week that the development had been delayed a number of times but that “we are hopeful to open early September at this stage”. Construction of the building is now underway at its Ventura Park location, next to Sainsbury’s. Nando’s will be joined by PizzaExpress and Costa on the former Allied Carpets site.
De Vere sells iconic Grand Hotel in Brighton: De Vere Group is set to sell The Grand Hotel in Brighton to a company owned by the Weston family, which controls Fortnum & Mason and Associated British Foods, for more than £50m – the venue has been sold through agent Christie + Co. The Group sees further potential in the development of Village Urban Resorts as a national brand with construction on two further properties already under way in Aberdeen and Edinburgh and work on a third – in Glasgow – due to commence shortly.

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