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Morning Briefing for pub, restaurant and food wervice operators

Wed 14th May 2014 - Propel Wednesday News Briefing

Story of the Day:

Pub and restaurant like-for-likes up 4.4% in April: Britain’s managed pub and restaurant operators are enjoying a strong start to 2014, with collective like-for-like sales up 4.4% in April against the same month last year. It follows a 4.6% increase in March. These latest figures from the Coffer Peach Business Tracker show that trading has been positive throughout the winter and spring, with April’s results marking 13 consecutive months of like-for-like sales growth for the sector. Total sales for April, which include the impact of new openings, were ahead 7.0% on last year, as the British public found more places to go out to eat and drink. “What will be especially pleasing is the fact that growth is not confined to London. During April businesses outside of the M25 performed in general better, with collective like-for-likes up 4.8%,” said Peter Martin of CGA Peach, the business insight consultancy that produces the Tracker, in partnership with Coffer Group, Baker Tilly and UBS. “Most of the new site expansion is being seen away from London, where total sales growth was up 8.0% last month, compared to 4.7% in London, fuelled especially by new restaurant brand openings,” Martin added. “The late Easter break helped April’s numbers, as the holiday weekend partly fell in March last year, but the important fact is we are now seeing consistent growth from the sector. March numbers were strong and we are seeing positive trading from both pubs and restaurants and inside and outside of London. The underlying trend is upward. The 28 companies now contributing to the Tracker have together seen positive like-for-like sales for each of the past 13 months. Looking at the long-term trend, year-on-year like-for-like sales were up 2.9% for the 12 months to the end of April, with total sales running 5.8% ahead. The eating-out and drinking-out market may now be a more reliable barometer of the general health of the economy than retail.” Trevor Watson, director at Davis Coffer Lyons, said: “In spite of weaker Easter trading compared to 2013 (due to its timing), April’s statistics are strong with total sales growth well ahead of RPI. This reflects the confidence that we are seeing from operators in property transactions. There is, however, a shortage of quality sites, which is driving up rents while also slowing down some operators’ expansion plans. Despite the lack of opportunities, we expect the remainder of 2014 to continue to show buoyant trading.”

Industry News:

Luke Johnson – aspects of the US market are still impressive: Sector investor Luke Johnson has described aspects of the US foodservice market as still impressive although the UK has caught up in many ways. He told Propel: “We began opening casual dining chains in the 1990s, and since then we have discovered fast-casual, things like pop-ups, food trucks – and fine dining has got very sophisticated in London. In the regions, arguably, there is some way to go. But we have our own home-grown ideas. I think in many ways we have caught up with the Americans. (But) the scale of the US market always stuns: when you meet the operator of the Corner Bakery Café, Mike Hislop, for example, and he is opening three times as many sites as I am, it just blows you away. Secondly, the vibrancy of the franchise market there, the quality and quantity of great franchisees is breathtaking. They invented the whole idea of franchising and they are the masters. The property barriers there are much lower, so that just the speed and dynamism of the market is so impressive.” Luke Johnson travelled to the National Restaurant Association show in Chicago last year with Propel Info and the ALMR, touring hot concepts, including Corner Bakery Café where chief executive Mike Hislop talked to delegates about his business. Propel and the ALMR’s annual trip leaves tomorrow and includes 16 hours of touring, involving 20 Chicago concepts and brands.
Red Hot World Buffet joins ALMR as income grows by 25%: Operator membership of leading trade body the Association of Licensed Multiple Retailers (ALMR) grew by over 30% in 2013, for the second successive year, with supplier membership increasing by over 18%. The ALMR now represents the interests of some 170 companies, between them operating 14,000 outlets and employing over 350,000 people in pubs, clubs, bars and restaurants. Income for the year grew by 26% with membership income increasing by 25% and event income also growing by the same figure. ALMR chief executive David McHattie said: “Last year (was) a fantastic year for the ALMR, with our membership breadth and depth continuing to expand and the incorporation of dynamic and vibrant new members. That is reflected in the makeup of our council and we are delighted to welcome Eddy Passey of Red Hot Buffet, one our newest members, to join the vital work our council does. We have seen some major political gains and have had enormous success getting our message across to politicians and policy makers – firmly underlining our standing as the leading voice for licensed retailers.”
CPL Training signs £1m deal with the BII: CPL Training Group has entered into a strategic partnership with the BII to deliver all BIIAB qualifications across the UK for the next five years. With a value of over a £1 million over the next five years, the partnership will deliver existing qualifications and also develop new qualifications for the licensed retail sector, comprising both face-to-face and e-learning. Chief executive of CPL Training Daniel Davies said: “We are delighted to announce this new joint-working relationship with BII. The first phase of this began last August when we moved our SCPLH volumes over to BIIAB. From May this year, our new, comprehensive agreement will see us will move our APLH volumes across and this will be followed with the uptake of other BIIAB qualifications.” CPL is the largest provider of personal licence training in the UK, and over 30% of people who sit the personal licence training course and qualification do so with CPL. Davies added: “BII has a new vision of its purpose and a fresh commercial impetus, and this has created great synergies between our two organisations.”
Aberystwyth licensee named UK’s top publican: Aberystwyth licensee Lee Price, from The Royal Pier pub, has been crowned number one pub landlord in England and Wales. Price was presented with the coveted British Institute of Innkeeping (BII) Licensee of the Year Award yesterday in front of a large audience of pub industry professionals at the BII annual lunch at Grosvenor House in London. Ahead of being crowned champion, he submitted his entry to the UK’s most respected national award for pub landlords back in January and has been through four gruelling rounds since, including a pub visit from the judges and then in the final round having to face a twelve-strong panel of pub industry experts who questioned every aspect of his business in great detail.
Pizza’s Hut’s largest franchisee criticises company’s digital deficit: Pizza Hut, which pioneered online ordering, has fallen behind its category competitors in digital platforms, especially in marketing, and is working to catch up, according to executives from the brand’s largest franchisee, NPC International, Nation’ Restaurant News has reported. The franchisee, which owns and operates 1,263 Pizza Hut locations and 91 Wendy’s units, cited the digital deficit as it reported that its profit fell sharply in the 1 April-ended first quarter.

Company News:

Simon Townsend – it’s business as usual at Enterprise: Enterprise Inns’ new chief executive Simon Townsend has told Propel that it’s “business as usual” at Enterprise after taking over from long-serving chief executive and founder Ted Tuppen. Townsend said he had developed strategy at Enterprise “alongside my predecessor” for 15 years and that the company is “relentlessly focused” on supporting licensees to maintain momentum in the business, which has now seen three consecutive quarters of like-for-like growth, the first time since 2008. The company reported 2.7% like-for-like net income growth among its 2,064 pubs in the south, with flat growth in the North (1,630 pubs) and the Midlands (1,765 pubs). Townsend said that 32% of its £41m of capital expenditure had gone on pub improvement schemes, with 326 undertaken in total at an average of £45,000 a site. A total of 15 schemes had seen investment of over £100,000 and 25 schemes had cost between £50,000 and £100,000. The company now has circa 150 free-of-tie pubs and Urban Pubs and Bars and InnBrighton have both signed up for Enterprise pubs on a free-of-tie basis in the past year. Townsend said the company offered free-of-tie leases “where appropriate” and “where we think the covenant of the tenant is right”. The company’s first managed pub, St James’s Taverns, is the company “exploring” the managed route with no ‘pre-conceived outcome’ – and the site could revert to the leased model in the future, he said. The company is seeing 70 to 75 new applicants for pubs per week, up from 63 last year and 55 the year before. The lease on an Enterprise pub in central London pub was assigned by its licensee for a premium of £600,000 last year. “That’s right back to the heyday,” said Townsend. (See bottom of this e-mail for analyst verdicts on yesterday’s results.)
Nando’s boosts UK marketing to reach broader audience: Nando’s is to boost its marketing spend in the UK to take its ‘youthful positioning’ to a wider casual dining market, Marketing Week has reported. Nando’s is pairing existing digital efforts with new outdoor and print work. Activity will combine the brand’s quirky tone of voice and its menu with an emphasis on ‘the sociable energy’ of what it is like to eat at a Nando’s outlet, said Marketing Week. Activity will avoid price promotions campaigns with inspiration taken from what fans are discussing online to push the brand in a more emotional way. Andrew Rayner, Nando’s marketing director at Nando’s, told Marketing Week its marketing plans frame an “exciting year” for the brand. He added: “We want to celebrate our launches with as many people as possible and have increased our marketing activity to reflect this. We are not moving away from PR and social activity, as communicating directly with our fans remains at the heart of what we do, but we are exploring other channels.” Early output from the strategy includes this month’s “Wing Roulette” campaign – Nando’s is running print, online and cinema ads for the first time to promote its platter of spicy chicken. Ads, created by 18 Feet and Rising, encourage people to share “finger selfies” on social media, playing on the finger licking habits of diners eating the spicy wings. The outdoor adverts are localised to target cinema goers and future campaigns will continue in the same vein, added Marketing Week.
Prezzo opts to open Cleaver rather than Chimichanga in Welwyn: Prezzo, led by Jonathan Kaye, has decide to open a sixth Cleaver site in Welwyn Garden City rather than its original plan, a new Chimichanga. The move will be seen as further evidence of Prezzo’s faith in its new burgers and chicken brand, which debuted in Cobham last summer and will open its fifth site in Billericay, Essex later this month. Welwyn Hatfield Council approved plans for Prezzo to develop the former Blockbuster site in Howardsgate. Planning documents detailed how the town centre shop was going to become a Chimichanga branch, with a mock-up of the shop front produced. A spokesman for Prezzo said: “Prezzo operates three brands, Prezzo, Chimichanga, and Cleaver and the company decided that it wished to open a Cleaver restaurant on this site.” The company is going to invest circa £500,000 into the development of the restaurant, which will employ approximately 20 staff. It is expected to open in early July. A spokesman for the borough said there were no planning issues with the last-minute change, despite the U-turn.
Busaba Eathai to open eleventh site with street food van, new dishes and desserts: Busaba Eathai will open its eleventh restaurant in Kingston this June, located at the Kingston Riverside, next to the historic Kingston Bridge, with new dishes and a street food van promotion. New dishes recently trialed at the Busaba Eathai Songkran pop-up at Fairground, Haggerston, will feature on the menu – such as Isaan grilled pork and a selection of summer salads, inspired by the executive chef Jude Sangsida’s recent trip to Thailand. Another first for Busaba, the Kingston Riverside branch will offer Thai-style desserts, such as mango sticky rice and sweet plantain fritters with vanilla bean ice cream. The new site has 135 covers, including outdoor seating on a 30 cover riverside terrace. A new lounge bar concept recently launched at the Old Street branch, will include a bar snack menu of small plates and cocktails including lemongrass and Thai basil Martini and Tamarind Negroni. To celebrate the opening of Busaba Kingston Riverside, and as part of the ‘Create in Kingston’ Design Festival, the Busaba team collaborated with street artist Hunto to paint its street food van, aptly named ‘Busaba Streethai’. Held on Monday 5 May, the festival attracted many locals and Hunto completed his design surrounded by shoppers on Clarence Street, the main retail area in Kingston. The Busaba Streethai van will be serving samples of Busaba’s new menu at Kingston’s Night Market on Thursday 15 May. 
Pub People Company signs for 13th Punch Taverns site: Pub People Company, led by Kevin Sammons, has secured its 13th Punch Taverns pub, the Fleece in Wakefield. The pub, situated on the High Street, is having a £260,000 co-investment by Pub People and Punch. Andrew Crawford, operations director of Pub People, said: “Pub People has a well-established working relationship with Punch and is always looking to operate and develop (new) pubs in the South and West Yorkshire areas. We shared Punch’s vision to create a new concept that fits within our portfolio of quality, town-centre pubs. At the Fleece, we are looking to developing a sports theme and want the pub to be part of the community, with high service standards throughout. There will be major work conducted throughout the pub with separate bar and lounge areas and multiple TV screens will be added showing live sports The plans look fantastic and I look forward to seeing the end result.”
New-build Hungry Horse receives 1,000 applications for 80 jobs: A new-build Hungry Horse site at the Gallagher Retail Park in Coventry, the Signal Box, has received more than 1,000 applications for 80 jobs. The pub has been named after the old Bell Green signal box which once stood at the site and controlled the entrance into Bell Green Goods Yard, off Stoney Stanton Road. 
Bill’s to hit 38 sites by the end of June – adds to retail offer: Bill’s Restaurants, owned by Richard Caring, will hit 38 sites by the end of June. It has opened in Tunbridge Wells, Eastbourne, Kingston and Worcester and will open in Bury St Edmunds, Norwich and Nottingham next month. A spokesman said: “We will be opening further restaurants over the coming months, including Manchester and York. Bury St Edmunds, opening 9 June, will be a lovely restaurant in a quirky area of this pretty town. Formerly a bank, there are cosy booths where the bank vaults used to be, and a generous garden with seating to the back of the restaurant. The Norwich site, opening on 16 June, is right in the middle of town, close to the famous market. It will be one of our largest, with plenty of seating on the ground floor and even more upstairs, where there is also a private dining area. The Nottingham site, opening on 23 June, is formerly a bank – this Georgian building is going to be a beauty. With high ceilings and a striking mezzanine, it’s a bright open space for breakfast and lunch that will transform into a space of twinkling lights in the evening. We have continued to grow our retail offering, and our two latest products are pink lemonade and oaties. The pink lemonade – in a beautiful pink and silver bottle – is made for us by a small artisan company in France, which has been making lemonade for over 100 years. We have two types of oaties – chocolate and Brazil nut and chunky toffee. They’re made for us by Frank’s Luxury Biscuits, using a recipe passed down through four generations of Frank’s family.”
Le Petite Maison to launch in Istanbul: Le Petite Maison is to open a site in Istanbul this month – the brand has existing sites in Nice, London and Dubai. La Petite Maison offers French Mediterranean and Niçoise cuisine. The new site is located in the chic, residential area of Nişantaşi. “It is an honour to take La Petite Maison to Istanbul, which is one of the world’s greatest cities. It’s a metropolis situated at the nexus of two continents, Europe and Asia, and one of the most ancient yet modern cities of the world,” said founder Arjun Waney. La Petite Maison, Istanbul will be operated in a joint venture with local Turkish partners. 
La Tasca launches major summer initiatives: Tapas chain La Tasca is offering a VIP Trip to the ‘closing weekend’ in Ibiza and a chance to be crowned DJ of the Year among a raft of summer major initiatives. In conjunction with Nestlé, La Tasca is also launching a range of Spanish-based iced smoothies, the purchase of which will win one lucky customer a VIP Trip to Ibiza, including flights, five star hotel, VIP passes to top clubs as well as the use of a limousine. In partnership with DJ Mag, La Tasca is also running a Latin/Salsa themed DJ competition where entrants upload their set to a link on the DJ Mag website. There will be two semi-finals in London and Nottingham followed by a final in Manchester will see the DJ of the Year crowned, with prizes including the production of their own disc as well as a tour of La Tasca’s late-night venues. Chief executive Simon Wilkinson said: “Following our successful participation in the Nestlé Toque D’Or finals we have again partnered with Nestlé to launch an amazing range of iced smoothies including our signature Frozen Sangria. The cool vibe and scene in Ibiza is very much part of our new generation of La Tasca guests so it is an aspirational prize to win. The DJ Competition is a great illustration of our ability to switch to a late-night venue in a proportion of our estate once our food service has finished and the late night guests wish to dance and party the Spanish way.”
Noodle brand Chopstix adds two more motorway sites: Noodle brand Chopstix has secured new leases, in the Baldock and Blackburn service stations from landlord Extra MSA Group. This follows two recent openings in Dundee and Great Yarmouth shopping centres, bringing the noodle chain to eight new sites since the start of this year. Andrew Long, chief executive of Extra MSA Group, said: “Extra MSA Group is pleased to be working closely with Chopstix as it continues to expand its representation in the UK. Chopstix have traded extremely well at Extra’s Peterborough and Cambridge MSAs since opening last year. The intention is to facilitate the opening of further Chopstix kiosks in other Extra MSAs, including the new MSA developments we are promoting.” Agent Cedar Dean Gilmarc acted for Chopstix.
Former Walkabout site in Wigan set to become lap-dancing club: The former Surfers Paradise nightclub in Wigan, which closed last Sunday week, has been purchased by an unknown firm with plans to turn it into a “gentlemen’s club.” Wigan Council has revealed that inquiries have been made about acquiring the licence that would make this possible and they now expect an application to be made. The site has been home to one of King Street’s most popular nightclubs. It used to be part of the Walkabout chain with the Surfers Bar located downstairs. 
Bolton town centre nightclub banned from playing music: A Bolton town centre nightspot has been banned from playing music. After Dark in Nelson Square was caught playing copyrighted music without a licence from music royalties collectors Phonographic Performance Ltd (PPL). A ruling at London’s High Court has banned Vinerock Ltd, proprietors of After Dark, playing any more recorded tracks there — or at other premises they run – until they bring their music licences up-to-date. Mr Justice Nugee, ordered the company, which was not represented in court, to pay £1,687 in legal costs.
Ardian provides £40m Eat funding: Ardian, the premium independent private investment company, has arranged a £40m unitranche financing facility for Lyceum Capital’s portfolio company EAT. Proceeds of the loan will be used to refinance EAT’s existing credit facilities. The facility also includes a £12.5 million capital expenditure tranche, which will be used to fund plans for further store openings. EAT was founded in 1996, when Niall and Faith McArthur opened the first store on London’s Villiers Street. Eat now has 113 stores across the United Kingdom, 90 of which are in London. Lyceum Capital acquired a majority stake in Eat in March 2011, investing alongside the founders and management. Eat chief executive Adrian Johnson said: “We are delighted to be partnering with Ardian to support and drive our exciting expansion plans. Ardian shares our passion for the Eat brand and the company’s investment recognises the clear potential to amplify the positive customer response to our rebranded offer with an exciting and step-change store opening programme. Together, I believe we can make Eat the premium food-to-go provider on every high street.”
Young’s re-opens the Castle in Tooting: London pub retailer Young & Co has re-opened the Castle in Tooting, South London after a major refurbishment. The changes included the conversion of the existing car park into a rear seating area/terrace, a new single-storey extensions to provide customer toilets, a new kitchen and burger shack seating enclosure, a raised alfresco dining area and pergola and fixed seating booths.
Whitbread commits to the Structural Timber Association: Whitbread has announced its commitment to only use the products and services of Structural Timber Association (STA) members in its future timber-based projects. Chris Foad, Whitbread’s head of construction process and existing estate expansion, said: “Timber is at the heart of many of the properties we construct and operate. Therefore, we need to ensure that the materials and services we use are of the highest quality, while also being sustainably sourced and priced at a competitive rate. To ensure we are meeting all of these requirements, Whitbread has taken the decision to only use the products and services of STA accredited members when building timber-based properties.”
Burger King franchisee Caspian sees Ebitda slip 3.7% after ‘difficult’ year: Caspian UK Group, which runs slightly more than 50 franchised Burger King restaurants, saw Ebitda slip 3.7% to £2.79m for the 52 weeks ended 4 January 2014, compared to the 53 weeks ended 6 January 2013. Turnover was down 2.5% to £45.36m, and operating profit fell to £735,000 from £903,000 after exceptional costs of £253,000. Profit after tax for the period was £99,000, down from £139,000 the previous year, while operating cash generated was £2.56m, down from £2.58m. Net debt fell to £3.17m from £3.71m. A dividend of £19,200, unchanged from last year, was declared. The company, which had 53 restaurants open at the end of the period, down two from the previous year, said 2013 was a “difficult” year, with adverse weather conditions and other circumstances affecting the company. However, it said in a statement placed with Companies House, gross profit was high, labour was under very tight control and store operating profit was good, and a number of new initiatives, including the introduction of smoothies, frappes and lower-fat fries, along with a focus on everyday value offerings, were expected to benefit the business.
Boston Tea Party earns three star sustainability award: Boston Tea Party (BTP) has been recognised as being among the most sustainable restaurant groups in the UK. The 14-strong independent café group has been awarded a Three Star rating, the highest possible, by the Sustainable Restaurant Association (SRA). The implementation of a number of positive measures over the past year has helped BTP improve from Two Stars in its SRA Sustainability Rating in 2013. Sam Roberts, managing director of BTP, said: “We were really pleased to achieve the Two Star SRA rating last year, but it was always our goal to achieve the highest possible standard – Three Stars.”
West Sussex pub sold to Bellsure Group: The property agent Savills, acting on behalf of a private client, has sold The Olive Branch in Yapton, West Sussex to the Bellsure Group. The freehold property was sold with vacant possession for £300,000. Nick Lyell, of the leisure and trading team at Savills, said: “The Olive Branch benefits from a prominent location in the heart of Yapton, an affluent residential area with good access to the A27 and A29.” Lyell said the pub sits on a sizable plot, had strong potential for development and would lend itself well to residential conversion, subject to planning.
Perle Hotels takes over management of trio of Skye hotels: Perle Hotels has taken over the operation of three Isle of Sky hotels after the previous operator went into administration, according to the BBC News. The company has taken over the management of the Broadford in Broadford and the Marmalade and Bosville properties in Portree, from Skye Hotels. Skye Hotels took over the management of the hotels last summer when the former operator MJ Macleod & Company went into administration. Now Skye Hotels has stepped away from management of the properties due to “severe cash flow problems and rapidly rising operating costs”. The individual hotels are not in administration.
Work starts on £25m leisure scheme start in Catterick: Work has begun on a £25m leisure and retail development in Catterick Garrison. The 150,000 sq ft town centre scheme will transform a former sports ground on Gough Road and, once completed, will include major retail units; a seven-screen cinema; cafés, restaurants and bars; and a 60-bed hotel with 350 car parking spaces. Greene King and KFC are among the operators already confirmed for the development.
Geof Collyer – Enterprise Inns has achieved its first underlying Earnings Per Share growth since the first half of 2006: Deutsche Bank analyst Geof Collyer has issued a buy note on Enterprise Inns shares, with a Target Price of 205p, after the company reported its first growth in underlying Earnings Per Share since 2006. He said: “Revenues -1.3%, were +1.9% better than DBE, with PBT of £55m, in line with Deutsche Bank estimates and flat year-on-year. Net income was +1.1% on a like-for-like basis. This was the third quarter in a row of positive like-for-like net income growth, with Q4’13 +0.6%, Q1’14 +0.5% and Q2’14 +1.5%. Possibly of greater importance, this was the first half-year of underlying and absolute EPS growth (+2.4% vs. DBE +0.8%) that Enterprise Inns has produced since H1 2006. Ebita growth was -4.1% on the back of a -5.5% decline in average pubs trading (vs. DBE -4.0%). However, this was after absorbing an extra £3m of head office overhead, so the underlying number was only down -1.4%. The per pub performance was comfortably better than Deutsche Bank estimates, both in terms of sales and Ebitda. Disposals of £42m were in line, with average proceeds per pub of £325,000, +17% better than those achieved for H1’13.” Douglas Jack, of Numis Securities, issuing a ‘Hold’ note and a Target price of 140p, said: “H1 PBT was flat at £55m (we forecast £55m; consensus £55m) with like-for-like net income up 1.1% against easy comps of -4.2%. The company is making gradual progress in many areas, helping the business failure rate to slow to an annualised rate of circa 8.5% of pubs, but: Ebitda is still falling as quickly as net debt; wet-led pub beer volumes are continuing to fall; and, with a regulatory overhang, valuations are questionable.”
The One Group hires Fleet Street Communications: The One Group, a high-end hospitality company that develops, manages and operates a portfolio of high-energy restaurants, lounges and bars, has appointed Fleet Street Communications, led by former trade journalist Mark Stretton, to handle its UK trade PR and media relations with immediate effect. The One Group also operates a turn-key food and beverage programme for hotels and resorts. It was established in the US in 2004 with the vision of becoming a market leader in the hospitality industry by melding service, ambiance and cuisine into one great experience.

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