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Morning Briefing for pub, restaurant and food wervice operators

Thu 29th May 2014 - Propel Thursday News Briefing

Story of the Day:

Mitchells & Butlers enters exclusive talks to buy Orchid: Mitchells & Butlers (M&B) has entered exclusive talks to acquire the majority of the Orchid Pub Company estate for £266m after outbidding private equity firms Colony Capital and Starwood Capital, according to The Times. M&B has bid to acquire circa 170 to 180 of Orchid’s 220 pubs with the remainder being placed in administration with Ernst & Young. The Times reports that the M&B bid is around £10 to £15m more than Colony Capital’s, the next nearest bidder – Greene King dropped out of the bidding last Friday after deciding the portfolio did not meet its acquisitions policy. M&B is likely to close Orchid’s St Albans head office saving around £8m a year. The decision by M&B to buy the Orchid estate will surprise many – it would be the first major portfolio purchase since it bought 239 Whitbread pub restaurants for £490m in July 2006. At last week’s results, chief executive Alistair Darby was stressing that the company would make opportunistic acquisitions such as last year’s four-strong Convivial London Pubs package and single site additions, with a fresh focus on freehold sites. 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. Orchid’s owner Deutsche Bank is being advised by Sapient Corporate Finance.
   

Industry News:

Panera Bread starts to replace cashiers with kiosks for food order accuracy: Panera Bread, the American cafe-bakery brand, has begun to replace cashiers with kiosks. The chain will start adding about eight kiosks per restaurant, while customers will also be able to order by phone. As a result, there will be one to two fewer cashiers in restaurants in the next year or two. Panera Bread’s chief executive, Ron Shaich, said the new system would help the accuracy of orders. Customers would also be able to customise their food. Shaich told Businessweek that the chain will not be cutting back on workers. The former cashiers will now carry food to customers’ tables. “The dirty little secret in the food industry is [that] one in seven orders is wrong,” Shaich told Businessweek. “We’re one in ten, a little better than average. Half of those inaccuracies happen during order input.”
   
Investec searches for Food and Drink Entrepreneur of the Year: Entries are now welcome for the first-ever Investec Food and Drink Entrepreneur of the Year 2014. The awards, sponsored by specialist bank Investec, are looking for successful food and drink producers and retailers, large or small. The competition is free to enter and the prize is £5,000. The closing date for entries is: Friday 12 September. Winners will be announced on Tuesday 6 November. The awards are partnered by Business is Great/The Great Britain Campaign, which was set up to showcase the best of what Britain has to offer. The judging panel is Luke Johnson, Lord (Karan) Bilimoria of Cobra Beer, Julian Metcalfe and Carole Bamford, founder of the Daylesford Organic Farmshops chain.
   
CPL Training delivers 100,000th APLH course: CPL Training has reached a major milestone, having delivered some 100,000 Award for Personal Licence Holders (APLH) courses. The landmark figure was flagged up by the internal sales team, who identified Zoe Hearmon of Yates, Luton as the 100,000th delegate. She was presented with a £1,000 cheque to mark the occasion. Hearmon completed her training in a face-to-face format, the preferred approach to learning for licence training, as part of employer Stonegate Pub Company’s training programme. She said: “This was a huge surprise and a very welcome one – I’m delighted.” Daniel Davies, chief executive of CPL said: “This is a great achievement for us – APLH training remains an important part of our business and we have been at the forefront of this sector for almost two decades.”
   

Company News:

JW Lees ‘inspired by Wetherspoon and John Lewis’ over bonus scheme: The Manchester brewer JW Lees will be paying a profit-share bonus to around 50% of its 1,100 employees this July in what is believed to be a first for the family brewer sector in terms of its scope. The scheme was announced internally last autumn, reports William Lees-Jones, JW Lees’s managing director. Now more than 500 of its staff are set to benefit from the first pay-outs under the scheme. “At a basic level, if a pub has hit its targets as well, every single person in that pub from the manager down to the glass collectors will be receiving a bonus,” he said. No figures are available yet on how large the bonuses will be, but “it’s going to be more than a drink”, Lees-Jones said. The company, reported turnover of £62.8m in the year to March 31, up 5% from £59.2m in the previous financial year. Its average managed house now takes £17,000 a week excluding VAT, a figure that has risen 37% in the past five years, and the 34 managed houses now bring in 41% of profit, against 39% from the company’s 130-plus tenanted pubs. Lees-Jones said the profit-sharing scheme was inspired by schemes in place at JD Wetherspoon and John Lewis. At Wetherspoon, employees are entitled to a bonus of between 19% and 50% of their pay, depending on their job title. Over the past five years the company has paid out approximately a third of its pre-tax profit to employees in the form of bonuses and free shares. At John Lewis, 91,000 staff are receiving an annual bonus this year worth 15% of their salaries, the equivalent of almost eight weeks’ pay. Lees-Jones added: “It’s common sense to reward people who have helped your business to be successful. That’s why we’re following the lines of JD Wetherspoon and John Lewis.”
   
Enterprise Inns wins prestigious social impact award for Heroes campaign: A Community Heroes campaign run by Enterprise Inns has been recognised at the national Foodservice Footprints Awards 2014. Solihull-based Enterprise won the Social Impact Award at the ceremony, which was held at Canary Wharf in London. The Enterprise Community Heroes initiative recognises and rewards publicans for their outstanding work at a local level, with regional prizes of £5,000 and a prize fund of £10,000 for the overall national winner. The company has earmarked more than £1 million over ten years for the project which is in its third year and opens for entries next month (June). Commenting on the winning submission, the judges said: “This is what we call sustainability working at its best. Empowerment with the right level of support and encouragement is the tool to success. Long may Enterprise continue to support this scheme and may it teach others to follow suit.” Foodservice Footprint Awards recognise excellence in corporate, social and environmental excellence. Enterprise was up against competition from Spirit Pub Company, Coca Cola, Nestle, Brakes, Compass, Kuehne & Nagel and Pret A Manger.
          
Thwaites re-opens ‘Inns of Character site’ after £625,000 investment: Thwaites has re-opened one of its Inns of Character sites in Keswick town centre after a £625,000 redevelopment. The site is now called Royal Oak at Keswick, which is its original 18th Century name – it was formerly the Inn at Keswick. The Inns of Character division won Best Accommodation Operator in the Publican Awards in 2013. It about to re-open the Judges Lodging in York as its eighth property and is rumoured to have bought The Crown Inn in Stamford, Lincolnshire for £3.8m. Further acquisitions are in the pipeline as the group drives towards its stated aim of 25 locations across the UK.
   
Soho House to open in Chicago in September: Soho House will open its fifth US site in Chicago in September. Its six-floor historic building, home to the original Chicago Belting Factory, includes two floors of bedrooms. The property will also feature a lobby bar, two signature open-to-the-public restaurants synonymous with the brand, Pizza East and Chicken Shop, a Cowshed spa, a 12,000-square-foot gym with a boxing ring and laundry services, a screening room, a Club Floor with a drawing room, pantry bar, club bar, and house kitchen and grill and a glass-enclosed Rooftop Bar & Kitchen, as well as an 80-foot swimming pool and outdoor deck, showcasing stunning views of Chicago’s famed architecture.
   
M&B brands to stock voters’ choice beer exclusively: Mitchells & Butlers Nicholson’s, Castle and Ember Inns brands are to get the first chance to stock a new Truman’s beer that won a co-creation trial. The beer brewed exclusively with British-grown hops triumphed over its US counterpart in the largest ever co-creation trial in the UK ale category. The Great Truman’s Taste Test, run in conjunction with Nicholson’s pubs, saw two competing beers put on the bar – UK Gold and US Pale. Drinkers were invited to give their feedback on the two brews and vote for their favourite. Truman’s brewed each beer three times, with the recipes improved and refined according to drinkers’ feedback. More than a thousand Nicholson’s customers participated – with UK Gold beating off its counterpart by 54% to 46%. UK Gold has been renamed in honour of our new brewery in Hackney Wick – The Eyrie. Truman’s Eyrie will be available exclusively in Nicholson’s, Castle and Ember Inns sites across the country from June. Eyrie will be available to the wider trade from September.
   
Stone Willy’s to open flagship store in Longbridge: Stone Willy’s, the pizza, burger and wraps franchise operation, is to open a flagship store in Longbridge, Birmingham. The store, in 774 sq ft of space on the high street, is set to open in the next couple of months after a fit-out. Peter Robinson, managing director of Stone Willy’s, said: “We are very excited about the opening of our new shop in Longbridge, which will be our flagship store. The shop will initially employ four members of staff but we are expecting this to grow by the end of 2014. We’ve got a fantastic menu with a focus on wraps and salads, giving customers a fresh, different option compared to what is typically available.” Stone Willy’s currently has more than 140 independent operator run-outlets across the UK, with two more openings planned in Hampton, Middlesex and Camborne, Dorset, and claims to be in more student unions than any other pizza company. Its Turbochef rapid cook ovens claim to cook pizzas in under two minutes.
   
Marston’s plan new-build pub restaurant at Dagenham site: Marston’s has purchased an acre of land in Dagenham, Essex and will start construction work on a new-build pub-restaurant later this year. The company will create 50 jobs at the site, located within the area once occupied by the French pharmaceutical company Sanofi site, which is subject to a regeneration programme aimed at transforming the site into a multi-occupancy science, business, manufacturing and retail park, under the brand name Business-east. Mark Bass, Sanofi’s land development and partnership leader, said: “We feel Marston’s is ideal to blend into the overall Business-east programme that we are trying to create, and will become a big attraction as well as a significant local employer.”
   
Whitbread signs Edinburgh Premier Inn deal with property fund: Consensus Capital Property, the private equity-backed property fund, and Premier Inn, the hotel chain owned by Whitbread, have agreed a deal to transform a well-known Edinburgh office block into a hotel. The £17m deal will turn the existing office space, formerly used by HM Revenue & Customs, into a 127-bedroom hotel development with a 30-year lease. The hotel, on York Place, in the centre of the city, will be less than 100 metres from one of the main stops on Edinburgh’s new tram network. The property agent Savills was also involved in securing funding for the deal, while planning permission was secured quickly earlier this year. The redevelopment work is expected to take between 12 and 15 months. Investors can expect an initial yield of 5.14% on the project, rising to 5.79% in year five and 6.52% in year ten. Edinburgh’s strong tourist and business traveller markets are anticipated to bring a return of £6,750 per bed in year one.
   
Celebrity baker closes artisan bread company: Celebrity baker Paul Hollywood is closing his artisan bread company with debts of just under £60,000, the Daily Telegraph has reported. “It’s a huge headache and massive problem because I wasn’t there enough,” he said previously. Hollywood set up the speciality bread business after being inspired by the baking techniques he discovered on his travels to Cyprus, Egypt and Jordan. In 2003, he liquidated his company Hollywood Bread. It had debts of £262,000 when it was dissolved in December 2005. Hollywood’s other firm, Paul Hollywood Limited, is unaffected by the closure of his bread business. The latest accounts for the company show that it had £410,000 sitting on its books.
   
Tesco to open sixth Decks carvery at Liverpool site: Tesco will open its sixth Decks carvery at its Bidston Moss store in Liverpool on 9 June after a £5m investment. Decks is a family dining restaurant serving a range of British food, such as classic roasts, English breakfasts, and freshly baked cakes. The brand was developed by Tesco as part of its strategy to ensure its large stores are compelling retail destinations, “making them worth the trip in an era where no one needs to leave their sofa in order to shop.” Tesco has already opened Decks carveries in its Coventry, Newport, Broadstairs, Slough and Lincoln stores.
   
Essex McDonald’s breaks UK company record for most customers served in an hour: A McDonald’s drive-through in Essex has broken the company’s UK record by serving nearly 300 people in an hour, one every 21 seconds, in memory of a teenager who died of meningitis. The restaurant at the Boreham interchange, Chelmsford, lured customers in with the offer of a free McChicken Sandwich as part of the fundraiser for Meningitis Now, in tribute to Jodie Willan, 17, who was killed by a viral form of meningitis from which 97% of people normally recover. Stuart Foote, the restaurant’s business manager, said: “We had 201 drivers in the first hour. The previous record was 252 – it now stands at 287 which we did in the second hour. We are very proud.” It means the restaurant holds the record for the most drive-through customers served in an hour of 1,200 McDonald’s sites through the UK.
   
Nando’s to launch mobile ordering service after 14-site trial: Nando’s is to launch a service that will allow customers to order and pay from their smartphones as part of a wider marketing drive to broaden its reach in the UK, Marketing Week has reported. The restaurant will let customers order food from its mobile app next month. The click-and-collect service launches next month after trials at 14 restaurants nationwide earlier this year. Users can purchase anything from the menu at their nearest restaurant as well as set the time they wish to collect their order. Directions are provided, as well as options to phone up the restaurant and check opening times. 
   
Papa John’s to open 30 UK stores this year: The pizza delivery business Papa John’s plans to open 30 UK stores this year to add to its estate of 250 sites. The company opened its 1,000th international store at the tail end of 2013. The company’s marketing director, Andrew Gallagher, told Essential Retail: “There’s a lot of share out there and there are a lot of towns we are not in yet. From a UK point of view, we are growing fast. There is clearly a leader in our marketplace, Domino’s, but we believe there’s a whole load of growth here – and we’re pushing hard on that.”
   
Douglas Jack – we’re expecting upgrades at the Fuller’s results: Numis Securities leisure analyst Douglas Jack has issued a ‘Buy’ note on Fuller’s shares, with a Target Price of 1050p ahead of final results due on Friday, 6 June. He said: “We forecast adjusted PBT to be up 6% to £33.0m (consensus: £33.0m). Due to a pick-up in expansion and strong trading in the managed estate, we believe forecast risk remains firmly on the upside. We reiterate our ‘Add’ recommendation. We believe we are likely to upgrade our forecasts after these results, driven by: 2014E’s outperformance; 2015E benefiting from a few major refurbishment projects having been brought forward into 2014E; and a pick-up in expansion. Four new managed pubs opened in 2014E; and three have already been added (albeit they are not open yet) in early 2015E.”
   
Red Hot World Buffet flagship site reports strong start to the year: Red Hot World Buffet’s flagship site in Nottingham has reported a strong start to the year. The 500-seater restaurant in the Cornerhouse is the largest of its kind in the East Midlands, offering cuisine from 24 countries around the world. Since the start of the year, the city centre venue has served more than 12,000 pizzas, 43,000 pancakes and 1,350 litres of ice cream. “It’s been an incredible start to the year,” said Kieron Bailey, the restaurant’s manager. “February half term stood out as an exceptionally busy week, with 8,409 covers served in those seven days alone.”
   
Host of brands line up for £250m Southwater development: The first phase of the £250 million Southwater project in Telford, Shropshire will open on Monday. It is the first part of the regeneration project to open and will be followed by the new hotel, restaurants and public library later in the summer. A Premier Inn is going to be the first to open in mid July to be followed Mimosa. Major high street chains coming to Southwater include Nando’s, Wagamama, Harvester, PizzaExpress, Chimichanga Zizzi and Bella Italia.
   
Starbucks goes franchise route in Australia after years of losses: Starbucks has franchised its 24-site Australia business to the Withers Group, which operates 7-Eleven in Australia and will take over the existing cafes there. The amount of the deal was not disclosed. Starbucks entered Australia in 2000 but has struggled to compete against established chains. Additional problems for Starbucks in Australia have been opening in areas with little pedestrian traffic, high menu prices, and too little marketing. By 2008, its losses totaled $100 million, leading the company to close 61 of 84 stores that year. Starbucks will “immediately benefit from the Withers Group’s extensive retail and marketing experience and direct investment in the Starbucks brand,” a spokesman said.
   
Former Dundee FC footballer plans second restaurant site: The restaurateur and former Dundee FC footballer Phil Donaldson has taken over the former Tasting Rooms on Whitehall Crescent in Dundee, his second site. He plans to open the new venue, Pizza Metro, in July in a joint venture with partner Martin Cannon. The two men also run Gracie’s in Broughty Ferry. Donaldson said: “Whitehall Crescent is a good site and one of the main reasons we are doing this is because of things like the waterfront and the V&A. There’s a feelgood factor about Dundee and there’s also been progress in the restaurant trade in the city centre. Sometimes you need to be on the front foot, and this is what we are doing with our move into the city centre.”
   
Starbucks to open restaurant in San Francisco: Starbucks will open a restaurant in San Francisco next month, according to the San Francisco Business Times. The restaurant will be called La Boulange, named for the California-based bakery chain the coffee giant bought a couple years back. The restaurant will stay open until 10pm, and will feature heavier dishes (main attraction: the croissant burger) as well as beers, cocktails, and wine, during dinner-time. Much of its daytime fare will draw from La Boulange’s existing menu. The restaurant will serve as a test kitchen, as Starbucks looks to at least gain some footing in the evening dining game with its existing cafes.
   
Greene King plans to re-open pub in July after tenant flit: Greene King will re-open The Trout Inn in Itchen Abbas, Hampshire, closed for nearly a month after the tenants upped sticks, in July. A spokesperson for Greene King said: “Unfortunately The Trout closed earlier this month [May], for reasons beyond our control. However, we wish to reassure locals and customers that it is an important pub to us and we are now in the process of recruiting a new tenant who will take The Trout forward. We plan to re-open it in July, following a refurbishment throughout the pub, its bedrooms and the garden.”
   
Harry Ramsden’s invests £2m in seaside estate: Harry Ramsden’s is set to invest close to £2m to completely transform a number of its seaside restaurants. Major refurbishment works are being undertaken at properties in Blackpool, Eastbourne and Great Yarmouth. This will bring them into line with the award-winning new look unveiled last year in Bournemouth, which has resulted in a sustained upsurge in sales and customer numbers at Harry Ramsden’s flagship restaurant. A fast-track programme of works in Great Yarmouth has just been completed, with the new look restaurant and takeaway now open to the public. Eastbourne will close in early June, while the Blackpool restaurant is now closed for refurbishment.
   
Punch licensee requests debt waiver: Ron Piper, licensee of Punch’s The Sir John Barleycorn, Hitchin, Hertfordshire for more than 11 years, has written to Punch requesting a waiver on the debt they claim he owes them and impending court action this Friday 30 May. Punch has just been granted a waiver on its £3bn debt by its bondholders so that they can hold more talks and Piper argued that it was only fair that licensees should receive the same treatment.
   
Tonbridge bar owner opens town’s only nightclub: A bar owner has opened what is the only nightclub in Tonbridge, Kent. The new Amp nightspot on Avebury Avenue, promises big-name DJs, comedy nights and live music. Owner Ali Jeerooburkhan, who also runs Bar Fusion in Tunbridge Wells, said it will become a “fresher and more vibrant multipurpose venue”. The venue, the former Source of Sound club, had been plagued with alcohol-related problems before it shut last August, leaving the town without a nightclub.
   
Punch pub recognised for innovation: Punch Taverns’ Star Inn at Vogue in Cornwall has been named best innovative pub as well as Cornwall’s Pub of the Year by the Campaign for Real Ale (Camra). The Star is the first Punch pub to have won any awards from Camra. Judges praised the pub for its quality and choice of real ales, its welcoming environment and good food, as well as its innovative facilities such as the pub’s library and hairdressers for the local residents. The licensees are Mark and Rachel Graham. Rachel said: “Pubs can’t rely on offering just food and drink to survive today and we are always thinking of new things to do. We worked with Pub is the Hub in November 2013 to install a library at the back of the pub, and we find that it is really busy, as the nearest library is only open at certain hours and a ten to 15-minute drive away. Customers can even order books in, and many like to stay in the pub to read. One of our barmaids is also a hairdresser and she was looking for somewhere to base herself so we converted a spare room into a mini salon four months ago and it is proving really popular.”
   
Fourth advises operators to prepare for allergen and nutrition laws: Industry software provider Fourth is urging eating-out companies to act, as the government releases advice on one of the biggest challenges facing the sector – new allergen and nutrition laws. The Food Standards Agency (FSA) has released draft guidance to help food operators interpret the new rules. These introduce requirements for eating-out businesses, including pubs, bars, hotels and restaurants, which will be tasked with making consumers aware of 14 key allergens, including fish, milk and nuts, which may be present in any dishes served. The FSA has requested feedback over the coming weeks on whether the guidance helps businesses understand their new allergen responsibilities. The FSA draft technical guidance recommends that: allergen information, or signage to where it could be obtained, should be easily accessible, visible, clearly legible and, where appropriate, indelible; where it is not practical for this information to be in a written format, businesses should use clear signposting to direct the customer to where this information can be found, such as asking members of staff; businesses providing allergen information orally from a member of staff must ensure it is consistent, accurate and verifiable upon challenge. Verification of this information should be provided in written form.
   
American Express hosts MasterChef pop-up restaurant in London: American Express is hosting a pop-up restaurant in conjunction with the BBC Two series MasterChef in September at the Blue Fin building in Southwark Street, London. The 130-cover restaurant, on the 12th floor, will bring together winners and finalists from the past ten years, who will be cooking for the first time together. Chefs signed up for the MasterChef restaurant and bar include Dhruv Baker, now co-owner of the catering company Earlsfield Kitchen, Andrew Kojima, now a freelance cook, and Tom Rennolds, now managing chef at the Skelwith Group’s new pub, the Curious Plum, in Husthwaite, North Yorkshire. They will be serving brunch, lunch, sharing suppers and tasting menus. There will also be a private dining area that will seat 12, and give customers the opportunity to eat at the chef’s table. Presale tickets were made available to American Express’ cardholders first before going on general sale on Monday (26 May).
   
Albert Roux wins planning consent for Essex restaurant: Albert Roux’s plans to transform the old Post Office in Brentwood, Essex, into a restaurant have been recommended for approval by Brentwood Council. The chef is hoping to install French doors and larger windows to the building, and will also need a change of use approval to use the building as a restaurant, according to the local newspaper, the Brentwood Gazette. The restaurant will employ 32 staff when open and provide 180 covers per day, and Albert Roux and his son Michel Roux Jr are expected to visit regularly.
   
Matthew Clark adds Chalk Hill to portfolio: The on-trade wholesaler Matthew Clark has announced the addition of the McLaren Vale-based winery Chalk Hill, to its portfolio. Matthew Clark will act as exclusive on-trade and independent agent for the winery in the UK. Chalk Hill Winery is a family-owned business which specialises in making small batches of hand-crafted wines. The Harvey family’s grape-growing heritage in South Australia goes back six generations, and the winery now has six vineyards spread across the McLaren Vale wine region.
     
Douglas Jack moves Punch share recommendation to ‘Hold’: Numis Securities leisure analyst Douglas Jack has moved his share price recommendation for Punch Taverns to hold with a 10p price target. He said: “Due to yesterday’s share price fall, we are moving our recommendation from ‘Sell’ to ‘Hold’. Our forecasts and 10p target price reflect current restructuring proposals, which could change again. However, given the greater downside risk to all stakeholders in the event of no consensual agreement, any further changes should be minor, in our view. 75% approval from all asset classes, including equity, is required. The proposed 26% reduction in total net debt and dilution of existing equity (with bondholders having 85% of the post-restructuring equity) has the support of seven junior bondholders, who also hold over 50% of the equity. As their support is still required, the other shareholders could try to hold out for better terms. In our view, potential upside from a further renegotiation in terms is materially outweighed by the downside risk of failure to approve a capital restructuring. Our 10p target equates to 9.6x EV/ebitda (2015E) vs. Enterprise Inns’ 10.0x. We estimate debt reduction should grow Punch’s revised equity value by 17% pa, provided ebitda is stable, as forecast.”

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