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Thu 26th Jun 2014 - Propel Thursday News Briefing

Story of the Day:

Gastro-pub collective launches fund-raising on Crowdcube: A gastro-pub collective, The Confederacy, has launched a fund-raising pitch on Crowdcube and is looking to raise £150,000 in return for 8% of its equity. The Confederacy is led by Peter Shea, chief executive of the stockbroker Daniel Stewart & Co, and barrister Adam Wilson. The pitch says: “The Confederacy ensures that owners and managers are as one, driving the business forward by offering to reward the successful managers with potential ownership in the underlying pub asset. This keeps management focused on the maximum profitability from week one and thus uniquely aligns shareholders with employees. We have successfully launched our first operation, based in Hartley Whitney in Hampshire. The managers of the Phoenix Inn have proven our concept by not just creating a successful, popular and profitable set-up, but with awards [such as] Les Routiers Inn of the Year 2013. From a standing start in 2010, converting a pub that had been closed for six months, the Phoenix Inn approached an annualised turnover of circa £900,000 in 2013. We now intend to roll out our concept, initially into two similar operations. Once these are successfully operational, we will then add further to the portfolio. The business opportunity primarily relates to the alignment of capital and management interests, which we've found traditionally rarely happens as a typical structure. As a management company, The Confederacy will seek proven talented management teams who are already working for large professional pub management groups and invite them to join us. We will secure and fund them into a gastro-pub site (chosen on specific criteria) and then finance their start-up. The management team is then allowed to earn equity in their gastro-pub by achieving agreed financial performance targets. All new management teams will undergo training by the current operations team at the Phoenix whilst their gastro-pub is being refitted. We are intending to build a business within three years with a turnover in excess of £3m.” The Phoenix Inn in Hartley Whitney is run by Andrew and Sisi Ryder.

Industry News:

Sector’s leading M&A firm reports £600m of transactions since the start of 2014: The leading sector mergers and acquisitions firm Sapient Corporate Finance, which acted as sole financial adviser to the shareholders of the Orchid Group on the sale of 173 pubs together with Orchid’s head office to Mitchells & Butlers for £266m (9.1x house ebitda), has reported £600m of transactions since the start of 2014. Sapient's founder, Peter Hansen, said: “There was strong interest in acquiring Orchid from both trade and private equity buyers. The transaction is the sixth deal worth in excess of £100m that we have worked on since 2009. It is also the largest managed pub deal since we advised M&B on the sale of its wet-led estate to Stonegate Pub Company for £373m in 2010. The start of 2014 has seen a particularly active period in the market – we have advised on corporate finance transactions worth in excess of £600m. There is no doubt that market dynamics are improving and we believe the sector is entering an active period of M&A.” Sapient reported that the Orchid deal involved a high quality estate, 91% freehold/long leasehold and average weekly takings in excess of £15,000. Average pub ebitda was £170,000 and food made up approximately 45% of total sales. Sapient has advised on deals valued in excess of £1.9bn in the past five years, which is more than the next four advisers combined. It advised on 26 transactions in the period, including a broad mix of deal types and sizes.
Euromillions winner buys local Essex pub: Adrian Bayford, who won the £149m Euromillions jackpot in August 2012, has bought his local pub through the property agent Everard Cole. The freehold of The Rose and Crown at Ashdon, near Saffron Walden, Essex was on the market for £349,000. It has been sold by private owners. Bayford is understood to plan to continue to run the premises as a pub.
CGA Peach – consumers welcome brand opening nearby: A sizeable proportion of the population would welcome brands, particularly Nando’s, JD Wetherspoon and Harvester, opening closer to where they live, the latest CGA Peach BrandTrack research has shown. The survey, carried out in April, asked the public to say, if they could choose one eating-out brand to be more local to them, which it would be. Nando’s topped the poll, with Wetherspoon and Harvester coming second and third respectively. TGI Friday’s and Wagamama completed the top five. In a free choice, 8.4% of those surveyed voted for Nando’s, with 7.6% going for Wetherspoon. Across Great Britain as a whole that equates to around 4.2 million adults wanting a new Nando’s and 3.8 million waiting for a Wetherspoon. Another 3.2 million would love a Wagamama near them. Regionally, Nando’s was top choice in Scotland, the North West of England, the West Midlands and the South East. Wetherspoon topped the vote in the North East of England, Yorkshire and the South West, while Harvester was top choice in Wales and the East Midlands. Toby Carvery won the popular vote in East Anglia, while Wagamama won it in London. CGA Peach's vice-president, Peter Martin, said: “Big brands regularly come up against councils and developers keen to keep them out. The public, however, generally have a more positive view. Although around 5% didn’t want any, large numbers welcome the reliability that branded chains bring. It’s about choice.”
US restaurant customers prefer cork stoppers: Wine drinkers in the United States have a growing preference when ordering in restaurants for wines sealed with natural cork over all artificial closures at all price points, independent research has shown. Wine & Spirits' 25th annual survey of the top 50 restaurant wine brands (pdf here) asked wine directors at 218 restaurants to name their ten best-selling wines. Their responses were compiled into a list of the top 50 restaurant brands. The results for 2013 by closure type showed that brands primarily finished with cork accounted for 90% of the top 50 restaurant brands, up 21% compared to ten years ago. Brands primarily finished with screw caps showed a 39% fall and brands using synthetic closures were down by 70% as reported by wine directors.
Licensed hospitality operators commend light-touch approach to zero-hours contracts: The Association of Licensed Multiple Retailers (ALMR) has welcomed the government’s confirmation of light-touch regulation and the retention of flexibility for business. Employment minister Jenny Willott has laid before Parliament a statement setting out the government’s intention to reform zero-hours contracts to prevent abuses of flexible working arrangements. The government will use the Small Business, Enterprise and Employment Bill to ban the use of exclusivity clauses in contracts which do not guarantee any hours, and introduce an "anti-avoidance" provision to ensure that the ban is enforceable. It will also consult with employers, employees and other stakeholders to develop a code of practice and review existing guidance. The ALMR's strategic affairs director, Kate Nicholls, said that Vince Cable, the Business Secretary, "has listened to our concerns and heeded our call for balanced and proportionate action to tackle abuses of these arrangements. For many working in licensed retail, temporary and casual contracts offer a flexible method of working, particularly for those combining work with study.”
BBPA raises concerns over Pub Code details in Small Business Bill: The British Beer and Pub Association has voiced concerns over the detail of plans for a tenanted pub company Code of Conduct published in the Small Business Bill. The association's chief executive, Brigid Simmonds, said: “The definition of a pub is a concern; the inclusion of tenancies-at-will and franchises on the face of the Bill and within the scope of the code would be unwelcome. Tenancies-at-will are temporary agreements, and would mean that in many cases, pubs would be closed if they faced the full range of provisions of the code on a short-term basis. Under the current industry framework code, on which these proposals are based, these temporary agreements are specifically excluded. Leaving the code itself to a later date is no surprise but will create uncertainty for many businesses, particularly since the draft is lacking clarity and imposes huge burdens on small businesses. In particular, we are disappointed that the Bill itself does not specify the proposals that have been ruled out by the government, such as mandatory free-of-tie or guest beers. This does add to business uncertainly for the entire sector.”

Company News:

Reuters raises questions over Chilango mini-bond: Questions over the security of investors in the mini-bond offer by the Mexican restaurant chain Chilango through the crowd-funding website Crowdcube have been raised by Reuters. A total of £754,500 has been pledged by 219 investors so far, and the bond pays 8% interest. In an article, Reuters said: “If the company raises £3m, 8% annual interest would equate to £240,000 a year. For bond investors the key metric for whether a company can service its debt is ebitda – earnings before interest, tax, depreciation and amortisation. While corporate bond issuers have to present their most recent quarterly earnings, Chilango lists the nearly nine-month-old results for the 53 weeks ending 29 September 2013. Chilango posted ebitda of just £111,708 in this time, less than half the required amount needed to service the coupon if it sells the full £3m. Chilango is using the bond to fuel expansion, and hopes to open six new stores in London if £3m is raised. The company does not list what the expected ebitda would be from six additional stores, however. In contrast, high-yield offering memorandums often present a run-rate ebitda figure showing expected gains from any planned changes to a business. Chilango has misjudged expansion in the past, closing two stores in shopping centres after they failed to perform. The company booked more than £1m in closure costs, losses and write-offs to wind down the stores in 2011 and 2012. Some investors are evidently concerned by the lack of information. The deal's fundraising page has a forum where potential investors can ask questions, and one person has asked for a more detailed version of the company's balance sheet. Chilango responded that some of the figures were commercially sensitive and 'we'd like to keep it confidential to make sure Chilango continues to kick ass'."
Charles Wells accounts show exceptional items aid debt reduction: Newly filed annual accounts for the Bedford brewer and retailer Charles Wells show the company made an exceptional profit of £5.4m in the year to 28 September 2013 through selling its Kestral Super Strength Lager brand to Brookfield Drinks, owned by a former director, Nigel McNally. The brand had sales of £8.7m in the previous year. The sale of the company's Morewood Centre distribution depot in Bedford produced a profit of £1.83m. Borrowings at the end of the year were £44.7m, a reduction of £18.8m on the previous year. Profit after tax was up 8% and adjusted ebitda for the group fell 20% to £13.9m. Wells & Young’s sales fell £8m to £161.9m, reflecting the sale of Kestrel. The company’s liability in relation to interest rate swaps fell to £8.88m from £11.37m the year before. Wells warned that property profits will be lower in 2014: it made a £1m profit on the sale of 18 bottom-end pubs.
BrewDog opens Florence site today: Brewer and retailer BrewDog opens in Florence today, its first craft beer bar in Italy and 19th worldwide. The new bar, in Via Faenza, is BrewDog’s fourth international bar launch of 2014, after openings in Sao Paulo, Tokyo and Gothenburg. The brewery plans to open bars in Rome and Bologna later this year. BrewDog Florence has room for 70 people over two floor. The bar is housed in a building once owned by the famous Medici family during the Renaissance. The bar will feature 12 beers on tap, as well as BrewDog’s Hopinator, a device that infuses extra hops and flavours to beers at the point of serve. Guest craft beers include Brewfist, Menaresta, Toccalmatto, Rogue, Mikkeller, and The Kernel. There will be American diner-style food on offer and a selection of traditional recipes from Italy, the UK, Japan, Mexico and Greece. Regular beer tastings with brewers and bloggers will be held at the bar.
Starbucks – we can repeat coffee success in carbonated drinks: Starbucks has launched a new range of "hand-crafted" carbonated drinks in the United States, looking to repeat its success in coffee. The company launched three flavours of Fizzio soft drinks, which are made by its baristas in about a minute and a half, at more than 3,000 locations in 16 states across the southern US. The launch is timed to coincide with rising summer temperatures, so that the cool drinks make up for any decline in hot coffee sales. Josh Fine, brand manager for Fizzio, told USA Today: "We are changing the game in terms of how to get a carbonated drink. Like what Starbucks did to coffee 40 years ago, we think we can do in the carbonation space.” The Fizzio drinks will be carbonated "fresh", as opposed to combining syrup with carbonated water, as in most commercial machines. Instead, the flavours and spices are combined in a large cheesecloth and steeped in hot water, akin to how tea is made. Buyers can choose from light, standard or extra carbonation.
Punch Taverns starts works on fourth Champs sport bar and grill: Punch Taverns has started work on its fourth Champs sports bar and grill, this time in Liverpool. The Marine, on South Road, Waterloo is having a £400,000 refurbishment funded by the leaseholder, Paul McIver, in partnership with Punch. The pub is expected to reopen in mid-August. Punch Taverns’ local partnership development manager, Alan Wills, said: “This will be our fourth Champs in our estate. The others in Sheffield and Washington are performing beyond expectation and we feel that Liverpool can really benefit from this type of venue.”
Jamie’s Italian plans ten Canada openings under franchise: Jamie’s Italian plans as many as ten openings across Canada, after signing a franchise deal with King Street Food Company, which runs the Buca and Bar Buca restaurants in Toronto. The first Jamie’s Italian in Canada will open by the early spring at north Toronto’s Yorkdale Shopping Centre. Jamie’s Italian first opened in 2008 in Oxford, and now has 35 locations in the UK, Australia, Ireland, Hong Kong and Singapore.
Marston’s to open new-build in Shrewsbury this week: Marston’s is opening a new-build pub restaurant in Shrewsbury this week, creating 50 new jobs. The Featherbed will open its doors in Battlefield after seven months of building work. The fast-food chain KFC opened in Battlefield last month, with Frankie and Benny’s and Chiquitos opening this summer.
Roxie Steak & Wine to open fourth restaurant, a little sister: Roxie Steak & Wine, the London steak specialist, with sites in Fulham, Putney and Earlsfield, has acquired its fourth site at 81 St John’s Road, Clapham. The company describes the new site as a "little sister", with a new focus on take-away. The 1.000 sq ft, 45-cover restaurant, which formerly traded as Cafe Pascucci, is undergoing a full re-fit and is due to open at the beginning of August. The restaurant will have a more fast-casual menu and design, and will offer a take-away service. The company said: “With our newest venture, Roxie Charcoal Diner, we’ll be focused on providing excellent value for money with our 'Feast for 15' offer, which will include steak, smoked brisket, chips, salad and sauce, all for £15. We’ve been looking to secure a site on or around Northcote Road for some time. We’re looking forward to opening Roxie’s little sister and seeing our new robata charcoal grill in action.” Selsian acted on behalf of Cafe Pascucci, agreeing an assignment of the 20-year lease at a rent of £40,000 together with an un-disclosed premium. Roxie was unrepresented.
Las Iguanas spends £500,000 on refurbishments: Las Iguanas is spending £500,000 on a new look to three of its restaurants, in Liverpool, the Trafford Centre in Manchester and West One in Sheffield. The interiors will be decorated in soft greens and corals and will feature reclaimed timber, soft leather upholstery and vintage Latin American imagery. The site at the Trafford Centre will be given a new extended seating area under the palms of the Great Hall.
Pret A Manger opens largest US site – with meeting room: Pret A Manger has opened its largest site in the United States, a 5,335 sq ft outlet in Boston, Massachusetts and its fourth opening in the Boston area. The site is in the Downtown Crossing neighbourhood and has multiple floors with seating to accommodate more than 100 customers. It includes a lounge area as well as a meeting room.
Subway, Papa John’s, Prezzo and Strada trial Voucher Cloud 'geo-fencing' app: Voucher Cloud has developed a new smartphone app using "geo-fencing" technology that is being trialled by retailers including Subway, Papa John’s, Prezzo and Strada. The app works by sending notifications and promotional deals from the store to phones with the app enabled within a 200-metre radius. The notifications and promotions being sent out can be customised by retailers, and restaurants can target lunch and dinner times specifically at weekends, where the footfall would be at its highest. Hotel Chocolat's revenue increased by 80% when the app was used to support its normal marketing and communication. Stephen Davis of said: “On some days, we have seen click-through rates of 45%. It's a great way of driving in-store activity and putting Voucher Cloud front of mind, drawing the customers’ attention to an offer they might not have seen otherwise.” Voucher Cloud has claimed an average conversion rate of 30%, which is higher than existing methods such as SMS and email.
Punch Taverns launches marketing support for Tour de France pubs: Punch Taverns has launched a range of marketing support for its pubs along the Tour De France route tis summer. Punch will be stocking two limited edition Tour De France-themed cask ales in its current rotation: Velo by Black Sheep Brewery and Lanterne Rouge by Wharfe Bank Brewery. Stephen Martin, category manager for Punch Taverns, said: “The Tour De France event is a huge opportunity for pub, especially those along the route. We want our pubs to make the most of this and we have been gearing up our support over the last few months, providing our partners with free marketing kits and advice to drive footfall.” One Punch pub on the route is the Water Rat in Ripon. Licensee Rick Jones said: “We are just 100m from the route so I find that we have an increase in footfall from tourists who camp out for the event. We have put posters up and will be doing a lot of marketing on the day via social media. We will be serving the Velo cask ale and will also be offering a range of food and drink offers that can be easily turned around to cope with demand.”
Soho restaurant Bob Bob Ricard launches Club Room: The Bob Bob Ricard restaurant in Upper James Street, Soho, central London has unveiled a £3m Club Room. The website Harden’s Restaurants said: “The Soho restaurant, famous for its ‘Press for champagne’ buttons on each table, a gimmick that has helped it sell more bubbly than any other establishment in the UK, has launched the 74-seater venue on its lower ground floor. The Club Room, like the restaurant designed by the David Collins Studio, is open for dinner Thursday to Saturday, offering the full menu and wine list. Positively dripping with ostentatious luxury, the dining spot features Orient Express-inspired booths, a backgammon-patterned dance floor, red and gold banquettes and tabletops that light up pink when you press the champagne call button.”
Wetherspoon to retain pub name after newspaper poll:
JD Wetherspoon has opted to retain the existing name of its planned pub in Crowborough, East Sussex (population: 20,000) after more than 1,000 Crowborough Courier readers cast their vote. The name of the pub on the Beacon Road crossroads will remain the Crowborough Cross, after Wetherspoon asked Courier readers their favourite from four names, which also included Red Cross Inn, Sir Arthur Conan Doyle and Willett’s Cross. Wetherspoon's chairman, Tim Martin, said: “We were delighted and amazed at the response from readers of the Kent and Sussex Courier to our invitation to choose the name for our new pub in Crowborough. More than 1,000 newspaper readers chose their favourite name, with the Crowborough Cross being the most popular. For that reason we will be naming the new pub the Crowborough Cross. The other names each received a high number of votes from readers and we will be making reference to each of these names within the new pub."
McDonald’s to leave Horsham town centre after 25 years: McDonald’s is to leave Horsham town centre  in Sussex next month as part of the wider redevelopment of the area. John O’Dwyer, McDonald’s Horsham franchisee, said: “I am sad to announce that our restaurant will close on Sunday 27 July. I am pleased to say that all staff have been offered transfers to my other restaurants and would like to thank all of our customers who have supported the restaurant over the years.” A spokesman said there were currently no plans to open another branch in Horsham. The closure comes as Horsham Council considers plans by the developer Westrock to renovate Bishop Weald House and redevelop the area west of Albion Way. In its £35m "West End" scheme, Westrock plans to partly demolish and redevelop Bishop Weald House to provide 53 new apartments above the shops. New retail units would be built fronting Albion Way. Robin Barton, development director of Westrock said: “The McDonald’s lease lapses in August. That’s a fact of their lease. It’s not something that has been brought about."
Burger & Lobster adopts Zapper: Burger & Lobster has adopted the mobile payment technology. Diners can scan a QR code on their bill using the Zapper app and pay in seconds. Restaurants benefit from being able to turn tables more quickly and, the company claims, can get to know and engage with their customers. The Zapper app is available for iOS, Android and Windows Phone devices and supports tips and the splitting of bills. Bradley Duke, the European managing director for Zapper, said: “We are delighted that restaurants are embracing this innovation in the dining experience. The Zapper for Restaurants solution benefits both restaurants and their customers. Diners can pay immediately without having to wait for the waiter to return with the card machine. Restaurants not only provide their customers with a better user experience, they also benefit from the efficiency that Zapper brings by being able to turn more tables and being able to know and engage with their customers and drive future business.”
Banbury House Hotel sells off £2.6m asking price: The freehold of the Banbury House Hotel in Banbury, Oxfordshire has been sold by Colliers International off an asking price of £2.6m. The Best Western-branded venue has 64 bedrooms. Collier International’s Peter Brunt said: “Many businesses are attracted to the town because of its position close to the M40 but also from weekend and leisure trade. Banbury is an attractive and interesting destination in its own right but also serves as a base to tour the surrounding countryside, including the north eastern Cotswolds.”
Gourmet Burger Kitchen lines up Aylesbury opening: Gourmet Burger Kitchen is to open in the Exchange building in Aylesbury, Buckinghamshire, between Nando’s and Wagamama. Work will begin in July and the restaurant will open its doors in October. Steven Evans, development director at Gourmet Burger Kitchen, said: “I think the arrival of Nando’s and Wagamama has proved that there is definitely a market for casual dining in Aylesbury. The theatre and the cinema also lend themselves to our brand of eating out.”
Nando’s opens 14th site in United Arab Emirates: Nando’s has opened its second Abu Dhabi restaurant, at Al Raha beach, taking the total number of UAE sites in the UAE to 14. Three new restaurants have launched since the beginning of the year: Abu Dhabi World Trade Centre in February, Dubai's Mirdif City Centre on 2 April and now Al Raha Beach.
KFC starts to make its Chinese restaurant more ‘homely’: KFC, the largest international fast-food chain in China, is revamping its restaurants in the country, and plans to offer better wi-fi and mobile experiences at its outlets, to attract more customers. The company's new store designs include off-white and gray walls decorated with modern paintings. They now have wooden tables and areas separated by green plants and glass, with the intention of trying to create the atmosphere of a social hangout as opposed to a traditional to-go fast-food chain. Zhao Li, general manager of Beijing KFC, said the new "Dining Room" concept aims to make the space "more homely", where consumers can dine, chat and surf online without being interrupted. The chain is also adopting new employee uniforms and a new electronic menu. KFC's US-based parent, Yum! Brands, indicated that it plans to have 700 new restaurants in China this year, with KFC being the majority. All newly built KFC restaurants will sport the new designs, company officials said.
Land Securities buys 30% stake in Bluewater: Land Securities has acquired a 30% stake in the Bluewater shopping centre in Kent for £696m from Lend Lease. The company has also acquired the full asset management rights for the centre and 110 acres of surrounding land for £40m. Lend Lease Retail Partnership owns 25% of the asset, M&G Real Estate and GIC own 35% and Hermes and Aberdeen Asset Management control 10%. The shopping centre, which attracts 27 million visitors a year, houses 330 retailers over 1.8 million sq ft.
Hard Rock lines up Alaska opening:
Hard Rock International, the brand that originated in the UK and is now owned by the Seminole tribe of Florida, is to open its latest site in Anchorage, Alaska. It has 175 locations around the world. The site opens this Saturday, 28 June.
Danny Meyer’s Union Street Cafe victim of spiralling New York rents: Restaurateur Danny Meyer’s Union Street Cafe in New York has become a victim of spiralling rent sin the city. It will end its lease at the end of next year, close its doors and move to a location yet to be determined. The East 16th Street space it has occupied for nearly 30 years will go on the market this week, brokers said. When Meyer opened his doors in 1985, taking over the lease and kitchen from a vegetarian restaurant, the rent was $8 per square foot, for a total of about $48,000 a year. Now, as the neighbourhood has become home to international chain stores such as Zara, Gap and Anthropologie, property agents plan to ask $650,000 a year for the lease. Meyer's other operations include Shake Shack and Gramercy Tavern.
New World Trading Company secures London site for The Botanist: New World Trading Company, the Living Ventures subsidiary, has secured a site in London for its The Botanist pub brand through the property agent Shelley Sandzer. The site in Gresham Street in the City is located in a Grade II listed building alongside a collection of high-end cocktail bars and restaurants. Kit Alexander, from Shelley Sandzer, said: “At Shelley Sandzer, we pride ourselves on our knowledge of the leisure market, and that has helped us secure the right locations for some of the industry’s most highly regarded brands. The Botanist is no exception. The team had a very specific brief for their new bar and we are pleased to have secured Gresham Street, which is exciting due to its unique position and heritage. The period building will work well with The Botanist’s eclectic and stylish design, and having such a prime location will help ensure successful growth for the brand.”
Hospitality staff in line for Rugby World Cup training:
Hotels, pubs, restaurants and other small hospitality businesses in Gloucester with fewer than 250 employees are set to be offered free two-day courses in customer service in time for the Rugby World Cup 2015. Marketing Gloucester is in the final stages of securing around £20,000 in city council funding for the initiative. Jason Smith, chief executive of Marketing Gloucester, said: “This programme will be open to any hospitality business in Gloucester which has under 250 employees."

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