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Morning Briefing for pub, restaurant and food wervice operators

Fri 10th Aug 2018 - Update: Gaucho, taxation and Diageo
Gaucho boss – we’re discussing expansion opportunities with potential buyers, ‘business as usual’ despite administration: Gaucho chief executive Oliver Meakin has said the company is discussing expansion opportunities with potential buyers and is confident of a sale within the next three weeks. Meakin also stressed it was very much “business as usual” for its 16 UK eponymous restaurants despite the company being in administration. Gaucho entered administration last month after sister brand CAU saw double-digit declines in like-for-like revenues, with “over-expansion, poor site selection and onerous lease arrangements”. All 22 branches of CAU were closed to allow the group to focus on selling the Gaucho chain. Deloitte is handling the administration. Meakin said there were several potential high-quality buyers for the business, a group reported to include private equity firm Carlyle and sector investor Luke Johnson. Meakin said: “We are talking to potential buyers about future UK expansion as we believe there are at least a further six locations where Gaucho would trade successfully. We also believe Gaucho could trade successfully in western Europe with openings under our management. In addition, prior to the sale process we were discussing a number of franchise opportunities in the Middle East with a local business partner.” He added: “There has been some confusion, even within the hospitality industry, of the exact status of the group and we would like to set the record straight. All 16 of our UK Gaucho restaurants are open, each location is profitable and completely sustainable, and our wonderful staff are fully committed to providing our guests with a genuinely memorable experience through delivering a taste of Argentina’s best beef and wine. We are continuing to trade through the administration period, supporting our administrators Deloitte, and are confident of an exciting sale of the Gaucho restaurants within the next two to three weeks.” Over the next few weeks, Gaucho will undertake a strategic communications campaign, led by marketing director Matt Ford, to ensure the “business as usual” message reaches the 16,000 guests who visit Gaucho each week, as well as encouraging new guests to try the offering. Ford said: “The Gaucho brand is 25 years old next year. This is a great business, making good money, with a very strong heritage in highly distinctive locations – we have a lot to be proud of.” Meakin also confirmed there had been no disruption to Gaucho caused by the administration, with key suppliers recognising the strength of the business and wanting to continue to support it. He added: “Gaucho is the first choice for so many diners for special occasions, celebrations and business dining, and our recent guest research confirms the overall experience we offer blows the competition out of the water. We offer a fantastic dining environment, industry-leading service, and exceptional food. We have incredibly loyal guests who love our unique proposition, which provides guests with memorable Argentine beef and wine. We’re looking forward to continuing the Gaucho success story for the next 25 years.”

UKHospitality calls on government to push ahead with tax on digital businesses: UKHospitality has called on the government to push ahead and introduce a tax for digital businesses to ensure online companies pay their fair share. UKHospitality chief executive Kate Nicholls said: “The taxation system must evolve to keep pace with the rapid rise in digital business. High-street businesses, particularly in hospitality, face an enormous tax inequality and the government needs to take proactive steps to address this to help support vital businesses at the heart of communities. Hospitality businesses are at a particular disadvantage, paying 10% of all business rates despite only generating 3% of turnover. As it stands, the hospitality sector is overpaying business rates by £1.8bn per year. Revenues from taxing digital companies could be used to slash the burden on high-street properties while the government reviews the tax system and implements one fit for the 21st century. UKHospitality has been pushing the exchequer for tax reform and we will continue our dialogue to make the point digital businesses need to pay their fair share.
Diageo kick-starts £2bn shareholder return programme: Diageo has kick-started its plan to return up to £2bn to shareholders through a share buyback programme. Last month, the group announced the buyback programme after a strong performance in its last financial year when it saw a 3.7% rise in operating profits to £3.7bn. Diageo announced it has struck an agreement with Citigroup Global Markets to launch the first tranche of the programme, which will see up to £1.4bn of shares bought. Diageo stated: “Citi will make its trading decisions in relation to the company’s securities independently of, and uninfluenced by, the company. The purpose of the buyback programme is to reduce the share capital of Diageo. All shares purchased will be cancelled.” Chief executive Ivan Menezes said at the time of the results: “Diageo has delivered another year of strong, consistent performance. The changes we have made in the business and the shifts in culture we continue to drive ensure we are well placed to capture opportunities and deliver sustained growth.”

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