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Morning Briefing for pub, restaurant and food wervice operators

Tue 26th May 2015 - Propel Tuesday News Briefing

Story of the Day:

Fuller’s acquisition programme ‘driven by move of commuters to live outside London’: Fuller Smith & Turner’s pub acquisition programme is being driven by the desire to follow its customers, who are being forced out of London by high property prices, the company’s chief executive has revealed. Speaking at a conference organised by Numis Securities in the City of London, Simon Emeny said: “London has become the property hotspot of Europe. We see a gradual movement for the next generation, who will be forced to buy their first properties outside London. This is driving our acquisitions programme. As we see enhancement of the rail infrastructure, with Crossrail opening in two years’ time, HS2 set to change the profile of travelling for commuters, as HS1 has, we’ve given additional focus to acquiring pubs outside London, in Bath, Brighton, Winchester, Romsey and so on. This is where our customers of tomorrow are choosing to move to, to commute into London. It’s very important that they retain an access to the Fuller’s brand.” Over 50% of Fuller’s pubs are now outside London, Emeny said. He also revealed that of the company’s 391 pubs and hotels, only 68 were with Fullers in 1985, when it owned 135 pubs. Emeny also said that the company’s pubs were now catering much more for the “occasions” market. He told the conference: “The days of the habitual customer going to the pub day in and day out to consume beer, smoke cigarettes and play the fruit machine have gone. What the smoking ban has done is give well-invested, really well-done pubs a really good chance of outperforming restaurants. Pubs can cater for a much broader spectrum of occasions than restaurants. Sunday lunch is now the busiest session in our business during the week, pubs are now packed for the meal occasion of Christmas Day – ten years ago most of our pubs just opened between ten and two and didn’t sell food. Now we’re doing two or three sittings. Easter Sunday, pubs are packed, Mother’s Day you have to book well in advance. Functions, now, particularly in London, are a really keen part of our business, whether through private dining rooms or sectioning off parts of the pub. Leaving parties, business breakfast meetings, product launches, or even NCT groups – these are all occasions where customers are choosing now to use a pub.”

Industry News:

Crowdfunding companies giving away less of their equity but it presents an “ethical minefield”: Companies that secure investment through equity crowdfunding are keeping a bigger slice of their equity than those who raise capital through other, more traditional funding channels. Research from business data company Beauhurst shows that for 65% of crowdfunding rounds worth less than £500,000, the company gave away less than 20% in equity. This was true of just 44% of private-equity-backed deals and 28% of companies who raised angel investment. Crowdfunded deals accounted for almost a fifth of all the visible equity deals in the UK during the first half of last year. Companies are attracted to crowdfunding platforms such as market leaders Crowdcube and Seedrs, because they are able to dictate their own valuation, Beauhurst said. The report warned that the trend presented an “ethical minefield”, as with arbitrary valuations, it is difficult to know whether entrepreneurs have placed the correct value on their businesses.

Whitbread chairman – business bosses must speak out on Europe: Whitbread chairman Richard Baker has called on the business community to speak up on the EU “both individually and collectively”. Baker, speaking at a British Retail Consortium event, claims that the UK will vote to stay in Europe by “a large majority” and has urged the business community to speak up on the issue “both individually and collectively”. Baker said he expected the Prime Minister to bring forward the date for a vote to as early as next May. Such a move would be “a good thing”, Baker said.

Tastecard set to change hands for £100m: Discount diners’ club Tastecard could sell for as much as £100m when it changes hands for the second time in less than 12 months, The Daily Telegraph has reported. The business, which has 7,000 British restaurants signed-up, was bought last September by Dutch rival promotions business Didix, which also owns UK Gourmet Society. The UK’s competition watchdog cleared the deal in January after a phase one probe into the deal. However, just four months later Didix’s owner, Benelux-based Waterland Private Equity, is now working on a potential sale of the business with advisers at Grant Thorton to capitalise on the group’s growth. Tastecard generates around £12m of annual earnings. Tastecard gives members half price dining or two-for-one meals at participating restaurants including high street chains Zizzi and PizzaExpress to Michelin starred restaurants. It was originally started by Matt Turner and Jamie Milner as Tastelondon with just 150 restaurants in 2006. Milner, a former pizza delivery man and car salesman, and Turner, a former pub owner, rebranded the business four years later to cover the whole country. The business charges £79.99 for an annual membership, although many companies offer access to the dining club as a job perk.

Average Brit eats 36 meals out that they’re unhappy with a year: One in five Brits have been embarrassed by their other halves when eating out together, according to new research. The research, commissioned by Subway, found regular food faux pas include knocking things off the plate, ordering ‘off menu’ and having a credit card declined. 40% of the 2,000 polled would never complain if a food order wasn’t right or tasted bad, with the average person munching through 36 meals out, every year that are far from their liking. British politeness still gets in the way of consumers getting what we want – just 30% would complain if an order isn’t to their liking. In comparison just 14% are happy to personalise their meal to ensure they get exactly what they want. 65% of people order food that is easy or less messy than what they actually want, so as not to create a scene and embarrass the person they are with.

Company News:

Peter Hansen – excess capacity and high rates will lead to branded pub and restaurant consolidation: A combination of increasing restaurant capacity, which is growing faster than demand, particularly in London, and higher business rates expected after the rating evaluation due in two years’ time and the next round of rent reviews will bring about another consolidation in the pub, bar and restaurant sector, according to Peter Hansen, founder of Sapient Corporate Finance, the leading leisure sector corporate finance adviser. However, Hansen, who was speaking at a conference in the City of London organised by Numis Securities, added: “It’s easy to say we’re going to run into excess capacity. It’s much harder to say precisely when that will occur. What is a little easier is to say who will get hurt. There are so many small brands that it reminds me of the consolidation of the town centre wet-led bar sector fifteen years ago. Who remembers Parisa? Or Bar Med? Or Litten Tree? These are all brands that didn’t achieve sufficient success with consumers and were left behind. We are likely to experience the same thing in the next four to five years, particularly in London but with restaurant brands.” On the managed side, “there’s a coming consolidation among some of the smaller players, simply because the larger pub companies will see them as tempting acquisition targets,” he said. Pointing to Amber Taverns, the 100-strong community pub operator led by James Baer and Bryan Wardman, Hansen said: “Its model is so similar to what is happening at Marston’s and Enterprise, somebody’s going to buy them at some time in the next few years. There will also be opportunities for growth for smaller managed pub companies, though. The tenanted pub companies will respond to Market Rent Only option by selling quality pubs capable of being converted to managed pubs at the end of their agreement. Well-funded small to mid-sized managed pub companies have a great opportunity to buy pubs they never thought would come to the market. Prices are moving up for tenanted pubs but they still haven’t reached the longer term average of 8x outlet Ebitda. We will see the emergence of new platforms to compete with Admiral Taverns and Hawthorn Inns.” On the restaurant side, he said: “Who is going to buy all of these restaurant businesses in five years? Will the Restaurant Group, for example, buy a fast-growing chain, paying lots for goodwill? TRG hasn’t so far, and as long as they can continue to grow organically they have little reason to do so. I am concerned about some of the multiples that are being talked about for some restaurant businesses. They will survive but I’m not sure how they exit. If we see more debt going into those transactions and the market suffers from excess capacity, problems will emerge. And competition from the grocery retailers is always going to put downward pressure on prices.”

JD Wetherspoon adds seventh site to Irish estate with Carlow acquisition: JD Wetherspoon has secured its seventh site in the Republic of Ireland with the acquisition of the former Traders Bar in Tullow Street, Carlow, the county town of County Carlow and the 14th largest urban area in Ireland with a population of 20,030 – it is 84 kilometres away from Dublin. Wetherspoon will invest €3 million in the site. The company still needs planning and licensing permission, though. “We’ve bought a site in a good location, in a good town. We’ve invested heavily and aim to build the best,” said spokesman Eddie Gershon. “We have €3 million to develop it, though we never reveal the purchase price. We have purchased around five or six others, which are at various stages of the licensing and planning process.”

The Sunday Telegraph – 30 pub disposals likely to meet CMA competition concerns on Greene King/Spirit deal: Greene King is expected to need to sell fewer than 30 pubs to meet competition concerns about its £774m takeover of Spirit Pub Company, according to The Sunday Telegraph. The Competition and Markets Authority (CMA) earlier this month ruled that while it did not have “major concerns” about the deal, it was worried that the tie-up could result in “a substantial lessening” of competition in 16 local areas. The regulator threatened to launch a full-scale inquiry into the takeover unless Greene King offered to sell some pubs. The two companies had until 18 May to submit undertakings to the CMA. Greene King and Spirit together account for more than 3,100 pubs, and some analysts had estimated that about 100 would need to be sold. The Sunday Telegraph claimed that the regulator will be satisfied with far fewer disposals, and the CMA is expected to clear the deal today when it gives its verdict on the pledges it has received.

Revolution – ‘we’ve got more Facebook fans per branch than anybody except Nando’s and Domino’s’: The Revolution Bar Group has more Facebook fans per branch than any other hospitality brand except Nando’s and Domino’s, chief executive Mark McQuater has revealed. McQuater, speaking to a conference in the City of London organised by Numis Securities, said: “Social media and digital engagement is one of our USPs. We’ve got 425,000 Facebook fans – on a per-branch basis that’s only exceeded by Nando’s and Domino’s. We got into social media very early, we pushed it very hard, and our websites had around three million visitors in 2014,” McQuater said, with approximately 60% accessing them from mobile or tablet devices. The bars’ spend per head, at £29.42 for Revolution at £32.68 for Revolucion de Cuba, was “similar to a casual dining spend per head”, McQuater said, and the company had a very high Ebitda of £340,000 to £350,000 per branch, with an average sustained ROI over the years of around 40% – “it’s not a flash in the pan, it’s down incredibly tightly controlled bar standards. Almost a quarter – 23% – of sales are cocktails, selling at £9 to £9.50 a time, and enjoying “very significant” margins”, McQuater said. On the food side, he said, Revolution felt “under-recognised” for the quality of its food, and “as people get more familiar with Revolution, one of the things they discover is the quality of the food end,” he said. The company believed there was room for 100 Revolution bars across the UK, and 40 Revolution de Cuba, McQuater said. As the sites get larger, the ROIs go up, McQuater said, with economies of scale kicking in. “Casual dining brands operating in city centres want smaller spaces than us, so we can take larger spaces a little bit off the absolute high street and that means our rents are more benign than theirs.” The company had built up “a specialist skills base over a long period of time”, he said, and is “able to run fairly complicated businesses”. Revolution saw few real rivals on the High Street, McQuater said: “We’re not seeing anyone around us engage the market the same way that we do, with the same offer and the same set, the same tactics and brand approach.” 

Wasabi to open close to YO! Sushi in Cambridge in mid-June: A 80-seat Wasabi is to open in Cambridge’s Petty Cury pedestrianised shopping street in mid-June, a few feet from YO! Sushi. A spokeswoman for Wasabi said: “With its large student population and vibrant business community, plus a busy tourist destination, Cambridge city centre was an ideal location to expand the Wasabi’s offering. We are confident Wasabi be popular with hungry shoppers in search of something new, different and healthy.” Other restaurants serving Japanese food in Cambridge include Japas Sushi in Saxon Street, U-Sushi in Burleigh Street, Teri-Aki in Quayside, Ohayo Sushi in Mill Road, Genki in Regent Street and Wagamama in St Andrew’s Street.

Fourth Wagamama in Amsterdam to open next month: The fourth Wagamama site in the Dutch city of Amsterdam will open early next month, located this time within the city’s Central Station. It will be the first site outside of the UK to serve breakfast. The new restaurant has seating at the bar, giving guests a direct view of the open kitchen. In the course of 2015, this formula will be rolled over the other Amsterdam restaurants.

PizzaExpress denies pocketing tips: PizzaExpress has denied claims that it is pocketing tips. Union Unite made the claim during last week’s National Waiters’ Day, suggesting PizzaExpress management are “pocketing an estimated £1m that should go to poorly paid staff”. The union was taking issue with PizzaExpress’ practice of deducting an 8% admin charge from tips when the customer pays with a credit card, calling on the restaurant chain to “give us our dough” and “stop pinching our tips”. The union said it was “reclaiming National Waiters’ Day to stand up and speak out against unfair tipping policies, zero-hours contracts and poverty pay which have left waiting tables top of the list of the UK’s worst paid jobs”. But a spokesman for PizzaExpress claimed Unite’s allegations were “false and completely without merit”. He said: “PizzaExpress does not profit from the tips paid by its customers. Instead, all tips, very rightly, go to the people that deserve them – our valued restaurant team members.” The spokesman said the Tronc system PizzaExpress operated meant that card payments went through without NI contributions being made. “Therefore, our restaurant teams are charged an administrative fee of just 8%, compared to National Insurance Contributions of 12.8%, which they would otherwise be required to pay. To cover the administrative costs of ensuring that the Tronc system is managed correctly and fairly and so that we meet our legal obligations as an employer, a small administrative fee of 8% is levied on the Tronc. Under no circumstances does PizzaExpress generate additional profit through the Tronc system. We went to great lengths to set up this Tronc system which is chaired by a Troncmaster and run by a committee of waiters and pizzaiolos, who independently decide how tips made by electronic card payment are subsequently distributed between front and back of house restaurant team; a system run by employees for the employees. We are proud that the committee chose to reward all team members who contribute to a fantastic customer experience by electing to give 30% of tips made by electronic card payment to our cleaners, pizzaiolos and other back of house team members (with the remaining 70% going to the waiter). We believe that PizzaExpress has great people at its heart and for this reason, we want to ensure that they keep their tips and ultimately, continue to deliver great service.”

Tesco boss earned £4.6m in first six months: Tesco boss Dave Lewis was paid a total of £4.1m in his first six months as chief executive of Tesco, the retailer’s annual report revealed. Lewis, appointed last July to turn the company around, received £3.3m to buy out share options and a £525,000 bonus payment he would have been entitled to at his previous employer Unilever. He received a salary of £570,000 during the period and £97,000 of benefits. Executives did not receive any bonus after Britain’s biggest grocer said in September that a previous forecast of first-half-pre-tax profit had been overstated by £250m. The company subsequently revealed that the overstatement was £263m. Awards granted in 2012, which would have vested last year, also did not meet the required threshold and will lapse. The troubled UK supermarket giant whose former chief executive Philip Clarke left the business in the wake of the profits overstatement scandal, said it could potentially claw back payments made to him and former finance director Laurie McIlwee.

Welcome Break to open all 51 Starbucks sites 24 hours a day: Motorway service station company Welcome Break is to open 51 Starbucks sites within its estate for 24 hours a day from 1 June. Rod McKie, chief executive of Welcome Break said: “As an extension to our dedication to the Starbucks brand, we’ve made the decision to offer 24 hour opening at all our sites from 1 June – this widens the food and drink options available to those customers travelling throughout the night and marks us out further as a leader in this competitive market.”

Easterbrook defends pay rise amid labour protests: Steve Easterbrook has defended the company’s recent employee pay increase amid protests by thousands of labour activists outside its Oak Brook, Illinois headquarters. Easterbrook said he was proud that McDonald’s stated earlier this year that it would raise hourly pay at its company-owned US locations to $1 above the local minimum wage. “We voluntarily took a leadership position,” Easterbrook said. “We voluntarily committed to pay $1 above the minimum wage at company restaurants. That’s all we have responsibility for. And it wasn’t just around pay. It was around paid personal time off. Nobody gives paid personal time off. It was much appreciated by staff.” Protesters congregated half a mile away from McDonald’s headquarters last week and made their way to the corporate campus in a pre-meeting demonstration. Many of the protesters had been bussed in from other areas. Police estimated that 2,000 protesters took part in the rally 

Yummy co-founder takes executive chef role ahead of unveiling of sixth site: Yummy Pub Company co-founder Jason Rowlands has taken the executive chef role at the company ahead of the expected confirmation of it sixth site. He has been focused on the food offer at the company’s original site Wiremill site in East Grinstead since the start of the year. Rowlands was head of operations before the company decided to refocus the offer at The Wiremill and bring in a young development team under Rowland’s supervision. The site now has the company’s youngest head chef, Matt Carvel and three apprentices, who will oversee the evolution of food offer at the site which has seen seven years of consecutive like-for-like sales growth. Rowlands’ new focus within Yummy will be on boosting GPs across Yummy’s kitchens, developing new concepts with head chefs at each individual site and launch the new Yummy site, whose location is believed to be inside the M25 and Yummy’s first high street location.

Coaching inn operator receives top accolade from world’s largest hotel site: Coaching inn operator Bulldog Hotel Group’s Talbot Hotel has been welcomed to TripAdvisor’s Certificate of Excellence Hall of Fame following consistent glowing reviews. Based in Oundle, Northamptonshire, the 35-room Grade 1 listed hotel received the top accolade after winning Trip Advisor’s Certificate of Excellence for five consecutive years. Kevin Charity, Bulldog Hotel’s managing director, said: “We are thrilled the Talbot Hotel has been acknowledged by TripAdvisor for its consistent positive reviews from guests. It has been a great six months for the hotel and this accolade is testimony to the success of our continued investment programme and dedication to the highest standards of customer service from our excellent team.” The Talbot has welcomed guests since 1626 and holds the prestigious Les Routiers Hotel of the Year 2015 award and is a top rated venue accreditation from wedding planning website The Bulldog Hotel Group, which is chaired by Ed’s Easy Diner chief executive Andrew Guy, has hotels in Yorkshire, Leicestershire, Lincolnshire, Northamptonshire, Gloucestershire, County Durham and Wales.

Dip & Flip opens second site: Dip & Flip, the roast meat sandwich specialist, has opened its second site, converting the old Britannia Bank, on the Broadway, Wimbledon, into its second restaurant following its first on Battersea Rise. A spokesman said: “We specialise in roast meat sandwiches dipped in gravy (Dip) and flat griddle smashed hamburgers (Flip). It takes us 36 hours to make our gravy from beef bones, vegetables and herbs. It’s so good we serve it with everything apart from our milkshakes (chocolate cherry ripe is our favourite). And we also serve some great beers, including local brew Sambrooks kegged Pale Ale, and bourbons.” A grant from Merton Council was received to restore the shop front.

Meatcure opens second outlet in Leicester: The Market Harborough-based restaurant Meatcure is opening a second outlet, in Leicester, after only seven months of existence. The new Meatcure will be in the former Red Lion pub in Highcross Street, Leicester. Rob Martyniak, who opened the first restaurant in October last year with Sam Rooker-Roberts and Paul Rigby, told The Leicester Mercury newspaper: “We are really passionate about good quality food. Opening up the new restaurant in Leicester after the success of the Market Harborough restaurant seems like the natural progression. Leicester is a great, up-and-coming city that is progressive, and the independent businesses, such as BrewDog, Gelato Village, Crafty and St Martin’s Coffee, all thrive here. People were waiting for us to come to Leicester.” Meatcure specialises in serving barbecue food that has been inspired by the New York meat-packing district. The beef burgers have been dry-aged for 28 days and are made using rib-eye, prime rib, chuck and bone marrow meat from a local butcher, Joseph Morris in South Kibworth. The restaurant also has specially made brioche buns for the burgers from a Market Harborough bakery, Emerson and West. Martyniak said: “We’re really passionate about our high quality food which has no additives. Our coffee is our own house blend and our beer is from Camden Brewery. The reason we chose the former space of The Red Lion pub is because we don’t want to be another high street company. We’re a small, fledgling independent business which is appealing to young professionals, families and the older generation. We want our customers to come to us and feel like they have gone to their friend’s house for a barbecue, and we’re looking for staff who can make our customers feel like that.”

Benihana ‘eyeing Manchester opening’: Benihana, the worldwide Japanese teppanyaki restaurant chain that has three outlets in London, is eyeing an opening in Manchester, according to local media. The group, founded in New York in 1964 by Hiroaki “Rocky” Aoki, currently operates more than 110 restaurants under franchise in 22 countries, including venues at the Benihana Grange Hotel in Carter Lane, near St Paul’s in the City of London; in the King’s Road, Chelsea; and in Sackville Street, near Piccadilly in Central London. The Manchester Confidential website reported the chain’s interest in Manchester for its first move in the UK outside London, but gave no details of potential sites. Benihana is known for its theatrical chefs, who prepare the food in front of guests.

Intertain opens first Walkabout in five years: Walkabout operator Intertain opened its first new Walkabout in five years last Thursday. The move follows the restructuring of Intertain’s main debt facilities, which included new long term funding arrangements and allowed the company to acquire a new lease on the site in West Street, Brighton. The new site, which is just a stone’s throw from the Brighton sea front, is the same one that Walkabout exited over five years ago.The company has invested over £600,000 in the renovation of the 850 capacity venue and has created 20 new permanent bar, kitchen and management jobs in the process. This project follows the half-million pound refurbishments of Walkabout Bristol and Walkabout Newquay earlier this year. John Leslie, chief executive of Intertain said: “The new venue in Brighton has opened with a bang. We have a great location and an excellent venue that really showcases what we are all about as a brand today. Reopening Walkabout in Brighton after an absence of over five years has been very symbolic for us – it signifies the start of a new chapter for the brand.”

Local authority buys former Oceania site in Swansea: The former Oceania nightclub in Swansea has been bought by Swansea council as part of efforts to rejuvenate the local area. It intends to demolish and replace with new office developments. However, plans for the 100,000 square foot Oceana club site are still subject to the availability of funding. Council leader Coun Rob Stewart said: “We know far more people need to be working and living in the city centre to create more vibrancy, attract more private sector investment and generate the kind of visitor numbers that are essential to strengthening its place as a key driver of the Swansea Bay City Region economy as a whole. It’s the ideal location for an employment district that would combine office and residential developments to help deliver the footfall levels needed to support our existing traders and encourage more high-quality shops, restaurants and other businesses to invest in Swansea.”

Pipers schedules summer of out-reach at shows and festivals: The leading on-trade premium crisp supplier Pipers Crisps is taking its award-winning crisps to more events than ever over the coming months, including Badminton Horse Trials, the Lincolnshire Show, CarFest (North and South), CLA Game Fair, The Great British Beer Festival, Burghley Horse Trials and the Speciality & Fine Food Fair. “It’s not just about selling crisps at these shows,” said founder Alex Albone: “We’ll be having conversations with as many people as possible about great taste, crunchiness and provenance of flavours. We’ll be demonstrating what ‘better’ tastes like and persuading customers to be more passionate about their food and more discerning about the quality they buy. And of course we hope they’ll fall in love with our crisps!” Pipers is widely recognised as the UK’s leading premium crisp brand, winning no fewer than 22 Gold Great Taste Awards since 2007.

Wine bar owner promises to rejuvenate Weston super Mare pub: A wine bar owner in Weston super Mare who bought a pub that closed twice in 12 months because of previous owners’ money problems has promised to rejuvenate it. James Willis-Boden, who already runs Bonds Wine Bar in Walliscote Road, Weston, said the potential of the Imperial in Weston had been a big draw in buying the pub, which he plans to re-open on 30 May. He told The Weston Mercury: “I’ve got real ambition for this place, it has so much potential and talking to people about it, there are so many memories; everyone has a story. Everything food-wise is going to be sourced locally and we have been trying to make sure our guest ales are from within 20 miles.” The Imperial suffered its most recent closure when it shut unexpectedly just days before New Year’s Eve, leaving dozens who had left a deposit for meals out of pocket. Willis-Boden said: “I’ve managed to track down some of the guests who were booked in and will be inviting them back and refunding them their deposit through their visit. What I want to do is release the potential of this place, all pubs now have to have a strong food menu and I plan to put on the traditional kind of thing, but then with some additions people might not have tried before – rabbit stew, fish soup, things like that.”

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