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Morning Briefing for pub, restaurant and food wervice operators

Tue 30th May 2023 - Update: Utility bills warning, Neat Burger and Hollywood Bowl
Warning from trade bodies as study shows average utility bill surges by 81% for sector businesses: UK pubs, bars and restaurants revealed their average bills have surged 81% over the past year as they made further pleas to the government for support. Industry bodies have revealed that less than a third of hospitality businesses are optimistic about their future after swallowing mammoth energy price increases, as well as more expensive food and wage bills. Data collected by CGA by NielsenIQ on behalf of the British Institute of Innkeeping, UKHospitality, the British Beer and Pub Association and Hospitality Ulster revealed the extent of the current turmoil facing the industry. The research showed that 29% of hospitality businesses said they feel optimistic about the next 12 months. Business owners said they are particularly concerned about energy costs, with 86% of firms saying it was a worry. The trade bodies have joined forces to warn that more venues will shut for good if cost pressures do not ease soon. In a joint statement, the organisations said: “The energy crisis has been pushing pubs, bars and restaurants to breaking point for a year now. The Energy Bill Relief Scheme provided a short respite but with that falling away last month businesses are back to paying high costs, with no end in sight for the thousands locked into contracts who will be obligated to pay extortionate rates well into next year. Put simply, this data is extremely worrying for thousands of otherwise viable hospitality businesses. No profits means nothing to invest back into businesses, no cash reserves means nothing to fall back on, and businesses being forced to close means important, irreplaceable assets being lost from local communities and economies across the country forever. The government must recognise this crisis isn’t just crippling businesses now. Left unresolved it will have a lasting wider impact long into the future, impacting local employment, supply chains and removing essential community hubs from villages, towns and cities across the whole of the UK.” A government spokeswoman said: “We acted swiftly to provide businesses, including the hospitality sector, with an unprecedented package of support. As of April, this has saved them £6.9bn on energy costs – amounting to around £35m a day – and enabling some to only pay around half of predicted wholesale energy costs. Global energy prices have fallen significantly and are now at their lowest level since before Russia’s illegal invasion of Ukraine. The new level of government support reflects this welcome fall in prices, but we will continue to stand by businesses. We are also assisting the hospitality sector with support such as freezing of alcohol duty, cutting energy bills, a £13.6bn business rates relief package and a £2.4bn fuel duty cut.”

Number of experiential concepts to feature in next edition of The New Openings Database, 5,600-word report included: A number of experiential concepts will feature in the next edition of The New Openings Database. The database will show the details of 121 newly announced site openings and upcoming launches for Premium subscribers when it is published on Friday (2 June), at midday, including which company has opened a site or its plans to open one in the future. It will have details on what type of site it is and its location, and there will also be a website link to the businesses. The database is published on a monthly basis, and the next edition features boutique bowling company Lane7, led by Tim Wilks, which has lined up a second opening in Birmingham, in Link Street. Also added this month is Roxy Leisure, the operator of the Roxy Lanes and Roxy Ballroom concepts, which has launched new family bowling format King Pins, in Manchester’s Trafford Palazzo. Meanwhile, Otherworld, the Imbiba and Edge-backed immersive entertainment business, which has lined up a new opening in Manchester’s Spring Gardens, will be featured. In addition, Energize Games, a new immersive games concept from the team behind the Breakin’ Escape Rooms business, which has opened its debut site within the Islington Square development in London, will be included. Premium subscribers will also receive a 5,600-word report on the new additions to the database. Premium subscribers also receive access to four other databases: the Propel Multi-Site Database, produced in association with Virgate; the Propel Turnover & Profits Blue Book; the UK Food and Beverage Franchisor Database; and the Who’s Who of UK Food and Beverage. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email to upgrade your subscription. Premium subscribers are also to be given exclusive access to the recording and slides to Propel Multi-Club Conferences. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before; regular video content and regular exclusive columns from Propel group editor Mark Wingett.

Vegan chain Neat Burger ups valuation to $100m in funding round aimed at fuelling US expansion: Lewis Hamilton-backed plant-based concept Neat Burger has upped its valuation to $100m in a new funding round aimed at fuelling its US expansion. The chain, which opened its first US site last month, in New York, raised $18m from new investors including boutique bank LionTree and Real Madrid goalkeeper Thibaut Courtois. The new investment is part of a series B round led by B-Flexion, the family office of Swiss billionaire Ernesto Bertarelli, reports the Financial Times. Existing investors, including Hamilton and SoftBank’s Rajeev Misra, were also involved in the latest funding round, which increased the valuation of the business by 40% compared with two years ago. Actor Leonardo DiCaprio, who invested in the series A round, did not participate this time. Neat Burger, which has eight outlets in London, plans to use the money to open another US site and up to three more in London by 2025. It is expanding despite signs of faltering demand for vegan food and mixed investor appetite for the sector, the newspaper said. Since Beyond Meat, a US pioneer of meat alternatives, listed in 2019, its share price has fallen 95% from its post-IPO peak to $10. In the UK, sandwich chain Pret A Manger has closed or rebranded half of the outlets of its meat-free spin-off Veggie Pret, leaving just five. Vegan-only outlets tripled in number across the UK between 2018 and 2022, peaking at 169, but have since fallen slightly to 164, according to the Local Data Company. Zack Bishti, one of Neat Burger’s co-founders, admitted the company had slowed its expansion plans because of “multiple black swan events”, including soaring inflation and a consumer slowdown since Russia’s invasion of Ukraine. But he stressed he still believed Neat Burger could rival mainstream burger joints, such as Shake Shack and Five Guys. “We want to eat their lunch,” he said. “When you had heavyweights like Beyond that had so much success early on and then you go through these macro headwinds, it’s not unreasonable to assume that it’s a bumpy road…but the numbers [of people reducing their meat consumption] are growing.” Last November, Neat Burger partnered with Baker Street Hospitality to bring its concept to the United Arab Emirates, with a restaurant opening in the food court of Dubai Mall, and it is also gearing up to launch in Italy. The business has previously stated a plan to expand to 1,000 corporately owned, franchise and dark kitchens by 2030. Neat Burger also has a new partnership with members’ club Soho House to offer its vegan burgers in their UK venues. But Mark Brumby, chief executive of restaurant advisory firm Langton Capital, said while meat substitute products and meat-free outlets were a “rising tide”, their growth would be held back by the economic slowdown and was more likely to be “a decades-long process rather than a storming of the barricades”. Like-for-like sales in the first quarter at Neat Burger were up 19% on the year before, but the chain does not reveal topline sales figures. It manufactures its own pea-based protein meat substitute and has had to cope with a 40% year-on-year increase in utility bills and a 15% year-on-year rise in the cost of food products. Despite the economic headwinds, Neat Burger’s founders stress they are optimistic they can benefit from permanent changes to eating habits. Tommaso Chiabra, a Neat Burger co-founder who was also an early investor in Beyond Meat, said: “We are just scratching the surface of the biggest food revolution we will ever witness.”

Hollywood Bowl on track for 15-20 new openings by 2025, strong balance sheet ‘supports ability to grow and further invest and innovate’: Hollywood Bowl, the UK’s largest ten-pin bowling operator, has said it is on track for 15-20 new openings by the end of FY2025, with a strong balance sheet supporting its “ability to grow and further invest and innovate”. It comes as the group reported adjusted Ebitda rose 13.2% from £31m to £35.1m – excluding the effect of the reduced rate (TRR) of VAT in H1 FY2022 – in the first half of FY2023 versus the first half of 2022. Group pre-tax profits were also up 7.7% from £24.8m in the first half of 2022 to £26.7m (excluding TRR of VAT in 2022). This after the group had earlier this month reported revenue of like-for-like revenue growth of 3.5%, with a record first half group revenue of £110.2m, up 9.7% versus the first half of FY2022. Excluding TRR of VAT, group revenues were up 20.7% versus the first half of 2022. The group said it was in a strong net cash position at 31 March 2023 of £44.1m, with an undrawn £25m revolving credit facility. It said trading in line with the board’s expectations for FY2023 and it is on track to meet target of 15-20 new centre openings by the end of FY2025 with strong new centre pipelines for Hollywood Bowl and Puttstars brands, as well as the Canadian Splitsville brand. “Continued balance sheet strength and disciplined capital allocation policy supports ability to grow and further invest and innovate for customers,” the group said. It is “confident in resilient demand as customers look for value for money leisure experiences” and “well-insulated from inflationary pressures, with electricity costs hedged to the end of FY2024”. Training and development programmes for team members is also progressing well with “continued investment in people to retain and attract the best talent”. Hollywood Bowl Speke and Puttstars Peterborough opened during the period and are trading ahead of management's expectations, and it is currently on site in Hollywood Bowl Merry Hill, which is due to open in the fourth quarter of 2023, with a combined Hollywood Bowl/Puttstars offering from the second half of FY2023. Eight refurbishments (including three rebrands) were completed in the half, with all trading in line with or above its return on investment expectations, and a further two underway. Food like-for-like revenue was up 9.0% and drinks like-for-like revenue up 1.7% following the introduction of a simplified food menu, including a new “snacks and sharers” lane offering and a new drinks range, all of which are increasing dwell time and spend. Pins on Strings was installed in seven centres during the period, bringing the total sites using the new technology to 48 (75% of the group’s UK bowling centres), with a further five planned before the year end. The group’s Canadian business is also performing ahead of expectation, generating Ebitda of CAD: 5.0m (£3.1m) in the period. Three further entertainment centres in Calgary acquired in February are trading in line with expectations, and the integration with Splitsville is “progressing well”. It has exchanged on a new build bowling centre in Ontario, due to open in the first half of FY2024, with “strong momentum and significant expansion potential supported by a strong group balance sheet”. Chief executive Stephen Burns said: “I am delighted with our record performance in the first half, and I would like to thank our fantastic team members for all the hard work that goes into delivering excellent value for money, high quality experiences. It is clear from our high customer satisfaction scores that our continually evolving proposition appeals to all generations looking to enjoy affordable leisure activities together. We are looking forward to driving further growth in the UK and Canada, capturing the significant market opportunity ahead. Our resilience to inflationary pressures, strong balance sheet and cash-generative model gives us confidence in the future as we continue to invest so that our customers have the best experience possible in our centres.”

Rate of price rises at UK supermarkets hits new high: The rate of price rises at UK supermarkets hit a new high in the year to May. The British Retail Consortium (BRC) and NielsenIQ said that the overall rate of inflation at grocers reached 9%. While prices for fresh food have fallen marginally, the cost of commodities such as coffee and cocoa has jumped. The government is in talks about asking supermarkets to cap prices on food items to help with the cost of living, and which would limit the cost of basic foods such as bread and milk. But the BRC has dismissed caps, stating the government should focus on cutting red tape so resources could be “directed to keeping prices as low as possible” as opposed to “recreating 1970s-style price controls”, reports the BBC. The BRC and NielsenIQ figures, covering the week between 1 and 6 May, show that overall food inflation ticked lower from 15.7% in the year to April to 15.4%. Despite the fall, the figure is the second highest rate of food inflation on record. Fresh produce showed a slowdown in price rises, from 17.8% to 17.2% in May. Mike Watkins, head of retailer and business insight at NielsenIQ, said: “Food retailing in particular is competitive, so hopefully the recent price cuts in fresh foods is a sign that inflation has now peaked, albeit ambient inflation may take a little while longer to slow.”

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