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Morning Briefing for pub, restaurant and food wervice operators

Fri 24th Jul 2015 - 16 story update: Loungers, McDonald's, M&B, JDW, TRG
Panmure Gordon – The Restaurant Group is well-placed to buy another brand: Panmure Gordon has argued that The Restaurant Group is well-placed to add to its portfolio. Issuing a ‘buy’ recommendation with a 770p price target this week, a note stated: “The Restaurant Group (TRG) has a proven portfolio of casual dining brands and is seen as anchor F&B tenant to many leisure and retail developers providing a visible expansion pipeline. A recovery in UK cinema attendance driven by stronger film release schedule, an increase in consumer incomes and increase in ‘eating out’ in general bode well for current forecasts. This, combined with strong cash flow, low debt and 2.5% dividend yield support a premium valuation. TRG plans to accelerate its roll out from 40 sites to circa 50 new sites in 2015 focusing on Frankie & Benny’s (circa 18 sites), Chiquito (circa 8 sites), Coast to Coasts (circa ten sites), Pub restaurants (circa five sites) and concessions (circa seven units). These will be a mixture of new developments and conversion of units from other operators but with a focus on larger leisure and retail schemes where barriers to entry are perceived to be greater. Most sites are leasehold although occasionally freehold. Trading to the end of May saw like-for-like sales up 2.0% and nine new restaurants open. Comparatives ease into the second half, which combined with stronger film release schedule should see improved half two performance and offer earnings upgrade potential. The company has commented that it remains open to evaluating acquisitions of existing businesses as was the case with Brunning & Price, acquired for £32m back in 2007. With many restaurant brands known to be for sale, and plenty of funding potential from its ungeared balance sheet, TRG is well-placed to add another brand to its portfolio to meet its long-term growth aspirations of doubling in eight years from 472 to 1,000 units. However, it is not alone as this is also fertile hunting ground for cash rich private equity houses also looking for cash flow/roll-out or even consolidation potential and hence there is a risk that TRG overpays.”

McDonald’s set to revive dollar menu in US in effort to arrest falling sales: McDonald’s is set to revive its core dollar menu in the US after seeing like-for-like sales in the country fall for the seventh quarter in a row. Chief executive Steve Easterbrook admitted the company had been hurt because replacing the dollar menu with a $2.50 deal for a double cheeseburger and fries “had not worked”. Easterbrook said the company was exploring its options but would be resuming the dollar menu, which it dropped in November 2013. He added: “There is no silver bullet. There’s been a decline for nearly three years.” McDonald’s saw like-for-like sales down in the US by 2% when it announced its second quarter results on Thursday.

Trust Inns reports profit rise: Trust Inns, the operators of tenanted pubs led by Lynne D’arcy and owned by Trevor Hemmings, has reported pre-tax profit of £3,021,000 in the year to 31 March 2015, up from £3,002,000 the year before. Profit before interest was £14,526,000 compared to £11,974,000 the year before thanks to a £2,967,000 profit on disposals (2014: £275,000). Turnover was £47,372,000 compared to £49,371,000 the year before. The company secured banking facilities of £130m in February 2014 including a revolving credit facility of £2m.

Pound Pub operator reports profit rise: Pound Pub operator Here for You Hospitality has reported pre-tax profit rose to £661,794 in the year to 31 December 2014, up from £613,855 the year before. Turnover was £7,653,290, down from £7,880,477 the year before. Gross profit improved from 30.6% to 31.6% which “offset some of the effect of reduced turnover”. Free cash flow has been use to reduce bank borrowings or on capital expenditure. Bank debt was reduce by £660,000 in 2014 “and this reduction continues in 2015”. The company stated: “As in previous years, Yorkshire Bank continued charging a quarterly fee. However, the company negotiated a cessation of the fee effective quarter four 2014. Libor has steadily increased from 0.525% to 0.552% in 2014 but the continued reduction in debt has mean our overall interest costs reduced by £30,000.”

Beefeater introduces new range of soft drinks and milkshakes:
Whitbread-owned Beefeater has introduced a new range of soft drinks and milkshakes. The brand is now serving lemonade that is made freshly in-house every day as well as a new range of J2O Spritz with flavours such as apple and watermelon and peach and apricot. It also has a variety of milkshakes handmade to order containing Beachdean Farmhouse Dairy ice cream that come in four flavours – chocolate, strawberry, vanilla and banana. There is also a limited edition strawberry and clotted cream version available.

Glasgow entrepreneurs expand portfolio after acquiring Italian Kitchen restaurant for £1m: Glasgow entrepreneurs Richard Laciok and Marco Mozzachiodi are expanding their portfolio after buying the city’s Italian Kitchen restaurant for £1m. The duo, which already owns the 120-cover Italian restaurant Viva Ristorante in Bothwell Street, has acquired the Italian Kitchen in Ingram Street from Paul Stevenson, who has sold up after 12 years to pursue other business interests. Laciok and Mozzachiodi were backed by Clydesdale Bank to complete the deal. They have retained the 22-strong team at the 90-cover Italian Kitchen, but are planning to make changes to the menu as well as some renovation work. Laciok told Herald Scotland: “When the restaurant came onto the market we had to move quickly to secure the sale. Fortunately Clydesdale Bank recognised it as a good opportunity to expand and supported our growth ambitions. We’ve got some great chefs and a very experienced front of house team, and the quality of the food is fantastic. Everything is fresh and homemade, from the bread to all the desserts and the ice cream. Our speciality is freshly made authentic pizzas stone-baked in our feature wood stone oven.”

Ed Turner steps down at Geronimo Inns
: Geronimo Inns managing director Ed Turner has stepped down from the Young’s board and is leaving the company with immediate effect. A statement from Young’s said: “Following a review, Young’s today announces a restructuring of its managed estate operations and a change to its senior leadership team.The 36 managed pubs trading as Geronimo will now report to Patrick Dardis, Young’s retail director. Geronimo will remain a discrete and separate division of Young’s and continue to be a key part of the Group’s long-term growth plans. As a consequence of this restructuring, Ed Turner, the managing director of Geronimo Inns and who has been with Geronimo for 16 years, has agreed, with immediate effect, to step down from the Board and leave the Group.” Nicholas Bryan, chairman of Young’s, said: “On behalf of the Board, I would like to thank Ed for his contribution to the Group over the last four and a half years, especially in his leadership of Geronimo since April 2013. We wish him well for the future and he leaves with our best wishes.”

JD Wetherspoon submits fresh plan to open in Diss, Norfolk: JD Wetherspoon has launched a new move to open a premises in Diss, Norfolk, which has a population of 7,000 but a catchment area of 40,000. The company secured planning permission for a new building in King’s Head Yard, off Mere Street and overlooking the Mere, in 2013. Fresh plans have been lodged to increase the floor space on the original application by 396 square metres, to a total floor space of 953 square metres.

Mitchells & Butlers signs national deal with licensing solicitors Poppleston Allen: Mitchells & Butlers (M&B) has signed a deal with licensing solicitors Poppleston Allen to handle its licensing work across its entire national portfolio. M&B head of security and licensing Andrew Nicholls said: “Poppleston Allen already provides us with a large amount of licensing services so this revised agreement means that our whole business in England and Wales now has a one stop shop for all our licensing requirements.” Lisa Sharkey, partner at Poppleston Allen added: “We have worked with Mitchells & Butlers for over 20 years and together we have developed a unique way of working. We are very happy to be part of the family.” M&B has a 1,800-strong estate across England and Wales with brands including All Bar One, Browns, Ember Inns, Vintage Inns, Harvester and Toby Carvery.

Royal Bank of Scotland set to sell five-strong Dragonfly Hotel portfolio for £14m: The Royal Bank of Scotland is set to sell its Dragonfly Hotel portfolio of five hotels for about £14m. The bank has appointed Colliers International’s hotel agency team to market the estate, which comprises 317 rooms across five properties in Cambridgeshire, Essex, Hertfordshire, Norfolk and Suffolk, reports Insider Media. The hotels are a 50-room King’s Lynn hotel, a 50-room Colchester hotel, a 71-room Bury St Edmunds hotel, a 70-room Peterborough hotel and a 76-room Stevenage hotel. Paul Barrasford, hotel agency director at Colliers International, said: “This is a fantastic opportunity to acquire an established hotel portfolio which offers prospective purchasers the opportunity to invest and reposition the businesses. These properties are also ideal for an individual investor or private individual with a vocation for the hospitality sector. Given the current strength of the hotel market, we anticipate a strong level of interest in the portfolio.”

BrewDog set to open 13 new sites in UK: Scottish brewer and bar operator BrewDog is set to open 13 new sites across the UK. The company stated: “The group of people with the shortest time to wait are the lucky inhabitants of Leeds. Our latest bar is all set to go, opening to the public a week today. Our most patient group are probably those BrewDog fans located around Brighton. Well, following numerous paperwork issues, we are finally in the old Blind Tiger club on the corner of Marlborough Place and Kingswood Street, and renovating the building prior to opening BrewDog Brighton before the end of August. Whilst we’re on the subject of bars that have taken a while due to red tape, we have to turn to our site in the Merchant City area of Glasgow. More good news to throw into the pot though – planning permission has been granted for what we intent to do with the building, and our conversion team are starting work there on Monday! It’s going to be immense – a full restaurant, a BrewDog bar and a BottleDog, all under one roof. And the door that leads you under that roof should open in October. Another centrepiece bar that will hopefully be opening its doors on a similar timeframe is our second bar for our hometown of Aberdeen. Still at the designing stage, all being well in four months we’ll have the beers pouring for all the BrewDog fans. The two-level Athenaeum has plenty of space and a huge amount of potential – not to mention a prime location at the east end of Union Street. A couple of weeks away from having our team of sledgehammer and paint-wielding experts arrive is our site in Angel, London. Located at 29-31 Essex Road, the old Giraffe Bar and Grill is living on borrowed time as we prepare to finally turn it into our first Dog Eat Dog. A huge selection of craft beer and gourmet hot dogs await; we’re hugely excited to get this – the first in another of our new concepts – on the road to completion. A mile-and-a-half from Angel (as a London crow flies) is the site of another massively exciting BrewDog project. Approvals are all in, and within the next four weeks our increasingly busy renovations team will be appearing at 92-100 Stoke Newington Road in Dalston. This former clothing factory will soon be wearing a very different look – as an awesome flagship BrewDog bar for north-east London. Open before the end of the year, it will feature a full bar and BottleDog, as well as a specialist homebrew shop and a top-secret brewing addition. Finally for London, we have just tied up the details of another site. Right in the centre of the city will be BrewDog Soho. We have a two-level unit on Poland Street, equidistant to Oxford Street and Leicester Square. Look out for a thirty-tap bar serving a full food menu. We’re not just about to take one capital by storm – the beer drinking public of the Festival City [of Edinburgh] are also set for much excitement over the months ahead. Both of our planned sites here are currently in front of the licensing department of Edinburgh Council. We’ll keep you updated on the progress of the artisan coffee and craft beer bar the Newington Fix, and BottleDog Edinburgh at 25a Dundas Street, once signed off. We have just signed the deal on a site within the city of York. Still subject to licence and planning, this prospective BrewDog bar will be located at 130-134 Micklegate. With 2,500 sq ft of space, it’s a fantastic size and we are thrilled to finally get a bar site sorted for this true city of beer. Looking further ahead, we are finalising deals for three more locations – we have a lead on a great site in Stirling and – after a setback, have another (two-level) bar in mind for Southampton. Lastly, we have also just done a deal for a fantastic 4,000 sq ft bar in the centre of Norwich.”

Manchester-based Mark Andrew Developments opens 1950s-themed American diner as latest Northern Quarter venue: Manchester-based bar and restaurant group Mark Andrew Developments has opened its latest venue in the Northern Quarter – Infamous Diner. The company, known as MAD, celebrated the launch of the 1950s-themed venue at the junction of Shudehill and Nicholas Croft by giving away more than 350 free burgers, reports the Manchester Evening News. The £1m restaurant, which has seating for up to 90 guests, aims to emulate famous movie diners, with plush pink leather booths, black and white check floors and a vintage jukebox. The food includes a host of burger options, hotdogs and freshly made waffles while there is a full cocktail list, 20 different bourbons and an all-American beer and wine selection. MAD has a portfolio of bars and restaurants in the Northern Quarter including Walrus, Hula and Rosylee.

Bella Italia opens in Islington on Monday: Bella Italia, which is owned by Casual Dining Group, is opening a site in Islington, north London, on Monday (27 July). The company is opening a 150-cover restaurant at the Angel Central shopping centre adjacent to the Vue multiplex cinema. It has invested more than £800,000 into the site owned by Henderson Global Investors and has signed a 15-year lease. Phil Derbyshire, group property director at Casual Dining Group, said: “We’re delighted to be investing in Angel Central, a high quality scheme in a fantastic location in the heart of Islington. Bella is a flexible offer which can operate on high streets, at leisure/retail schemes, or, in the case of Islington, on one of the most varied and cosmopolitan eating out circuits in London.” Bella Italia, which has some 90 restaurants across the UK, has recently opened in Dudley, Hemel Hempstead and Crewe and is expanding at the rate of 20 sites per annum.

Coffee Republic opens 25th coffee bar in Bedford: Coffee Republic has opened its 25th coffee bar in Bedford, Bedfordshire, as it looks to double the size of its UK estate by the end of 2015. The company has opened a 1,600 sq ft 48-seat venue in the High Street, creating more than ten jobs. Coffee Republic is experiencing the most successful period of growth since new owners took over in 2009 and currently operates four managed sites and 21 franchised venues in the UK.

Loungers applies to open 13th Cosy Club in Derby: Loungers, the Bristol-based café bar, has lodged plans to open its 13th Cosy Club in Derby. The company has applied to convert the ground and first floors of an empty grade II-listed building on the corner of Corn Market and Victoria Street. The building housed the former Royal Hotel until the 1950s and more recently The Royal nightclub, which was launched in 2009 but shut in 2013. Plans prepared by Richard Pedlar Architects said much of the modernisation work six years ago was “not sensitive” to the listed building. The application seeks to reverse some of the work carried out in the nightclub conversion and it is understood the building’s owner is also set to carry out major repairs. Developers will also remove bar fittings from the club’s Red Room and Bar Royale areas, install a new commercial kitchen, remove nightclub paraphernalia, carry out a complete internal redecoration and install a new heating system. A planning statement added empty properties within city centres “do not contribute positively to the social or economic situation within the community”. Loungers has nine other Cosy Clubs across the UK with each venue based in historic buildings.

Dunkin’ Brands Group boss blasts proposed minimum wage increase for fast food industry in New York City: The boss of Dunkin’ Brands Group has blasted the proposed minimum wage increase for the fast food industry in New York City. Chief executive Nigel Travis criticised lawmakers for “choosing to skirt the legislative process” by appointing a wage board to decide on increases to the minimum wage, reports Nation’s Restaurant News. He told Wall Street analysts following Dunkin’ Brands’ report of earnings for the second quarter ending 27 June that franchise operators were “denied the chance to fairly express their concerns so the state could make an informed decision on this topic”. He added: “Most concerning to us was that the fast food industry was singled out for this increase. We would have been happy to have been part of working with the governor and the legislature on finding a solution to address this concern of low-wage earners, while simultaneously protecting small business, but we were not given that chance.” Last week the New York Fast Food Wage Board voted to recommend a phased-in increase of the minimum wage to $15 per hour at limited-service restaurants with more than 30 units by 2018 in New York City, and by 2021 for the rest of the state. The wage board’s resolutions defined “fast food” restaurants as those where customers order and pay before dining, that offer limited service and are part of a chain or franchise with 30 or more outlets nationally. The three-member wage panel will make its recommendation to the state labour commissioner after a 15-day comment period.

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