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Morning Briefing for pub, restaurant and food wervice operators

Mon 12th May 2014 - Propel Monday News Briefing

Story of the Day:

Whitbread executives see pay jump led by £6.4m package for Andy Harrison: Whitbread chief executive Andy Harrison’s pay package jumped by 85% to almost £6.4m last year after he was allowed to cash in £2.6m of shares he was given in a one-off matching scheme of 67,568 shares made on appointment. The owner of Costa Coffee and Premier Inn also said it wanted to increase the amount Harrison can earn in long-term bonuses this year from 125% of his salary to 175%, with scope for him to get double his salary. Whitbread’s annual report showed Harrison’s pay jumped to £6.4m from £3.4m the year before. The main reason for the jump was a £4.4m payment under its long-term incentive plan (LTIP). The windfall includes the £2.6m payout on shares. Head of restaurants and hotels Patrick Dempsey earned £2m in the year compared to £1,694,000 the year before. Costa division boss Christopher Rogers remuneration package was £2,670,000 compared to £2,224,000 the year prior. Finance director Nicholas Cadbury earned a total of £1,123,000 compared to £338,000 the year before when he joined part-way through the year. HR director Louise Smaller earned £934,000 compared to £276,000 in the year prior.

Industry News:

Sky executive Alison Dolan to present at the Propel Multi Conference on 3 July: Alison Dolan, deputy managing director of Sky Business, will present at the Propel Multi Club conference on 3 July. She will look at the future of live sport and entertainment in pubs and restaurants – and the opportunities that are being missed. The Propel Multi Club Conference will be followed by the Propel summer party in the evening and 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
Disney-style theme park in Kent wins planning fast-track status: Plans to build a £2bn Disney-style theme park in Kent have moved a step closer after gaining special government status. A public consultation on Paramount Park is expected to begin in months after it was classified a Nationally Significant Infrastructure Project (NSIP) by the communities and local government secretary Eric Pickles. The move means the project is on track to open in the first half of 2019, creating 27,000 jobs on an 872-acre site on the Swanscombe Peninsula.
Heineken to launch nine new products in 2014: The UK’s largest brewer Heineken is to launch an unprecedented nine new products in 2014 at a total cost of £25m. Chief executive David Forde told The Mail on Sunday: “Nine is unheard of. But the scores from focus groups have been off the scale.” As well as new Radler and Bulmers varieties, Heineken is launching a 4% Strongbow Citrus Edge as well as a new lime and mint version of lager-and-tequila brand Desperadoes, the UK’s third largest bottled lager. There are also three varieties of a new brand from New Zealand, Old Mount Cider.
Prime Minister to consider compulsory labelling of halal products: Prime Minister David Cameron is to consider compulsory labeling of halal products if restaurants and supermarkets fail to provide information to customers about how animals are slaughtered. The Prime Minster said he would be “perfectly happy” to eat halal but that restaurants should operate on the assumption that customers expect that meat is not halal. He added that he would review the situation in a few months’ time if customers were still not given enough information.
US restaurants start to introduce no-tipping policy: A number of new restaurants in New York and Los Angeles have started a “no tipping” policy, charging 15% higher prices to cover paying higher wages to staff and informing customers they do not need to leave extra at the end of their meal. Michael Lynn, a professor at Cornell University’s School of Hotel Administration, said the no-tipping policy is becoming more prevalent in upmarket restaurants, as establishments try to pay their staff a better living wage. The downside is that patrons are sometimes put off by increased prices on their menus.

Company News:

Wellington Pub Company reports 1.4% dip in income: Wellington Pub Company, the UK’s largest free-of-tie pub estate, has reported a 1.4% dip in income in the year to 31 March 2014. The company stated: “At the quarter end, there were 786 public houses in the estate. This is one fewer than the last quarter. The disposal strategy remains to sell bottom end and / or problem properties and those that have a higher alternative use value. 664 pubs (84% of the estate) are let on a long lease. Six properties were re-let on a long lease during the quarter and there were seven lease forfeitures. The estate is producing an annual income of £27.1 million, which is a 1.4% reduction from last year. The average level of rental uplift achieved at review in the year was 3.3%. Quarterly Bond interest of £2,638,006 (‘A’ Class loan notes – £2,067,520, ‘B’ Class loan notes – £570,486) was paid in January. The issuer surplus at that time was £864,925, which was paid to the issuer. ‘A’ Class loan notes to the value of £1,168,640 were repaid and ‘B’ Class loan notes to the value of £510,000. Following these payments the company retained circa £18 million of cash on deposit. The annualised Ebitda for the 12 months to the end of March 2014 was £17.7 million.”
Steve Holmes set to take Ask Italian and Zizzi dual role as Gondola prepares for sale: The managing director of Ask Italian, Steve Holmes, is to take on the dual role of chief executive of sister brand Zizzi as owner Gondola Holdings considers a separate sale of the two businesses aside from PizzaExpress. Jason Thomas, who is operations director at Whitbread Hotels and Restaurants, will become managing director of Ask Italian reporting into Holmes. Rothschild is overseeing the sale of Ask and Zizzi, which have a combined estate of 245 sites while Goldman Sachs is overseeing the sale of PizzaExpress, which has reached 500 sites within the UK and abroad.
McDonald’s trialing new seasoning options for fries: McDonald’s is trialing new seasonings for its fries in select locations. At Stockton, California, and St Louis restaurants, McDonald’s customers are being offered garlic Parmesan, zesty ranch and spicy buffalo fries. The new fries come with step-by-step instructions for customers on how to sprinkle their fries with seasonings. McDonald’s spokesperson Lisa McComb said the company got the idea from its seasoned fries in Asia, which first debuted in Hong Kong nearly a decade ago and have since launched in China, India and Australia.
Oxford Inns and Hotels puts historic Scole Inn, Diss, on the market: Oxford Inns and Hotels has put the historic 23-bedroom Scole Inn coaching inn in Diss, Norfolk on the market with an asking price of £995,000. Alan Crowest, of agent TW Gaze, said: “Having known The Scole Inn for many years, it has been sad to see the ups and downs in trade and reputation experienced over the last decade. It is a truly magnificent building and I am sure that, in the right hands, it can once again be restored to its former glory and be one of the premier establishments in the region.”
Asda rebrands 70 cafes as Seattle Best Coffee: Supermarket chain Asda has rebranded 70 of its cafes as Seattle Best Coffee sites, the sub-brand owned by Starbucks. The US coffee company said it hoped to have 1,000 distribution points across the UK by the end of the year. A Starbucks spokeswoman said she was confident that Asda would eventually convert all of its 252 in-store cafes to the Seattle Best Coffee brand. Seattle Best Coffee is also in distribution at selected KFC and Kiddicare branches.
Thaikhun lines up first Scottish opening: A Thai restaurant brand will open its first Scottish eatery in Aberdeen. Thaikhun, an offshoot of Chaophrata, is to open a new restaurant in the city’s Union Square, creating 60 new jobs. Located on the first floor next to Best Wishes, the new eatery will offer recipes from the world-renowned street food stalls of Bangkok. Joint owner Kim Kaewkraikhot said: “My passion is to bring authentic Thai dishes from the streets of Bangkok to the streets of the UK.”
More details emerge on East London EIS gastro-pub plan: Two chef colleagues from St John and Jamie Oliver’s Fifteen have formed their own company to raise funds for a Michelin-level dining room in East London. Tom Harris and Jon Rotheram are seeking £2.4m to acquire the freehold of the Marksman pub on Hackney Road, where they plan to open a restaurant above the bar and add hotel rooms over that. They are raising money through the Enterprise Investment Scheme and putting in £100,000 of their own money. “It’s a cracking site and the pub is doing good business,” Harris said in a telephone interview with Bloomberg. “We’ve raised about half the money so far. We’ve been working at the Michelin level for a long time and we’re not going to dumb down what we do.” Harris, and Rotheram are working with Daedalus Partners LLP and the offer to subscribe is open until 30 June.
Vodka maker wins alcohol licence for Kentish Town site: A vodka expert planning to transform former public toilets in Kentish Town to a new underground bar has won an alcohol licence. Councillors agreed that the Ladies And Gentlemen bar at the fork of Fortess Road and Highgate Road in Kentish Town could be licensed to sell alcohol. Planning permission is still need to convert the space. William Borrell, from spirit makers Vestal Vodka, told a local newspaper: “We wanted to open until 2.30am because we probably won’t be busy in summer in an underground bar, so we wanted to meet the need for drinking a bit later. Now we will be opening from 5pm till midnight from Tuesday till Sunday. We’ve put a lot of money into a derelict building that would otherwise have been left to decay.”
Moo Bar looks to double up with Carlisle opening: Penrith businessman Nigel Tarn wants to expand his Moo Bar concept to Carlisle, creating 15 jobs. The craft beer specialist opened in a former cattle house – hence the name Moo Bar – in King Street, Penrith, in late 2012. It showcases draught real ales from Cumbrian microbreweries – six are on hand pump at any one time – alongside more than 100 bottled beers from all over the world. Now Tarn has applied for planning permission and listed building consent to convert the former HFC Bank next to Le Gall in Devonshire Street, Carlisle. He confirmed that the bar would be along similar lines to his Penrith venture. “Moo Bar in Penrith has traded successfully for 18 months,” Tarn said.
Joseph Holt secures £20m refinancing: North east brewer and retailer Joseph Holt has secured a £20m refinancing deal with the Royal Bank of Scotland (RBS). The company plans to use the funding to open new food-led pubs across the area. Last month, it was reported that Joseph Holt has embarked on a joint venture called Touchwood Restaurants with Cloverleaf founders John Winder and Gary Douglas. The new facility sees funding increase from £16m to £10m.
Craft beer bar serving Indian food to open in Leeds city centre: A craft beer bar serving Indian street food is to open in Leeds city centre, in a joint venture between two award-winning West Yorkshire organisations. Bundobust, located at premises in Mill Hill, will be a partnership between Bradford’s Sparrow Bier Café and Drighlington’s Prashad vegetarian restaurant. The site of the new venture is being rented from Leeds-based property company Metsmatics. Housed in a Grade II listed building in Bradford’s North Parade, the Sparrow, opened in May 2011, is run by Mark Husak, a former music promoter and teacher, and Les Hall, an ex-lawyer. The venture won the Campaign for Real Ale’s Bradford pub of the year accolade in 2012, has featured in ShortList magazine’s top ten UK pubs and The Guardian’s top ten UK craft beer bars, and is included in the Good Beer Guide. Prashad was opened by the parents of current owner Bobby Patel over 20 years ago – it was a finalist on Channel 4’s Ramsay’s Best Restaurant in 2010.
Free coffee at Caffe Nero most popular 02 reward: A free coffee at Caffe Nero was the most redeemed offer in the O2 Priority reward scheme, which was used seven million times in its First Quarter of 2014, with customers taking advantage of more than 1,000 offers. The top offer was a free coffee from Caffe Nero, which was redeemed by around 80,000 of 02’s customers, saving them over £150,000. O2 said that within the next few weeks, it will be launching a range of new Priority offers.
Prezzo unveils opening date for fifth Clever – with takeaway: Prezzo has revealed that it will open its fifth Cleaver site in Billericay on 20 May, creating 18 jobs. Cleaver is opening in the High Street on the site of the former Chimichanga. The restaurant, which cost £500,000 to develop, will have seating for 118 diners on the ground and first floor, as well as an additional six seats at the front of the restaurant. It will also offer takeaway.
Greene King buys Flying Fortress site in home-town of Bury St Edmunds: Greene King has bought The Flying Fortress pub in Mount Road, Bury St Edmunds, a large estate pub. Local media is speculating that the site could be converted to its Hungry Horse brand. A spokeswoman for Greene King Pub Partners told the local newspaper: “We have secured the site and we are now looking at the options.”
Philippines company buys Whyte and Mackay: Philippines-based brandy maker Emperador has acquired the Scottish whisky brand Whyte and Mackay for £430m. The sale of Whyte and Mackay was forced by UK competition regulators after Diageo bought a controlling stake in Indian drinks company United Spirits. The £430m sale price values Whyte and Mackay at circa 20 times Ebitda of £22.3m.
TCG to roll-out Match Pint: Managed pub and bar group TCG is rolling out the MatchPint listing service to all its venues showing sport, in time for this summer’s World Cup. The partnership will ensure that customers can check the matches being shown in TCG venues, which are promoting the tournament in Brazil as a Festival of Football. Ben Levick, TCG director of operations, said: “Our pubs and bars aim to be the best place in town to watch sport on TV. With this year’s Premier League title race going right up to the wire, and the World Cup on the way as part of a busy summer of sport ahead, we’re introducing MatchPint at a crucial time.”
Yummy founder – our relationship with Shepherd Neame has transformed: Yummy Pub Company founder Tim Foster has praised landlord Shepherd Neame for a much-improved relationship in the past 12 years. Yummy is tenant of the brewer’s Grove Ferry pub in Kent and the relationship has been fraught in the past. Writing in his blog, Foster, who reports like-for-likes are up 44% at the site, said: “Our relationship with our landlords has transformed in the past 12 months. Those that bitch should have read the detail better. In all honesty, we should have. But if you demonstrate that all you want is success, I’m convinced there is middle ground. That’s where we are with Sheps. There’s no question our business development manager Andy Davison has had an enormous impact on our relationship. In reality, he’s saved it. But now, the more of the guys we work with, the more I see a desire to just get on with it, have great pubs to be proud of. Product range is still crap. I could deliver huge margins with a week in their purchasing team, but changes in Britain’s oldest brewer are coming through, the big cogs are turning. It’s not how good your relationship is when it’s all good, it’s how good it is when it’s all going south – it’s taken us a number of years to learn that.”
Greene King looks to build second Sheffield Hungry Horse: Pub retailer and brewer Greene King is looking to redevelop a former industrial site between Broadfield Close and Little London Road in Sheffield, near the Virgin Active health club and gym, as part of its Hungry Horse brand. There is already Hungry Horse on the Turner Business Park in Handsworth Road. The company is telling the council it is aiming to meet “a genuine local need” with the proposed one and two-storey building in Broadfield Close, which is due to have an outdoor seating area, small children’s playground and 79 parking spaces. Proposed opening hours are 9am to 11pm during the week and 9am to midnight at weekends. The Broadfield site – once occupied by a mill pond, iron foundry and dye works – would be brought back into “safe, public use”.
Analyst Douglas Jack issues ‘Buy’ note on Domino’s shares: Numis Securities leisure analyst Douglas Jack has issued a ‘Buy’ note this morning on Domino’s shares with a Price Target of 710p. He said: “Domino’s is moving quickly in the right direction, under a clear strategy that the new CEO, David Wild, helped to formulate. We expect UK trading to remain strong in Q2-3, leading to forecast upgrades. Given this and the company’s intention to return almost 100% of Profit After Tax to shareholders, the shares are undervalued and should be bought, in our view. Our 710p/share target price equates to a 2015E PEG of 1.3x (well below the market’s 2.2x average), based on cautious forecasts assumptions, in our view. The 2015E P/E is 16x if one excludes Europe, a potentially valuable long-term option that could be stopped if necessary. We believe the discount to the 23x historical average P/E is too large 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.”
McDonald’s gets go-ahead for seventh Derby site – next to Marston’s pub: McDonald’s has won planning consent to open its seventh Derby site – next to new-build Marston’s pub The Blue Jay pub in Derby’s Rayneway area. A McDonald’s spokesman said: “It will create at least 65 new jobs, both full and part-time. We are working with Derby City Council to progress plans, but there is no timetable as yet for opening.” The restaurant will cater for 160 people and have a car park with 31 bays and storage space for ten bikes.
Wholesaler reports wine category growth: Wholesaler Matthew Clark has reported a year of continued value growth in the wine sector with an increase of 7% over the past 12 months (MC YOY 26th Jan 2014). Despite the market sector experiencing double-digit decline of 13% (CGA year-on-year to 26 January), Matthew Clark has seen a surge in sales within its wine portfolio. This growth comes following a period of evolution for the wholesaler, which has been focusing on honing its wine list to concentrate on offering high quality and exciting wines. The shift has seen the addition of a series of smaller, boutique agencies from around the world, including names such as Chapel Down, Te Karainga, Bai Gorri and Herencia Altés, and has led to a string of awards being attributed to individual wines on the list. The successful year for the wholesaler culminated in the ‘Discover the Unexpected’ customer tasting last month, which saw a total overhaul of the usual tasting format to further challenge perceptions of Matthew Clark. The interactive, colourful and educational format moved away from the traditional trade tasting layout and was heralded a huge success, with Matthew Clark seeing a 65% rise in visitors on the previous year’s London customer tasting. Ian Smith, commercial director at Matthew Clark, said: “This growth in wine value sales proves that our decision to focus on quality was the right one.” 
Busaba Eathai hires Jason Myers as new chief executive: Thai restaurant group Busaba Eathai has hired Jason Myers as its new chief executive – he will join Busaba Eathai on 7 July. Myers joins from Jumeirah Group, where he was managing director of Jumeirah Restaurants, and general manager of Jumeirah RnB, responsible for the setting up of Jumeirah’s stand-alone food and beverage division, Jumeirah RnB, and worldwide operations of Jumeirah food and beverage brands. Myers said: “I am extremely excited to be joining Busaba Eathai, to work with the excellent Busaba team, to continue the growth of these fantastic restaurants both in the UK and internationally.” Chairman of Busaba Eathai Stephen Gee said: “We are delighted to have Jason join our group to spearhead our development plans. His considerable experience and talent will ensure we continue our growth as the leading Thai restaurant company in the UK.” Busaba Eathai currently operates ten restaurants in the UK with a further three in development. The first of these opens in Kingston on Thames in June 2014.
Mitchells and Butlers converts O’Neill’s site to Castle division: Mitchells and Butlers has converted an O’Neill’s Irish pub site in Didsbury, Manchester to its Castle division of iconic pubs. The newly opened pub, now called The Stoker’s Arms, offers “proper pub food, superb range of speciality beers, wines and spirits”. 
Player bar bought by Sherry Butt Paris: The Player bar in London’s Broadwick Street as been sold by Cedar Dean Gilmarc to the owners of The Sherry Butt, Paris. The Player has been a Soho staple for 15 years and it is understood that negotiations were long and protracted with talks coming to an end after seven occasions.
Robinsons reports stunning success with Trooper: Stockport-based brewer Robinsons has reported ‘stunning success’ with its Trooper ale, with sales of five million pints in the first year – 50% sold into the export market. Trooper is currently distributed in 40 countries and its continuing global expansion, allied with the expanded capacity and capabilities of a new brew house, has seen Robinsons more than quadruple it export sales, which are up 730% year-to-date. Robinsons joint managing director Oliver Robinson said: “Establishing a new beer is a long and difficult process. It’s tough enough to launch a new beer in the UK, but to do so this successfully and to also take a beer global immediately is a different scenario altogether. Brewing over five million pints in a single year is not extraordinary in itself. However, brewing five million pints within the first year of launching a new ale brand is astonishing for a regional brewer like Robinsons. Also, 47% of the beer brewed is already being shipped to 40 countries – of which 15 markets are first-timers for Robinsons – including 36 out of 50 US States, Canada, Europe, Mexico, and Brazil. This is quite simply the most successful new product we have ever launched into the export market in our 175-year history.” 
Former Whitbread IT director starts new role: Former Whitbread IT director Andrew Brothers has started a new role as global chief information officer of TCC, a company running programmes for major retailers aimed at changing shopper behaviour. Operating in more than 60 countries worldwide, TCC’s services include campaign design, logistics, measurement and analysis to attract new customers.
Brighton restaurateur applies to open third site in resurgent part of city: Brighton restaurateur Essy Sharanizadeh has applied to open his third restaurant, this time targeting a former bank in a resurgent part of the city. The conversion of the old Santander bank in London Road into a new eatery is the latest boost amid a drop in vacancy rates for premises to 8% – half what it was in 2012. It will follow in the footsteps of the Al Campo Lounge, Hare and Hounds, Shuffle Bar and Kitchen, Carlito Burrito and Meat Liquor, who have all enjoyed successful openings in the past six months. This year so far there have been 19 planning applications submitted for the street compared to 30 for the whole of 2010. Sharanizadeh already runs Al-Nakhl in West Street and Bon Appetit in North Street. He hopes to open by the first week of September. He said: “We are hopeful of being successful in London Road, there are so many residents due to be in that area in the future. The kind of food we are serving is suitable for students on a low budget.”
Six bidders line up for Orchid Pub Company estate: An array of trade and private equity bidders are lined up to take a tilt at buying the Orchid Pub Company estate owned by Deutsche Bank and led by Rufus Hall, according to The Sunday Times. Trade bidders include Mitchells & Butlers, Spirit and Greene King. Among the private equity firms lined up for the business are US property investment firms Starwood Capital and Colony Capital, plus a third unnamed private equity bidder. It is thought that private equity bidders want to acquire the entire business, which may give them an advantage in the process. Offers are expected to value the business at up to £250m. A source told Propel: “The business is performing strongly with 40% Return on Investment on its current capita expenditure programme.” Orchid operates an estate of 225 pubs, with 190 plus freeholds. Last September, Orchid reported Ebitda of £29.3m on turnover of £178.8m in 2012. The company saw average weekly sales rise to £14,100 per pub from £13,900 the year before. In March this year, Hall said: “We have made no secret of the current situation – it is only right that the Board and Deutsche Bank weigh our options after a significant period where they have provided tremendous support to the Orchid management and business, allowing us to lead an exciting period of transformation for the group. The very positive news is that all options remain on the table and that this process is something that we undertake from position of complete strength, with the business performing very well, and those venues that have been the subject of capital investment responding very, very encouragingly.” Last month, Orchid reported it is to add 26 family-friendly All Inns after a 23% rise in like-for-like sales at the existing 16 in the past 12 months. The company’s Return on Investment in the segment is 30% and average weekly sales have risen from £17,000 to £21,900. Orchid’s total capital expenditure has been £4.25m. The company’s Our Family loyalty card has seen total spend increase 13% to circa £13m with a 25% increase in the number of cards used. Orchid has reported particular success with its Pizza Kitchen Bar concept, which has been described as a “genre-buster” for the way it combines a high quality pizza offer and sports bar. Hall has argued it could be expanded to 800 sites. The Pizza Kitchen & Bar (PKB) concept has added theatre and new customers to wet-led venues, according to Hall. “We promote the fact we use 100% fresh dough pizza and this appeals to women and families in particular,” he said. He explained that pizza is “high-margin peasant food, essentially it is just flour and water. It is simple, it goes with sport and it’s a concept that really works”. PKB works in a range of locations with differing demographics, he told a Propel conference last year. PKB sites see an average investment of £160,000 with average sales increasing by 33% year-on-year with a 29% Return on Investment. A further 19 sites are scheduled for conversion to the brand in 2014.

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