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Morning Briefing for pub, restaurant and food wervice operators

Tue 27th May 2014 - Propel Tuesday News Briefing

Story of the Day:

JW Lees boss – “we’re looking to expand through buying others’ unloved pubs”: Manchester brewer JW Lees is looking to expand by buying “unloved pubs that other companies can’t work out”, according to the firm’s managing director, William Lees-Jones. Speaking at the company’s annual conference at the Bridgewater Hall in Manchester, Lees-Jones said the company plans to invest £67.5m over the next five years buying and developing new pubs, which will create 1,000 new jobs, using a strategy that will involve “buying unloved pubs, doing something with them, and making people really love them.” The company, which operates 35 managed pubs and 115 tenanted pubs, has four trading templates and will use local knowledge to buy other operators unloved pubs – its target is five managed pubs and ten tenanted sites per annum. Pointing to a recent example, Lees-Jones said The Blue Bell in Monton, near Eccles, was a Spirit Leased pub that had closed after a gang riot in the pub: “Spirit Leased couldn’t see that it was a good pub because it needed £60,000 – the roof was leaking, and the carpet stuck to your feet. It’s a pub on a main roundabout in a good area that’s got itself in a cycle of not performing well. We bought it and we spent £500,000 on it, which is not a big deal as a sum these days – but we’ve added a million pounds’ worth of value. It’s quite a high-risk strategy – we couldn’t even get people to apply for jobs in the pub, its reputation was so bad. But it’s been a phenomenal success story under its new manager, Martin Hughes. If you’ve got the format to put into the pub and the money to invest in it, you’ve got an existing pub rather than a new build, which means you’re getting it at about two thirds of the price, and you’ve already got the chimney pots around it. So that’s our number one goal, to keep finding sites like that and doing the same thing again and again. We can take things that are in the ‘too difficult’ box and we can turn them around and we can add value. I don’t think we are doing anything clever, but we can make quick decisions, we have local knowledge, supportive bankers and good operational people. We are unashamedly closing more pubs than we are opening, but the ones that we are opening are bigger, busier, they can sustain a proper manager and a proper head chef.”

Industry News:

Tim Martin – World Cup will be no better “than flat to slightly negative”: JD Wetherspoon chairman Tim Martin has told The Times that the World Cup will be no better “than flat to slightly negative” for the pub operator. He said: “More and more people have flat-screen TVs and other technology in their homes, which can have an impact – a neutral tournament would be a good result.”
McDonald’s – we’re good corporate citizens: McDonald’s presented itself as a company with growth potential around the world and a responsible marketer and corporate citizen at its annual general meeting for shareholders. The meeting was held as protesters outside called for McDonald’s and other quick-service companies to pay hourly workers a wage of at least $15 per hour. “We’ve had people outside, and we respect that they want to challenge us relative to wages,” chief executive Don Thompson said during the meeting. “We pay competitive wages, provide opportunities and training for people entering the workforce. McDonald’s has a great story, and it’s a story of diversity. There is no better testament to McDonald’s commitment to its employees that 50% of our general managers started as crewmembers. So did 60% of our owner-operators. We’re consistently recognised as one of the best places to work around the world.”
TGI Friday’s looks to increase appeal to younger customers in the US with food truck: TGI Friday’s is looking to increase its appeal with younger customers in the US with the launch of a Summer of Fridays, a food truck tour that promotes new menu items to young festival-goers. At the weekend, two Fridays-branded food trucks began handing out food samples at Boston Calling, a music festival, and the trucks are to traverse the country throughout the summer, stopping at music, arts and food festivals as well as at sporting events. An assertion that figures prominently on the trucks, and in other new marketing and advertising for the brand, is that the food is “handcrafted”.
Marco Pierre White restaurant receives zero hygiene rating: A Marco Pierre White-branded steak restaurant, the Steakhouse Bar and Grill in The Cube, Birmingham, has received a zero hygiene rating after inspectors found filthy work surfaces, poorly trained staff and raw and cooked and raw food stored together, The Times has reported. The restaurant, opened two years ago, is run by Sanguine Hospitality. A spokeswoman for Pierre White said: “A far as Marco is concerned the running of the restaurant is the responsibility of the franchisees, Sanguine Hospitality.” 
PC given bravery award for clearing Red Hot World Buffet site: A police constable who helped evacuate a burning Red Hot World Buffet site in Northampton has been given a bravery award for his actions. PC Rob Welsford was leaving the Cineworld cinema in Sixfields last December when his son noticed smoke coming from the roof of the nearby Red Hot Buffet building. Immediately spotting how quickly the fire would spread, he and another man – who turned out to be a soldier, Sapper David Emery – ran into the building to get people out straight away. He said: “I don’t think the staff realised just how serious the fire was because, as we approached it, they were slowly gathering their coats and sorting out the till.” The flames quickly swept through the building, which eventually burned to the ground. The company, owned by Risk Capital Partners, will not rebuild the restaurant. 

Company News:

Five Guys UK reports £3.89m loss: Better burger brand Five Guys UK has reported a loss of £3.89m in the period to 29 December 2013 after administrative expenses involved in its UK launch hitting £4.58m. The company, which was incorporated in August 2012, began trading from its first site in Covent Garden on 4 July, reported revenue of £3.6m – it also opened sites in Reading and Islington during the period. Five Guys UK, which opens its eighth UK site in Birmingham’s Bullring today, said its first three sites “delivered on or ahead of planned performance” with trading margins hitting “our key gross profit KPI of circa 40%.” The company is targeting 20 sites by the end of this year and has a long-term goal of 250 UK sites. Five Guys UK, which is owned by Charles Dunstone, is thought to have paid a premium of circa £2.3m to acquire it first site in Covent Garden’s Long Acre, a former Novus site.
Greene King withdraws from Orchid sale talks: Greene King has reported that it has pulled out of takeover talks with pub operator Orchid Group. “We have decided to withdraw from the Orchid sale process as the transaction does not meet our strict acquisition criteria,” Greene King chief executive Rooney Anand said in a statement.
Alistair Darby – the sector is unlikely to see stellar growth: Mitchells & Butlers chief executive Alistair Darby has told City analysts that the recovery is now visible across the UK: He said: “The good news is that we are starting to see recovery across all of the UK. We have a substantial turnaround on food and drink volumes after three years where food and drink volume have been in decline. For us, it’s a pretty big turnaround.” Darby added, though, that the sector is “unlikely to see the stellar growth we saw before the (economic) bust.” 
D&D Restaurants – City of London like-for-likes up 15%: D&D Restaurants has reported a strong start to its new financial year with like-for-like sales in the City of London up 15% in the first two months. Chief executive Des Gunewardena stated that this was “the strongest start we’ve had for many years”. Last week, D&D Restaurants bought the rooftop bar and restaurant on top of the One New Change shopping mall on Cheapside for circa £4.5 million. The sixth-floor terrace venue, Madison, was launched in 2011 by the entrepreneur Frank Dowling whose restaurant business was plunged into administration after a tax-fraud probe.
Ed’s Easy Diner holds beauty parade of advisers: Ed’s Easy Diner has held a beauty parade of advisers as it considers a sale, The Sunday Telegraph has reported. The company, led by Andrew Guy, saw turnover double last year to $17.6m from £9.4m in 2012, with sales forecast to rise to £26m this year. A company spokesman said: “We talk to lots of people all the time about our various needs. Apart from our auditors and lawyers, we have not appointed any advisers. It is flattering that people are talking about Ed’s success and like any company we, of course, will evaluate any opportunity that is presented to us to maximise the development of the company and the value of shareholders.” 
Heartstone Inns moves into profit as turnover rises 10%: Heartstone Inns, the company led by James Birch, has reported turnover up 10% to £6,429,914 in the year to 31 December 2013. Operating profit rose 56% to £442,669. Profit before tax was £116,918 compared to a loss of £685,328 the year before. The company added a tenth pub in the year, The Blathwayt Arms near Bath and sold The Boatman in Guildford to Young’s, realising a profit of £356,177. The company stated: “Net debt at 31 December was £2,652,608 (2012: £4,360,814) representing a loan to value ratio of 20% based upon a third party professional valuation of the group’s property portfolio of £13,500,000. 2013 was a year of significant progress for the group and has created a sound platform to enable the group to raise additional capital to continue the development of the current estate and make further acquisitions.” The company has £2,527,579 of tax losses to set against future profits.
Loungers to open seventh Cosy Club next month: Loungers, the cafe bar concept led by Alex Reilley and Jake Bishop, will open its seventh Cosy Club site next month, on 13 June, in Bristol. It’s located in a former banking hall on Corn Street in the heart of Bristol’s historic Old City. The company stated: “Behind the neo-classical facade is a building rich in grandeur with dressed stone walls, marble floors, mahogany panelling, domed glass roof lanterns, and richly embellished and decorated plaster cornicing. They’ll be the bar to end all bars, four 2m wide solid brass chandeliers, and all of the distinctly eccentric, quirky and fun Cosy Club hallmarks.”
Mitchells & Butlers wins planning consent for Vintage Inns new-build in affluent suburb: Mitchells & Butlers has won planning consent for the first pub, a Vintage Inns site, in the Nunthorpe area of Middlesborough. The new-build will be located just off the Poole roundabout, south of the 295 homes currently being built by David Wilson Homes. The pub will be the first in the affluent suburb. Steel magnate Sir Arthur Dorman, who played a significant part in the planning of Nunthorpe and lived in the area, imposed many covenants – including one that no pubs were allowed. But a meeting of Middlesbrough Council’s planning and development committee was told that the existence of a covenant was not a material planning consideration.
Brewhouse Pub and Kitchen opens second site: Brewhouse Pub and Kitchen, led by ex-Mitchells & Butlers executive Simon Bunn and former Convivial London Pubs chief executive Kris Gumbrell, has opened its second site, a £1.8m development at Dorchester’s Brewery Square. The company bought the old Station pub on Weymouth Avenue last year and has transformed the derelict building into a microbrewery and pub, creating 20 jobs. The development has seen the importing of three copper brewery tanks from China to brew beer in at the pub. Jeremy Pope, the former owner of the building and a shareholder at Eldridge Pope Brewery which brewed its ales there for more than 100 years, said: “More and more brewery pubs are opening now, and so are micro breweries so it just shows people have faith in the ale. Originally in the 18th Century when public houses first opened, there were no large breweries and the beer was brewed on the site where it was consumed – so we are going back to that.” Brewhouse Pub and Kitchen’s first site is a former JD Wetherspoon pub in Portsmouth, The White Swan, which has been acquired freehold off an asking price of £700,000.
Staycity secures 170-room Birmingham apartment deal: Serviced apartment operator Staycity has signed a £17m deal to build 170 further apartments in Birmingham. The property, due to open in May 2015, will consist of one- and two-bedroom apartments in the city’s historic Jewellery Quarter. Dublin-based Staycity currently operates 82 apartments in Birmingham’s Arcadian centre, near New Street Station. Said chief executive Tom Walsh: “Birmingham is one of the most important business and leisure centres outside London. This property will give us a stronger foothold in the city as the demand for serviced apartments grows.” Staycity has over 1,000 apartments across eight European cities including Dublin, Edinburgh, Liverpool, London Heathrow, Manchester, Paris and Amsterdam. The company is aiming to expand its operations to 5,000 apartments over the next five years. Later this month the company will open 161 purpose-built apartments across two properties in Greenwich, London, with further new apartments to open in Venice and Lyon, France.
JD Wetherspoon to open in Newtown, Wales today, sells Dover site: JD Wetherspoon is to open its first pub in mid-Wales, The Black Boy in Newtown, Powys, (population: 12,783) today (27 May). The grade two-listed building has undergone an extensive refurbishment costing £1.6 million and has created 50 new jobs. Meanwhile, JD Wetherspoon has sold the former Snoops nightclub building in Castle Street, Dover. A company called Dover Heritage and Regeneration, based in Hertfordshire, has purchased the empty site. It is unknown what the firm intends to do with the largest building in central Dover, which was on the market for around £150,000. Wetherspoon, which bought the property 11 years ago, had been criticised for letting it fall into a state of disrepair. In January, the pub chain was issued with a legal demand from the local authority, under section 215 of the Town and Country Planning Act, to smarten up the building.
Eat – there’s potential in the UK for 300 more sites: Eat chief executive Adrian Johnson has told The Mail on Sunday that he believes there is potential for 300 more Eat sites in the UK. He said: “The market is ripe for the brand to take market share from our competitors.” The company is spending £12m on refurbishing and updating its 112 existing stores. “While the food had a loyal following the stores were quite dark and off-putting. We’re now making them more light and opening up the kitchens so people can see hot food being prepared,” he added. The company will then embark on a £12.5m expansion plan opening at least 30 new sites a year. The company, founded in 1996 by Niall and Faith MacArthur, recently arranged a £40m refinance with private investment firm Ardian. It introduces a dozen new products each month.
Las Iguanas to take Strada site in Leamington Spa: Las Iguanas, led by Eren Ali, is to take over the former Strada site closed in Leamington Spa. The Bristol-based chain, which has more than 30 restaurants across the UK, is moving into the unit at Regent Court next to Cafe Mezeme and near Travelodge. In the past year, Nando’s and Turtle Bay have opened at Regent Court, while Wagamama has enjoyed success since it opened round the corner on the Parade in 2012.
SSP opens new concept, the Flying Hippo, at Newcastle airport: Travel hub expert SSP has opened a new concept, the Flying Hippo at Newcastle airport. A total of 30 new jobs have been created at the diner, which focuses on local suppliers from Dropswell Farm and Manners Butchers to The Geordie Bakers. The menu features everything from proper cooked breakfasts and American-style pancakes to a range of ribs, wings, burgers and pizza – all with a 15-minute service promise. Chief marketing officer Lucy Knowles said: “In a fast-moving travel environment, we need to make sure we cater for someone with minutes to play with, as well as those who have time to spare for a relaxing meal. Flying Hippo does just that and wraps the whole experience in a colourful, vibrant and fun atmosphere. This is a first for Newcastle and we have exciting plans to introduce the concept in other parts of the country.”
McDonald’s plans to let restaurants buy their own sustainable beef: McDonald’s plans to let restaurants in different international markets choose their own paths for achieving its recent pledge to purchase sustainable beef. McDonald’s, which is the largest buyer of beef in the US, vowed in January to begin purchasing verified sustainable beef in 2016, with the goal of eventually buying all of its beef from sustainable sources. Achieving this goal will depend on sustainability innovation that is unique to local restaurant markets, according to Jeffrey Hogue, McDonald’s senior director of global corporate social responsibility and sustainability. At McDonald’s, “Innovation often occurs at the market level and bubbles up to other markets, rather than being corporation-driven,” Hogue said at the annual conference of the Forum for Sustainable and Responsible Investment. One example of this bottom-up approach is the shift away from refrigerants that contain hydrofluorocarbons (HFC) in European restaurants that is now being copied in restaurants in the US, he said. Hogue also cited the “Track My Macca’s” app developed in Australia, which allows consumers to trace the supply chain of their Big Mac or Chicken McNuggets down to a particular farmer or rancher. “That’s one that we’re looking to scale in other markets as well,” he said.
Sale of Enterprise Inns pub to go-ahead: The sale by Enterprise Inns of The Rose Hill Tavern in Brighton is to go ahead despite attempts by Brighton and Hove Council to list it as an “asset of community value”. The 144-year-old pub, in Rose Hill Terrace, closed on Sunday (18 May). A spokesman for Enterprise reported that the contract for the sale of the pub was exchanged before an asset of community value (ACV) application was made by the Save The Rose Hill Tavern Action Group. Local media reports suggested that the local community group would have six months to buy the pub but appear to have missed the cut-off point.
Burton MP asks for reassurance over Burton’s Molson Coors plans for Worthington Brewery: Burton’s MP has written to Molson Coors asking for reassurance over the future plans of William Worthington Brewery. The brewery has been closed for improvement works since April this year but there has been no set date for the reopening. The brewery is undergoing a major review looking at how the machinery can be re-configured to make improvements in the brewing, cleaning and maintenance.
Jamie Rollo – Mitchells & Butlers results looked weak across the board: Morgan Stanley leisure analyst Jamie Rollo has described Mitchells & Butlers results last week as looking “weak across the board”. He added: “Note that prior year EBIT was restated down by £1m due to IAS 19, and we have adjusted our previous H1 forecasts accordingly. H1 was impacted by the shift in Easter, which fell in H1 last year and was (worth) an estimated £1-2m to EBIT last year. There were £11m exceptional charges, relating to a short lease impairment charge, an adjustment in the net finance charge for pensions and the associated tax credit. The company has drawn £148m from a liquidity facility under the terms of its securitisation, with the funds charged under the securitisation and not available for use by the group. This will lead to a higher interest charge, which, along with the restated lower base net of lower depreciation lead us to reduce our 2014 EPS forecasts 2% and our later year forecasts 4-5%. The company needs 2% growth in EBIT in H2 to make our updated £318m FY forecast.”
Shirley Parkgate officially opened: Shirley Parkgate, which has taken a decade to bring to fruition, and is one of only four major new mixed-use retail and leisure schemes currently under construction in the UK, officially opened this week. The opening of Solihull’s biggest retail development is being tipped to spark a wave of regeneration and development in Shirley. At the heart of the £85 million development in Stratford Road – a joint venture between Helical Retail and Coltham Developments – is an 80,000 sq ft Asda store. It will be joined by 26 new shops, cafes and restaurants, some of which have already opened. Occupiers that have signed up so far include JD Wetherspoon, PizzaExpress, Prezzo, Perios, Starbucks, Shake Waffle and Roll, and Loungers.
Spirit Pub Company invests £200,000 in Saltdean pub: Spirit Pub Company has re-opened The Spanish Lady, in Longridge Avenue in Saltdean, after a £200,000 refurbishment. It now has an elevated beer garden with views out to sea. The bar has been completely revamped with six real ale pumps and a range of continental and craft lagers. It will also open for breakfast on Saturday and Sunday from 9am.
Norfolk pub set to fall into the sea launches a microbrewery: A family whose north Norfolk coastal pub is likely to end up in the sea in 25 to 30 years’ time has launched a microbrewery. The Dancing Men brewery is brewing its first ales at The Hill House Inn, on Happisburgh’s fast-eroding clifftop. The new microbrewery is named in honour of a famous Sherlock Holmes story written by Sir Arthur Conan Doyle after he visited the pub in 1903. Pub owners Clive and Sue Stockton and their partners have bought the business from former brewer Alec “Alf” Brackenbury who was forced to sell his Bees Brewery when he lost a hand in a factory accident last June. The pub is thought to have about 25 to 30 years before the land it sits on is eroded by the sea.
Sector building contractor collapses: A Dudley family-owned building contractor founded in 1945 has been placed in administration. R Bennett & Co, which employs 50 staff and turns over £7m a year, has called in Harrisons Business Recovery & Insolvency. The building and joinery business was founded by Bob Bennett 69 years ago and has been run by four generations of the family. Bennett built a niche specialising in work for the brewing and pub industry, developing into building maintenance for councils and new build jobs up to £2m. Clients include Mitchells & Butlers, Marston’s, Enterprise Inns, Greene King, Fuller Smith & Turner and Young’s.
Profitable Cornwall hotel for sale: The Exeter office of agent Christie + Co is offering for sale The Primrose Valley Hotel, St Ives, Cornwall. Situated within 100 metres of the highly acclaimed Porthminster Beach, the hotel has sea views to the front. Current owners Andrew and Sue Biss purchased the business in 2001 and carried out a major refurbishment to not only upgrade the property but also change the style of operation which has in recent times traded as a contemporary 3-Star metro hotel with net profits in excess of £100,000 per annum. The business has achieved many accolades in recent years and has also been shortlisted for Cornwall Tourism Awards. Matthew Smith, director of the Exeter office of Christie + Co, said: “This is an established and profitable 3-Star metro hotel which benefits from all-year-round business. It has a superb trading position with approximately 90% of income currently derived from bed & breakfast.” The business is available at a guide price of £995,000.
Greencore to focus on grab-an-go market in the UK and US: Starbucks sandwich maker Greencore is stepping up its expansion in the US through an increase in capital expenditure that could almost double the Irish group’s sales capacity there. The London-listed Dublin-based group is investing $35m in a new sandwich factory in Rhode Island, New England, to capitalise on US like-for-like sales growth of 25% in the six months to 28 March. A number of other, smaller US investments will boost sales capacity from $350m currently to a potential $600m by the end of 2015. Greencore’s biggest US customers are Starbucks and 7-Eleven chains. Patrick Coveney, chief executive, said: “The US will then represent a lot more in contribution to revenues than the current 15%.” But he emphasised the group’s commitment to the UK with a £30m investment to expand a Northampton factory. “Our strategy of focusing on the food-to-go market is working well in both the UK and the US,” he said.

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