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Morning Briefing for pub, restaurant and food wervice operators

Fri 15th Jun 2018 - Propel Friday News Briefing

Story of the Day:

Number of emerging high-street restaurant brands falls 38%, Crosstown Doughnuts fastest-growing: The number of emerging high-street restaurant brands has fallen 38% in the past 18 months, reflecting the overall slowdown in the market that has been exacerbated by increasing capacity, according to the latest Ones To Watch report. In the report, which tracks fast-growing brands in the UK, Peter Backman said small-scale operations are in growth while the rest of the casual dining market is effectively going backwards. Crosstown Doughnuts is the fastest-growing brand in the Ones To Watch list as measured by percentage growth in outlet numbers. Meanwhile, German Doner Kebab topped the list again when measured by actual increase in site numbers during the past three years. Also noticeable is the expansion of overseas brands within Ones To Watch. Turkish restaurant Simit Sarayi is investing heavily in the UK, while North American brands Tim Hortons, Taco Bell and Shake Shack feature. The number of brands listed has continued to fall – now 136 – and is roughly the same size as in 2015. That was a year, Backman said, when there was immense energy among private equity firms which, having identified the potential of the restaurant sector, were ramping up the roll-out of their estates. A total of 41 brands were unable to sustain the pace of growth required to stay on the list – at least 20% during the past three years – while there were only 25 newcomers. Changes to the market since 2015 have exposed many operators and their investors, leading to many of the larger companies reducing their site numbers, Backman said. He added casual dining was falling out of favour as a growth vehicle in Ones To Watch with recent leaders falling behind, including Italian, Thai and cosmopolitan cuisines. Nevertheless, there are growth trends, notably the continuing expansion of coffee shops and the re-emergence of sweet snack offers. Backman said this continued development underlined the investment attraction of small-footprint offers that require comparatively low investment per site. Japanese dining has continued to grow at above-average rates, while the rate of expansion by Mexican outlets has slowed. The number of units per brand was slightly down compared with six months ago (10.4 outlets per brand in May versus 10.6 in November last year). The overall number of Ones To Watch outlets has grown from 1,402 in May 2015 to 1,413 – an increase of 0.8% in three years. Backman said: “The numbers in Ones To Watch have grown significantly year after year until May 2017 and then they went into reverse. The number of emerging brands has fallen by a huge 38% over the past 18 months and, unsurprisingly, is continuing to fall, echoing the closures we’ve seen in recent months among larger restaurant chains. However, there are still growth trends in the market. Coffee shops continue to grow and we are seeing sweet snack offers re-emerge. They are small-scale operations with a small footprint and limited fit-out costs. Coupled with a franchise-based growth model, they are as attractive to investors as small-scale startups.” Top performers (fastest growth in estate numbers 2015 to 2018): 1. Crosstown Doughnuts 1,100% (12 outlets); =2. The Little Dessert Shop 800% (18); =2. Insomnia 800% (18); 4. Shake Shack 700% (eight); 5. German Doner Kebab 667% (23); 6. My Restaurant 600% (seven); =7. The Hub 500% (six); =7. The Honesty Group 500% (six); 9. Black Sheep 450% (22).    

Industry News:

Propel launches video service for Premium subscribers: Propel is launching a new service for Premium subscribers that will see them receive regular video recordings of key speakers from Propel events and conferences. On Friday (15 June), Premium subscribers will receive the first, a 30-minute videocast featuring Clive Watson, chief executive of City Pub Group, in which he talks about his experience of undertaking an initial public offering (IPO) and the pros and cons of being a public company. He also reveals how City Pub Group’s IPO turned into a twin-track process after the company received interest from a trade buyer. Propel Premium subscribers also receive their morning newsletter 11 hours early at 7pm the evening before our 6am send-out, and have access to our database of 1,100 multi-site companies. Propel managing director Paul Charity said: “We plan to compile an invaluable library of senior leaders and advisors offering insights and advice, a resource Premium readers can tap into.” An annual premium subscription costs £345 plus VAT for operators and £445 plus VAT for suppliers – plus £50 each for additional team members. Email to sign up or call her on 01444 817691.  

More part-time senior positions and real-life examples can boost hospitality sector diversity: Offering more part-time senior positions and showcasing real-life examples of progression would help to diversify and promote the hospitality industry, the second session of the UK Hospitality Commission 2030 was told. MPs at the session, which took place in the Houses of Parliament, heard from Courtney Avery, a youth employment ambassador; Nikki Kelly, acting chief executive and director of programmes at Tottenham Hotspur Foundation; British Future director Sunder Katwala; and Conor D’Arcy, senior research and policy analyst at the Resolution Foundation. Other ideas discussed included reviving the Saturday job and developing work schemes that suit older workers. Speakers also called for the government to put hospitality at the heart of its Industrial Strategy. Chair of the session Michael Tomlinson MP said: “It was brilliant to hear from a variety of speakers on how we can work together to promote hospitality across the UK. I was particularly interested to hear Courtney’s comments on why young people don’t view the industry as a long-term career path and I look forward to working with the Commission to develop tangible recommendations to address this issue.” UKHospitality chief executive Kate Nicholls added: “The industry employs more women than men and is the second-largest employer of EU workers and the fifth highest as a percentage of the workforce. Now is the time for government to step up and support our industry in developing the hospitality workforce of the future.” The Commission, led by UKHospitality, aims to promote understanding of the importance and potential of the UK’s hospitality sector and brings together a wide range of employers, all-party parliamentary groups, stakeholders, industry bodies, and authorities to deliver an employment foundation for the sector. The third session will be held in early July focusing on education and skills.

London hotel market sees rise in supply and demand during May: The London hotel market saw a rise in supply and demand during May, according to the latest data from STR. Supply increased 2.0% during the month compared with April 2017, while demand rose 0.9%. However, occupancy rates fell 1.0% year-on-year to 82.3%, a 12th consecutive month of decline. Average daily rate decreased 4.1% year-on-year to £146.51, the third consecutive month to register a fall following 16 straight positive months in the metric. Revpar dropped 5.0% compared with May last year to £120.59. STR analysts noted that although there was a weakening of the pound in May, there was no significant increase in demand. The Royal Wedding on 19 May also failed to produce a significant impact on performance.

World Cup to create biggest pub trading days in 2018: The World Cup is set to create the biggest pub trading days in the 2018 calendar, according to beer quality and insight expert Vianet. The company’s customer sales data revealed that in 2016, major sporting events accounted for the biggest trading days outside Christmas. The Euro 2016 match between England and Russia showed the highest trade of all sporting fixtures that year. The average number of pints served per session during the tournament was 197 (223 if the game was won by England). Pubs showing the 2016 match between England and Wales saw an uplift in volumes of 108% versus the same day in 2015. Vianet managing director Steve Alton said: “The data has clearly shown football is the biggest sport in terms of trade increase by pubs – Euro 2016 took more in sales than the Six Nations that year. Pubs need to be prepared to make the most of the World Cup and that’s not just having enough stock, its making sure it’s served perfectly and the pub is getting the maximum number of pints from each keg or cask.”

Pub Accommodation Group launches free event to help maximise rooms revenue: The Pub Accommodation Group has launched a free event to discuss how pub operators can maximise revenue opportunities from rooms. The seminar will take place on Wednesday, 4 July at Fuller’s pub The Counting House in London. Discussions will centre on how pubs can implement marketing strategies, and technology solutions to manage all aspects of room bookings and the guest journey. Additionally, pub companies will find out how guest reviews can help them increase loyalty, growth and profitability and how they can capitalise on the growth of foreign tourism via a new VisitEngland scheme. The authority is launching £1.2m inbound tourism scheme England’s Great National Walks, in which pubs and accommodation will play a key role. The event will also include a Tourism Alliance overview of the new Package Travel Regulations, which come into force on 1 July and will have an impact on businesses that combine accommodation with any other product or service provided by a third party. To book a place, call 01206 752571 or email The Pub Accommodation Group comprises Stay In A Pub, British Beer & Pub Association, UKHospitality, VisitEngland, Eviivo, Guestline, Ei Group, Punch, Fuller’s and Young’s.

London Craft Beer Festival reveals food line-up: London Craft Beer Festival, which will take place from 3 to 5 August, has announced its food line-up. Sri Lankan restaurant Hoppers, barbecue pioneer Pitt Cue, “Britalian” concept Luca and Cantonese bun specialists Bun House will take part alongside a seven-course tasting menu by chef Tom Hunt. Meat specialists L’onglet and festival circuit favourites Big Apple Hot Dogs will complete the line-up. More than 65 breweries will take part in the event at its new location in Tobacco Dock, Wapping, with ticket-holders able to enjoy unlimited 100ml pours from a selection of 100 beers. Festival co-founder Dan Sylvester said: “Each year the festival is a unique chance to eat some of the city’s best food with some of the world’s best beer and we’re excited to be joined by our biggest line-up yet of international and home-grown brewing talent.”

Almost 70 UK projects shortlisted for 2018 Restaurant & Bar Design Awards: A total of 68 UK sites have been shortlisted in the 2018 Restaurant & Bar Design Awards. The list includes 257 projects across 34 categories from the world’s leading architects, interior designers, lighting designers and hospitality operators. The competition is an independent annual awards programme dedicated to celebrating the best food and beverage spaces from around the globe in all types of environments, including hotels, transport, business, culture, leisure and retail. Now in its tenth year, the 2018 awards received more than 900 submissions from the UK and 70 other countries. The winners will be announced at a ceremony in King’s Cross on Thursday, 4 October.

Company News:

Steamin’ Billy secures £1.5m funding package to support expansion: Leicestershire-based Steamin’ Billy Brewing has secured £1.5m from HSBC to support its significant expansion plans. Founded in 1998 by Billy Allingham and Barry Lount, the company owns 13 sites across the East Midlands. The funding package, which Propel reported earlier this year was close to being completed, will allow the business to continue its expansion across the region and carry out extensive renovation work. Allingham told East Midlands Business Link: “Our ongoing expansion programme has seen us purchase pubs across the East Midlands and transform them into quality establishments, ensuring they become a central part of the community. HSBC has extensive experience of our sector as well as in-depth knowledge of the Midlands market, so we are confident our new relationship with the team will be a great success.” David Tomlinson, HSBC’s area director in the East Midlands, added: “We are glad to provide support and guidance to Steamin’ Billy as it continues its expansion strategy. We look forward to seeing the company enter this new acquisition phase.” Since opening its first pub in Leicester, Steamin’ Billy has undertaken a series of strategic acquisitions, identifying and purchasing properties that have untapped potential. It has established a presence in Leicestershire, Rutland and Derbyshire and recently expanded into Warwickshire.

Notes caps fund-raise as it passes £1m mark: Notes, the nine-strong, London-based coffee shop and wine bar concept chaired by James Horler, has capped its fund-raise on crowdfunding platform Crowdcube at £1.2m. The company has already passed the £1m mark having shot through its initial £600,000 target within two days of launch, offering 5.66% equity in return for investment. So far, 712 investors have pledged £1,011,550 and the campaign is “overfunding” with eight days remaining. Notes said trading continued to be strong across the business with like-for-like sales last week up 13.5%. The pitch states: “Since our last Crowdcube raise in 2015, we have opened four locations, doubled our revenue to almost £5m (£0.2m Ebitda), increased site Ebitda by three times and expanded our roastery, which now produces more than one tonne per week for Notes and our wholesale partners.” Notes raised £908,400 on Crowdcube in June 2015 after setting a £600,000 target.

Michelin-starred chef Alain Ducasse to open debut UK chocolate shop: Michelin-starred chef Alain Ducasse is to open a debut UK site for his chocolate brand, Le Chocolat Alain Ducasse, in London. The venue, at Coal Drops Yard, King’s Cross, will be the second outpost for Le Chocolat following its launch in Tokyo in March. The King’s Cross site, which will open in October, will offer single-origin and flavoured ganache, praline and chocolate bars among other items. Located in a reimagined set of coal drops next to Granary Square and Regent’s Canal, Coal Drops Yard will house more than 50 stores from a mix of established and emerging brands, along with cafes, bars, independent restaurants and new public spaces when it opens in October. Le Chocolat Alain Ducasse was founded in 2013. Its chocolates are made traditionally in Paris in a workshop at the back of a small cobbled courtyard, with each step of the confection process mastered and controlled by Ducasse’s artisan chocolate maker Nicolas Berger. Ducasse’s restaurant at The Dorchester hotel is one of only three in London to have been awarded three Michelin stars.

Loungers eyes North Wales debut: Loungers, which is backed by Lion Capital, has submitted plans to open its first site in North Wales. The company has applied to Denbighshire County Council to change the use of a former NatWest branch in High Street, Prestatyn, into a cafe restaurant. The site has been empty since the bank closed in 2016, the Daily Post reports. Loungers operates more than 120 sites through its Lounges and Cosy Club brands, with plans to invest £10m to open a further 16 Lounges in 2018. The company was founded by friends Dave Reid, Alex Reilley and Jake Bishop in 2002. Its nearest sites to Prestatyn are Milo Lounge in Liverpool and Benito Lounge in Manchester.

Wahaca to launch menu next week inspired by Test Kitchen creations: Mexican restaurant brand Wahaca will launch its new menu next week inspired by creations from its Test Kitchen. The menu, which will be available from Wednesday (20 June), will highlight the breadth and diversity of the country’s cooking using produce from Mexico and the UK. Inspiration has been taken from its recently opened Test Kitchen in Shoreditch, where consumer feedback has guided the most popular dishes to appear on the new menu. New items include Mexican bowls with ingredients such as black beans, green rice, slaw and salsa, plus toppings including Wahaca classic slow-cooked pork pibil. The DIY taco board comes straight from the Shoreditch Test Kitchen, with bavette steak, grilled fundido cheese and fresh meco salsa. The crispy duck croquetas, which were a recent special, will now feature on the new menu. Co-founder Thomasina Miers said: “Our food is in a new phase of creativity as we see how the nation is whole-heartedly embracing Mexican food. Where we were once cautious about pushing the boundaries too much, we are now excited about how much we can offer in terms of flavourful, healthy, vibrant food. We feel this is only the beginning.”

Healthy ‘happy eating’ cafe High Mood Food launches second London site: Healthy “happy eating” cafe High Mood Food has opened its second site in London. The concept has a unique focus on gut health and “intuitive eating”. The new venue has opened in Old Spitalfields Market to follow High Mood Food’s debut site in Duke Street, which launched in late 2017 following an initial pop-up in Duke of York Square, Chelsea. Executive chef and co-founder Joey O’Hare told Propel: “Our food is nutritious and inclusive. We champion a varied vegcentric menu enhanced by the bold flavours and beneficial live bacteria of fermented foods.” O’Hare has been a chef for ten years and made it to the final 12 of MasterChef: the Professionals in 2015. Her business partner and co-founder Ursel Barnes trained as an executive coach, working with highly pressurised professional clients, and knows the “critical difference a healthy diet makes to wellbeing on every level”.

Asian-inspired Yen Burger to launch in London this month: Asian-inspired Yen Burger is launch in London at the end of the month. Owner Yen Nguyen has secured a 2,630 square foot site at Borough Market through agents CDG Leisure. The Japanese urban-inspired restaurant will offer premium Asian-influenced burgers that combine ingredients such as Japanese chilli and kimchi mayonnaise, plus Asian herbs such as shiso, a Japanese leaf known for its taste and health benefits. Each burger will be made in-house, while there will also be a gluten-free option. All bread buns will be made daily at Bread Ahead. Side options will include Asian coleslaw, edamame beans and homemade sweet potato chips. The Asian-influenced cocktail menu will include a range of spice-infused aperitifs charged with fresh kumquat, calpis, and fresh mint. Seating will be spread across two floors for up to 70 guests, not including the bar. Nguyen, who has experience at leading restaurants in the UK and Germany, said: “Although I grew up in Europe surrounded by lots of great western food chains, I could never go a day without my mother’s Asian cuisine. I wanted to create something that combined western food with light East Asian ingredients – an Asian burger. The opening of Yen Burger sees this dream come to fruition.” Sammy Weinbaum, of CDG Leisure, who brokered the deal, added: “We are excited to secure this off-market deal for Yen.”

Kent-based operators to launch Italian restaurant with rooms for second site: Nick Levantis and Darryl Healy are set to launch an Italian restaurant in West Malling next month for their second site in the Kent town. Amano, which is Italian for “by hand”, will specialise in authentic dishes and offer four boutique hotel rooms. Chef Fabio Moschini’s menu will include dishes such as calamaro grigliato (grilled squid, aioli and lemon) and scaloppina di pollo alla milanese (crumbed chicken escalope with green bean salad), alongside freshly made pasta dishes, classic recipes and pizza. Ingredients will be sourced from Italy and the local area. Interiors will include blackened timber cladding, clay wall finishes and marble table tops, while an internal courtyard will house an orangery and banquette seating. Levantis said: “West Malling is a vibrant and bustling market town with plenty of places to eat but one thing missing is a good Italian restaurant. Amano will bring a new flavour to the neighbourhood, a friendly, local eatery with boutique rooms for those visiting from elsewhere.” Levantis and Healy’s other site is The Swan bar and restaurant, which they opened in 2011.

McDonald’s adds cold-brew coffee to US McCafé menu as Dunkin’ Donuts duel heats up: McDonald’s has added cold-brew coffee to its McCafé menu in the US as its battle with rival Dunkin’ Donuts heats up. Customers can order a cold-brew frozen coffee or cold-brew frappe at $3.09 for a medium-sized drink or $3.79 for large. However, a small McCafé drink, including the new cold-brew beverages, cost $2 as part of the $1, $2, $3 menu. Cold-brew drinks are especially appealing to younger consumers because they tend to drink more coffee during the day, like trying new products and are open to trading up, according to Mintel’s 2017 coffee report. McCafé menus have remained largely unchanged since the concept’s launch in 2009, Nation’s Restaurant News reports. The move follows an announcement by Dunkin’ Donuts it plans to increase sales through coffee. This year, the company rolled out two next-generation restaurants rebranded as Dunkin’, dropping the “Donuts” to underscore a focus on all-day coffee. Last year, Dunkin’ added Frozen Dunkin’ Coffee to its line-up. Last month, Starbucks said it planned to focus on cold beverages, which make up half of all beverage sales in the US and generated almost $5bn in 2017.

Douglas Jack – Revolution Bars Group should eventually maximise shareholder value: Peel Hunt leisure analyst Douglas Jack has said he believes Revolution Bars Group should eventually maximise shareholder value despite things not going as management planned. Issuing a ‘Buy’ note on the shares with a target price of 200p following the company’s trading update, Jack said: “On 17 October, the board said it ‘remains confident regarding the underlying strength’ of the business and its ‘ability to operate and grow as a standalone business’. The latest statement is less bullish – second-half like-for-like sales are down 1.7%, resulting in full-year like-for-like sales falling 0.5%, with drink performing better than food. We believe 20% of this was due to management issues – no chief executive, the operations director left in January, the property director has resigned, and four of 11 area managers have left. We expect Revolution Bars Group to be a small loser from the World Cup, leaving limited scope to recoup sales during the last three weeks. Small pockets of positivity are this year’s five new sites are performing well, with a further six due by Christmas; the completed roll-out of labour scheduling; and the appointment of a new food director. The management losses have not been a secret, having been regularly written up in the trade press. Our view has not changed – this is a company that should eventually maximise shareholder value.”

Mikhail Investments acquires second Liverpool pub: Merseyside-based operator Mikhail Investments has acquired Liverpool local The Brewery Tap for its second pub in the city. The Stanhope Street pub is being given a new lease of life as part of the Cains Brewery Village regeneration. Mikhail Investments owns former Cains pub Doctor Duncan’s in the city alongside the Bold Hotel in Southport and the Eccleston Arms in St Helens. It also owns Punch Tarmey’s Irish pubs in Southport and St Helens. Chairman Andrew Mikhail told the Liverpool Echo: “Cains Brewery Village is undergoing a huge resurgence. It’s a really busy, vibrant part of the city and we look forward to playing a part in its future. This pub is steeped in history and has something unique to offer.” Mikhail Investments will launch hotel and champagne bar Lord Street in Southport next month.

Papa John’s franchisee opens second Oxfordshire site: Papa John’s franchisee Bally Brar has opened a store in Didcot for his second site in Oxfordshire. Brar has been a franchisee since 2014 and originally worked in a Papa John’s in Berkhamsted, Hertfordshire, before striking a deal to buy the business, which he ran with his brother before they decided to build their own portfolios. Brar said: “The Papa John’s property team identified the location and found the property in Didcot for me. It is a thriving town known for its rail links to Oxford and London and there are a number of housing developments being created, which all offer opportunities. It’s also close to my Abingdon store, which is helpful for staff training and marketing.” Papa John’s was founded in the US in 1984 and has more than 350 stores across the UK and over 5,000 stores in more than 40 international markets and territories.

US Subway franchisees no longer required to serve breakfast: Subway is no longer requiring its US franchisees to serve breakfast. The company has changed its policy to allow franchisees to opt out of opening by 7am daily. Subway’s breakfast options have never caught on across the US in the eight years since they were launched. Research found 43% of Subway customers do not visit for breakfast, while 19% didn’t even know the company served breakfast. Subway’s US store count fell by 909 in 2017, losing almost three times as many locations as it did the year before. It expects to close about 500 of its US locations this year. Finding employees to work during the early hours was another complication that helped convince Subway to change its breakfast policy, reports Bloomberg.

Brixton Brewery pumps up the volume at new site: Brixton Brewery, the fledgling firm in which Heineken acquired a minority stake in November, has started full-scale operations at its new south London brewery. The new facility in Dylan Road is near the brewer’s original railway arch site, which will remain open to the public on Friday and Saturday nights. The new brewery will allow capacity to rise from about 14,000 pints a week to a potential 100,000 pints. A canning line has also been installed, which can handle 6,000 cans an hour, allowing Brixton Brewery to make its beer available in cans for the first time. Senior brewer Cam Mitchell said: “The best bit is the automatic mash tun rake. No more climbing into the hot mash tun to shovel out bags of heavy, wet grain at the end of a brew. It’s the dream!” Brixton Brewery was founded in 2013 by two couples – Jez and Libby Galaun and Mike Ross and Xochitl Benjamin. It brews a core range of six beers, most named after Brixton landmarks. All brews are vegan, unfiltered and unpasteurised. At the time of the deal, Heineken called Brixton Brewery the “perfect London brewer to partner”.

Fledgling escape room business gets go-ahead to open first site, in Birmingham: A fledgling escape room company has been given the go-ahead to open its first site, in Birmingham. Escape Brum has been granted permission by the city council to transform a storage and distribution building in Camden Street, which has a floor space of about 4,865 square feet. The business will initially operate two games rooms and expand to six, creating about 25 jobs. The site has been vacant for the past 18 months, reports Insider Media.

Serviced apartment company SACO reveals plans for Locke site in Manchester: Serviced apartment company SACO, which is backed by Oaktree Capital, has revealed plans for a site for its Locke brand, in Manchester. The company will convert the former Atrium Serviced Apartments complex on the corner of Princess Street and Whitworth Street into a 160-bedroom aparthotel called Whitworth Locke. The development will include a mix of 258 square foot studios and one-bedroom suites, housed over three former cotton mill buildings. Whitworth Locke, which is due to open in October, will include co-working space, dining options, a cocktail bar, gym and apparel kiosk. Locke Hotels has also struck a partnership with local organisation Foundation Coffee to oversee the complex’s coffee and cultural programme, which could include yoga, live music and film nights. Eric Jafari, co-founder and creative director at Locke, told BDaily: “We believe travellers are willing to compromise on a short stay but not necessarily for longer trips. They want an aspirational second home.” Locke, which “combines the best aspects of boutique hotels and serviced apartments”, launched in 2016 in Aldgate, central London. It also has a site in Edinburgh while it is developing a £40m aparthotel in Dalston.

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