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Wed 4th Jan 2023 - Propel Wednesday News Briefing

Story of the Day:

Survey finds late-night operators suffered a 20% drop in business in December: A flash poll of 200 bar, nightclub and late-night operators has found business down 20% in December compared to December 2019, the last December unaffected by restrictions. New Year’s Eve performed better than expected with businesses trading 16% down on 2019, but across December businesses lost a fifth of their trade due to consumers having less disposable income, train strikes and cost inflation, the survey by the Night Time Industries Association (NTIA) has found. Some 53.7% of respondents did not make enough profit to cover cash reserve requirements for the slower periods, with 20.9% barely making enough, meaning that over 50% of businesses only had enough cash reserves to survive for up to two months as strike action escalates. Many businesses are now reliant heavily on the March Budget to survive and gain some financial headroom to continue trading in 2023, with the main asks from businesses being a VAT reduction across the board, energy cap freeze, alcohol duty freeze and business rates extension. NTIA chief executive Michael Kill said: “Following a flash poll of members, over 50% of businesses have not been able to build the necessary cash reserves required to survive early 2023, with over 50% of respondents suggesting that they only have enough to survive the next two months, as night time economy businesses see a 20% drop in trade across the Christmas period. With operating costs continuing to increase, rent and VAT due in January and the media talking about the government halving the current energy subsidy scheme we are faced with a challenging First Quarter of 2023, with many trying to find a pathway through the uncertainty. It is clear that inflationary pressures, both business and domestic, have caused the most damage, with Industrial action impacting cities and large towns reliant on consumer mobility at night. This is one of the biggest challenges the industry has faced, for many a greater crisis than the pandemic, with many businesses being left on the edge trying to survive. We will not accept that there will be casualties of this crisis, and urge the government to be clear with its intentions on energy and the coming March budget before its too late.” 

Industry News:

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Ogilvy’s Rory Sutherland to speak at Restaurant Marketer & Innovator European Summit 2023, open for bookings: Rory Sutherland, vice-chairman at Ogilvy, will speak at the Restaurant Marketer & Innovator European Summit 2023. He will argue that hospitality and psychology are a match made in heaven, The event is a partnership between Propel and Think Hospitality, aiming to build a community, promote the sharing of ideas, recognise talent and define the future of eating out. Bookings are now open for the two-day conference as the centrepiece of the January event series, taking place on 24 and 25 January at One Moorgate Place in London. McGinn, who works with some of the world’s leading brands, helping them drive sustainability and social purpose, will explain why trust is the only metric marketers should be measuring. More than 50 industry and agency leaders will take to the stage over two days representing brands including Burger King UK, Cornish Bakery, Gail’s Bakery, The Alchemist, Hawksmoor, Searcys, Press Up Hospitality Group, Vapiano, Popeyes UK, Inception Group, Oakman Group, New World Trading Company, Peggy Porschen Cakes, Krispy Kreme, KellyDeli, Red Engine, East Coast Concepts, Coco di Mama, The Cocktail Club, Tattu Restaurants, Hilton, Elior, MJMK, Lollipop, Chotto Matte, Ping Pong, Nobu, Gusto Italian, BrewDog, Kaleido, Darjeeling Express, Flat Earth Pizzas and Six by Nico. For the full speaker schedule for day one click here and for day two click here. Day one themes will be consumer and sector trends, start-ups, concepts and creativity and digital evolution, while day two focuses on purpose and responsible business, strategies for growth and communication and culture. Tickets for operators for the two days are £600 plus VAT and £350 plus VAT for one day. Tickets for suppliers are £950 plus VAT for the two days and £525 plus VAT for one day. Tickets can be purchased by contacting Jo Charity at Propel on

Coming this month for Premium subscribers – the Who’s Who of UK Food & Beverage: Propel is to add a fifth major database to its Premium service this month. The Who’s Who of UK Food and Beverage will be the first time full profiles of the UK’s top 700 food and beverage operators will be available in one place. The companies, listed in alphabetical order, will have their most recent results reported as well as broader information around Ebitda, plans and trading style available. The database has taken 16 months to pull together, merging Companies House information, interviews and other public information to provide an easy to reference and exhaustive guide to the sector. Propel managing director Paul Charity said: “This invaluable guide simply hasn’t existed in the UK before. It’s a reference guide to the 700 largest operators in the UK. It will also be updated every month because on average 50 or so companies update each month of the year. So if you want to find out the most up-to-date information on a company, this is the database you will need on your desk at all times. It is also a wonderful complement to our Blue Book of Turnover and Profitability which is also updated each month and ranks these companies by turnover, profit and profit conversion. Together they provide the UK’s most detailed and insightful profile of absolute and relative performance.” Premium subscribers also receive access to three other databases: the Propel Multi-Site Database, produced in association with Virgate; the New Openings Database and the UK Food and Beverage Franchisor Database. Premium subscribers are also to be given exclusive access to the recording and slides to Propel Multi-Club Conferences. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email to upgrade your subscription. Subscribers also receive access to Propel’s library of Friday Wrap interviews and now also have access to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out; regular video content and regular exclusive columns from Propel group editor Mark Wingett.

Train strikes cost hospitality industry £2.5bn, delay on energy support package having “corrosive effect on business confidence”: The disruption to the travel industry caused by months of rolling strikes will cost the hospitality industry £2.5bn for the period from June to the end of this week according to UKHospitality. Chief executive Kate Nicholls told the BBC that is £1bn more than the £1.5bn it had previously estimated as an expected pre-Christmas bounce back during a period when fewer strikes were called never materialised and factors in the new strike dates called by rail workers this week. Rail union leader Mick Lynch said today the strikes could continue for months yet unless a deal on pay and working patterns that they could accept was forthcoming. He said: “If we don’t get that there will have to be more action, and we’ve got a mandate that runs through to May this year, and if we have to go further, that’s what we’ll need to do. We don’t want that, though.” Nicholls told the BBC that the travel disruption was deterring customers from booking restaurants, shows and other events in advance. She said: “People are booking at the last minute or not at all which makes it very hard for businesses to plan ahead.” Nicholls also said that the delay to an announcement of the support businesses will receive towards their energy costs when the current package expires at the end of March was having “a corrosive effect on business confidence”. The government had promised details by the end of December but are now not expected till next week. The BBC also understands hospitality chiefs are due to meet with the Chancellor later this week.

Companies forced to dip into savings to keep afloat: Companies are running down their savings to stay afloat, according to a survey that suggests many face bankruptcy in the New Year as they run out of money. The Telegraph reports almost two thirds of small and medium-sized businesses polled by Investec said rising costs had forced them to dip into their savings at the end of last year. The survey showed 43% expected to run down their savings over the next six months, while 4pc said their savings will be wiped out. Samantha Booysen at Investec said this implied hundreds of thousands of companies will be left without a cash cushion just as the economy falls into what the Bank of England has warned could be the longest recession on record. Higher interest rates will further increase the cost of borrowing for households and businesses next year. Investec said this will narrow the options for those who can’t borrow their way out of trouble, forcing some into administration. Falling sales and higher wage bills were also cited as reasons why bosses were forced to dip into their savings. “SMEs are inevitably feeling the economic strain from rising prices and increases in energy bills as well as issues with recruiting staff and funding pay rises for their existing workforce,” said Booysen. Investec said a small minority of prudent executives had been able to boost their savings at the end of last year due to faster growth. However, a quarter said the reason they had more cash in the bank was because they were forced to cut jobs or could not find the right people to fill job vacancies. Investec estimates SMEs have an average of £117,000 squirrelled away in their savings accounts, although this varies hugely between companies. Some companies remain bullish, however, particularly those in fast-growing tech industries. Investec said around a fifth of firms said they were using savings “to invest in the growth of their business”.

Findlay – Hospitality needs a supportive government: Ralph Findlay, the former chief executive of Marston’s and current chairman of C&C Group, who was awarded an OBE in the New Year Honours list, has said that hospitality needs a supportive government, and if it gets it, “the sector will grow; if it doesn’t, it will shrink”. Findlay, who stepped down from his role of chief executive of Marston’s at the end of September 2021, after 20 years in the role, said: “I was honoured and fortunate to have been awarded an OBE for services to hospitality in the New Year’s Honours list. Part of the responsibility for me of receiving this honour is using it to continue to make the case for the huge contribution the hospitality sector makes to the UK – not just to people’s lives and livelihoods, but by contributing hundreds of millions to government in tax receipts, providing millions of jobs, and helping to sustain communities. These points bear repeating, often and loudly. It is obvious that parts of the UKs valuable and essential public services are stressed, and that government funding is stretched thin. In these circumstances, it will be tempting for the government to try to raise more money from the sector, but that would be a mistake. Hospitality is still scarred by covid, and is now trying to navigate a landscape of higher costs and weak consumer confidence. Hospitality needs a supportive government. If it gets it, the sector will grow; if it doesn’t, it will shrink- and so will the number of jobs and the amount of tax contributed to our public services. The number of empty pubs, bars and restaurants will increase. The sector is making real progress to support the government’s health agenda, to respond to the environmental challenges we face, and to increase pay and make the Living Wage a reality. It’s a sector employing a high proportion of women, and we know that women were disproportionately affected economically by covid through job losses and employment insecurity. Government has said that it wants women’s economic empowerment to be a focus in the post pandemic economic recovery: well, hospitality provides an opportunity to do just that. For hospitality, when it comes to taxes and avoidable costs, less will be more for everybody.”

Company News:

Busaba backers acquire steak and lobster restaurant concept Bourgee: Tnui Capital, the private equity backers of Busaba, has acquired the Essex-based, two-strong steak and lobster business Bourgee, Propel has learned. Bourgee, which was founded in Essex in 2014 by founders James Welling and Mark Baumann, was forced to close three of its locations – in Southend, Chelmsford and Bury St Edmunds – after going into administration in 2018. It subsequently kept its site in Chelmsford’s High Chelmer restaurant quarter and secured the former Cafe Rouge at Lakeside for a new site. Propel understands that Welling and Baurmann has now left the business, which will be operated separately from Busaba, which Tnui Capital has backed since 2020. However, it is thought that there is a possibility that the Lakeside site could be converted to a Busaba in time. At the same time, the Chelmsford site could reopen under a new name. The Terry Harrison-led Busaba currently operates ten sites across London, Oxford and Cardiff. The brand, which was founded by Alan Yau, went through its own restructure in 2020, where it looked to exit sites in Oxford Circus, Reading, Manchester and St Albans.

Beds & Bars FY turnover bounces back to just under £30m, trade in six months to September “far exceeded” forecasts: The pan-European hostel company Beds and Bars, led by Keith Knowles, has reported turnover of just under £30m in the year to 26 March 2022, as it bounced back from the impact of covid-19, while the six months to September 2022 far exceeding its forecasts in both revenue and Ebitda. The company said that turnover for the year was £29,868,256 (2021: £5,710,987), however this is still well below the £55,313,400 figure reported to March 2020. Ebitda for the 12 months to 26 March 2022 stood at minus £234,747 (2021: (£7,008,882)), while pre-tax losses narrowed from £11,293,973 in 2021 to £4,996,667 (2020: pre-tax profit of £1,011,856). The company, which opened its 19th St Christopher’s Inns hostel in Europe, in Vienna, last year, said: “The covid lock downs took place just before the start of the 2021 financial year, and restrictions continued in one form or another in all our UK and European units throughout the two-year period ended March 2022. The board immediately took action to reduce the cost base across all expenditure lines recognising that preservation of liquidity was of paramount importance to survive until business recovered. The group took advantage of the government furlough schemes and are equivalent each of our core cities of London, Edinburgh, Paris, Amsterdam, Berlin, Barcelona and Bruges. It was always a challenging task to reduce the cost base while preserving key skills and personnel within the group, both the UK and Europe, but trade in the first six months of the financial year to march 2023 has vindicated our approach. We start the new financial year with accrued losses for the two years of restricted trade, but pent-up demand and the lifting of travel restrictions has ensured a very quick recovery with the first six months to September 2022, far exceeding our forecasts in both revenue and Ebitda. The economic climate in the UK and Europe remains uncertain, with cost pressures mounting and household budgets under strain. Nevertheless, our predominantly young clientele still want to experience European travel and we are confident that our business model remains relevant and desirable, offering a pan-European experience based on our cornerstones of safe, secure, value and fun.”

Wasabi boosts sales to two-thirds of pre-pandemic levels, delivery now a different proposition: Wasabi, which operates a chain of 44 sushi and bento takeaway food shops and restaurants across London and parts of the UK, and also sells its products through supermarkets throughout the country, increased its turnover by some 41% in the year ended 25 December 2021 as its stores saw an end to lockdown-related restrictions and the company continued to expand. Turnover for the year was £66,305,782 compared to £47,041,832 in the previous year, with Ebitda performance improving to a profit of £530,927 (2020 saw a decrease to a loss of £5,760,434). However, turnover still has some way to go to return to pre-covid levels – £95.9m in the year to December 2018 and £100.4m in the year to December 2019). The company’s store business saw sales return to pre-pandemic levels reported for the year to December 2019, boosted by strong growth in its partnership with Sainsbury’s. In July 2022 the group announced a partnership with surplus food app Too Good To Go, to help it fight against food waste. The partnership means all Wasabi stores currently open in the UK are now signed up to the app so that surplus fresh sushi, bento, salads and snacks can be eaten and enjoyed at a discount price rather than wasted. Wasabi customers can simply download the free app and search for the company’s nearest site with unsold food. New sites opened in Putney, Clapham Junction, London Bridge and Bishopsgate – expansion in suburban areas comes after “strong sales of similar suburban sites” and is seen as “an attractive area for future growth”. Chief executive Henry Birts said the partnership with Sainsbury’s had also delivered “continued success” with sales up year-on-year. He added: “Wasabi’s delivery business is a significantly different proposition to pre-covid as the business has benefited from partnerships with all the major delivery aggregators, which will continue to drive value as consumer habits evolve. We have also supported and strengthened our teams at all levels through focused recruiting, increased pay levels and enhanced training and development. There is still a lot of work to do and challenges ahead, but we remain excited and confident about the future.” Capdesia acquired a minority stake In Wasabi in 2019.

Masala Zone operator nearly triples turnover in post-covid bounce: Masala Zone operator MW Eat has reported that business was still being affected by the covid pandemic in its year ended 27 March 2022 – but returned to profit and was cash-flow positive. However, turnover was still down by some 40% on pre-covid levels. The company, whose outlets include Amaya, Chutney Mary and Veeraswamy in London, as well as six Masala Zone branches in the capital and a delivery/pick-up service, saw a turnover of £17,189,742 for the year – a near three-fold increase from £5,803,900 in the previous reporting period – with a profit before tax of £460,858 (2021: loss of £4,469,581). The company was in receipt of government grants for the furlough scheme totalling £659,495 (2021: £3,902,731). No dividends were paid. Cash in bank and hand increased from £484,241 to £2,062,635. Pre-tax profits in the year to March 2019 totalled £3.9m on a turnover of £27,958,564. Co-founder Ranjit Mathrani said: “Covid-19 has had a significant impact on the company and resulted in the business being affected adversely in the financial year ending March 2022. However, we are profitable and cash flow positive, and we are confident that we will have sufficient resources available to trade comfortably for the foreseeable future. The group’s objective is to continue to grow profitably, generating positive cash flows through its trading operations and maintaining the brands position at the forefront of the premium Indian restaurant sector.”

Wagamama launches initiative to donate one million meals to low income families: Wagamama, the brand owned by The Restaurant Group, has launched a veganuary dish with a special partnership allowing one million meals to be donated to low income families. It has launched a new vegan take on its kare lomen dish – its regular menu is already more than 50 percent plant based. This will be launched alongside the new charity partnership with The Bread and Butter Thing. The partnership with Wagamama will involve projects in its restaurants and out in the community. Overall, it will see the restaurant chain provide support for The Bread and Butter Thing to deliver 1 million meals worth of food to low income families who use the charity to receive a more affordable weekly shop. Wagamama chief executive Thomas Heier, said: “At Wagamama we believe in the Japanese philosophy of seijaku; finding calm and tranquillity in the midst of activity. In these challenging times it is important that we all continue to nourish ourselves and our communities.”

Wetherspoon launches January sale: JD Wetherspoon has launched its January sale, including a 99p pint offer. The company is reducing the price of a range of drinks and meals from Tuesday January 3 until Tuesday January 17. The pub chain has confirmed a pint of Ruddles beer will cost just 99p at 560 of its pubs. The average price of a pint of Ruddles is £1.79 so customers buying the drink will be getting a roughly 45% discount, however, in Scotland and Wales, the price will be slightly more expensive at £1.10 due to licensing laws. The sale prices include a pint of Bud Light at £1.69, a pint of Stowford Press Apple Cider at £1.69, a Bells whisky (25ml measure with mixer) at 99p, a bottle of Becks Blue (alcohol-free lager) at 99p. Additionally, the prices also include a pint of Guinness at £2.89, Pepsi Max (14oz) at 99p and Lavazza Coffee, tea and hot chocolate (with free refills) at 99p. Customers can also enjoy savings on food too, with offers on three breakfast items (MOMA porridge, Breakfast muffin deal (fried egg, sausage, bacon, American-style cheese, in an English muffin) and Breakfast wrap deal (fried egg, bacon, sausage, hash brown, Cheddar cheese in a wrap)). A 3oz burger, served with chips (with soft drink) will cost £4.49. Wetherspoon founder and chairman Tim Martin said: “Department stores and shops hold their sales in January, so it is the perfect time to have a sale in the pub too. The range of drinks and food on sale in the pub is aimed at suiting a wide variety of tastes. This year we have included our biggest selection of low and non-alcoholic drinks. I believe that the January Sale will prove popular with our customers. As always, staff at the pub will serve customers responsibly.”

Upham – Christmas trading “relatively positive”, well positioned for rapid expansion when the market confidence resumes: Upham Inns, the Hampshire-based operator, has told Propel that trade over the Christmas period was “relatively positive” and that it is continually in “positive talks with potential investor partners”. The 15-strong business said that for the 5-week period ending 1 January its sales were up +15% against 2021, and in the key festival week they were +25%. Ian Dunstall, director at Upham Inns. Said: “We benefited from the upgrade investment in our core businesses, with a number of these posting record performances.” It comes as the business posted turnover of £17.68m for the year to 31 March 2022 (2021: £6.33m), with a pub Ebitda of £2.135m and a group Ebitda of £1.735m. Kevin Todd, executive chairman of Upham, told Propel: “We are pleased to report a return to profitable trading after the disruption of previous years. The improved performance is the result of a huge team effort as we continue to evolve Upham Inns as a leading premium pub group. In 2022 we continued our positive evolution. Since covid lockdown we have now completed upgrade investments in eight of our 15 pubs to enhance the guest experience, as well as ongoing investment to premiumise our boutique bedrooms associated with the majority of our pubs. Sales growth against 2019 remains impressive. We were not quite able to match the 2021 like-for-like sales in peak summer as we experienced exceptional staycation demand in our leisure destinations post lockdown, but we have been in real like-for-like sales growth since September. This year’s focus remains on cost control to mitigate against the exceptional cost inflation the industry is experiencing on product, staff and energy costs. Our ambition for estate growth remains, and we are continually in positive talks with potential investor partners. We believe we are well positioned for rapid expansion when the market confidence resumes.” Upham operates village inns in affluent rural locations and its Harpers Steakhouse concept in suburban locations.

Various Eateries to begin roll out of Noci concept with Battersea site: Various Eateries, the Coppa Club operator, is to begin the roll out of its pasta-only concept Noci, with an opening in the Battersea Power Station scheme, Propel has learned. The new concept was launched on the ex-Cote site in Islington Green, last March. As with the company’s Tavolino concept, Noci is overseen by former Bancone head chef Louis Korovilas, who has also worked at Locanda Locatelli and Pied à Terre. Propel understands the company has now secured a site on the first floor of the Battersea Power Station development for an opening later this year. Speaking about the new concept, last October, the business said: “Noci, our new neighbourhood specialty pasta restaurant in Islington, has performed strongly since opening in March 2022, quickly becoming a firm favourite in the local community with demand steadily increasing and excellent reviews. We are actively seeking opportunities to grow the brand’s estate and are confident it will form an important part of the group’s future.” The Yishay Malkov-led Various Eateries currently operates 11 sites under the Coppa Club brand with terms signed to open Coppa Club Cardiff and Coppa Club Guildford in the first half of this year. A site in Farnham has also been lined up for the brand. 

Rare Restaurants eyes Covent Garden opening for Gaucho: Rare Restaurants, the Martin Williams-led operator, is eyeing an opening for the Gaucho brand, in London’s Covent Garden. Propel understands that the business, which opened its latest Gaucho site last month, in Liverpool, is in talks to take over the former Wahlburgers site at 8-9 James Street, for a new flagship restaurant. Last summer, the James Street site hosted a south east Asian restaurant pop-up called Sunda Kitchen, which was from Adam Papa, co-owner of Happiness Forgets in Hoxton and Ever After in Shoreditch, and Jamie Younger, who heads up the kitchens at Peckham’s Begging Bowl and Catford’s Perry Hill. The opening in Liverpool and planned Covent Garden site, is part of Rare Restaurant’s five-year growth strategy, which could see it opening up to 30 new sites across the UK. It has also lined up Gaucho openings in Newcastle and Cardiff. Last October, Propel revealed that Rare had appointed advisors to review its funding options. It is understood to have appointed Clearwater International to assess its options, which could include a sale of the business. Williams told Propel: “We are assessing our strategic options after a highly successful 18 months trading post pandemic. After enjoying sustained sector leading growth, we anticipate turnover for 2022 will exceed £70m.” The business currently operates 18 Gaucho sites and three M Restaurants.

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