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Morning Briefing for pub, restaurant and food wervice operators

Thu 9th Nov 2023 - Update: Domino’s, McDonald’s, Nightcap, interest rates, Airbnb
Domino’s Pizza reports total orders return to growth in fourth quarter, now expects to open at least 60 stores this year, starting Uber Eats trial in 2024: Domino’s Pizza UK has reported total orders have returned to growth in the fourth quarter of 2023 and now expects to open at least 60 stores in the current financial year. The business said it now has more than 45 stores in development for 2024 and will also begin a trial with Uber Eats in early FY24 on following its partnership with Just Eat. The company stated: “Total orders have returned to growth in the fourth quarter, up 1.2%, with an improved trajectory in delivery orders, despite a tough comparison with the strong prior year performance. New store openings are well ahead of plan with 45 year to date versus. 21 at the same point in FY22. As a result, we now expect to open at least 60 new stores in FY23. New store openings trading ahead of expectations. The 2024 pipeline continues to grow with more than 45 stores now in development versus 25 in August 2023. While the market and consumer backdrop remains uncertain, we are making strong strategic progress, and we continue to expect to deliver FY23 underlying Ebitda in a range of £132m-£138m.” It comes as the business reported like-for-like system sales, excluding splits, grew 3.7% in the third quarter and total system sales were £363.7m, up 5.5% on the previous year. Total orders in the quarter were down 1.2% to 16.7 million. Collections were up 8.4%. Domino’s stated: “We continue to see a good opportunity to grow collections over the coming years as they remain lower as a percentage of total orders than other Domino’s systems globally. Delivery orders were down 6.3% in the third quarter reflecting softer demand in the wider delivery market. Year to date, total orders are up 1.5% driven by the growth of collections.” The company stated: “We have continued to make strong progress with our new store openings following the rebuilding of the pipeline. We have now opened 45 new stores this year with 20 different franchise partners compared with 21 at this time in FY22 from 13 different franchise partners. These stores are in quality locations and are trading ahead of expectations, with particular strength in new territories with smaller address counts, giving an opportunity to accelerate our growth. In the third quarter, app orders as a percentage of online orders were 79.4%, an increase of 26.3 percentage points versus last year. App downloads were 73% higher versus last year and the number of active app customers reached 8.7 million, an increase of 55% compared with last year. We have launched a number of new trials aimed at increasing the menu choice available to customers at different parts of the day to drive incremental sales. Our store trials for ‘Domishakes’ wraps and ‘Italianos’ across multiple franchise groups continue to perform ahead of expectations, highlighting opportunities for future growth. Domino’s has now been rolled out on the Just Eat platform for three full quarters and it continues to be a driver of sales growth, bringing in incremental customers and orders. Following Domino’s Pizza’s global agreement with Uber Eats, we will start a trial in some stores in early FY24.” Chief executive Andrew Rennie said: “Having been in the business for 100 days and spent that time travelling around the UK and Ireland visiting franchisees, suppliers and colleagues I’m even more excited about the opportunities ahead for Domino’s and our outstanding franchisees. I look forward to providing an initial outline on these growth opportunities for the business at our investor event on 11 December. Our franchisees are performing well in an uncertain market, and we are all benefitting from an aligned system. We remain focused on giving our customers great tasting food, exceptional service and great value, every single time. Together, our store openings are ahead of plan and trading well, collections are continuing to grow, our digital strategy is powering ahead, and we are bringing exciting menu innovation to our customers focused on different parts of the day. We’ve continued to make great strategic progress to drive sustainable growth. As we look into next year, we see inflation stabilising and our focus will be on continued customer and order growth, as well as franchisee profitability. We remain confident that our resilient, asset-light business model will deliver further financial and strategic progress, and increased returns for our shareholders.”

Next Propel Turnover & Profits Blue Book to feature updated figures for 78 companies: The next edition of Propel’s Turnover & Profits Blue Book will feature updated figures for 78 companies. Premium subscribers will receive the next edition of the Blue Book tomorrow (Friday, 10 November), at midday. It now features 789 companies that are turning over a total of £56.9bn. A total of 536 companies are making a profit while 253 are making a loss. The profit being made by sector companies is now outstripping losses by £1.82bn. The Blue Book shows the total profit of the 789 companies in the list is £3,754,189,462 and losses are £1,935,831,027. The Blue Book is updated each month and ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Meanwhile, for the first time, Propel group editor Mark Wingett has chosen the best videos from the Propel conferences in 2023, picking out a selection of talks and interviews that resonated with delegates from across the breadth of the hospitality sector. The 12 videos will be made available to Propel’s Premium subscribers at 9am on Friday, 24 November. Premium subscribers also receive access to five other databases: the Multi-Site Database, which is produced in association with Virgate; the New Openings Database; the UK Food and Beverage Franchisor Database; the Who’s Who of UK Food and Beverage; and the UK Food and Beverage Franchisee Database. 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 kai.kirkman@propelinfo.com to upgrade your subscription. Premium subscribers are also being given exclusive access to the recording and slides to Propel Multi-Club Conferences. They also receive their morning newsletter 11 hours early, at 7pm the evening before; regular video content and regular exclusive columns from Mark Wingett.
 
McDonald’s staff still witnessing ‘disgusting behaviour’ following BBC investigation: McDonald’s staff have claimed they are still witnessing “disgusting behaviour”, months after the BBC revealed sexual abuse claims at the company. More than 160 people have approached the BBC with new allegations after its investigation. They include claims of sexual assault, harassment, racism and bullying. McDonald’s said it was “determined” to root out behaviour that falls below the high standards it expects of staff. It comes as a group of ex-McDonald’s workers told the BBC they planned to take legal action against the firm, accusing it of failing to protect them. The UK equality watchdog said some 200 people had contacted its email hotline, which it set up in the wake of the BBC’s story. It said it was “concerned” by the latest allegations of harassment and that it was considering “a number of options” on how to proceed with its existing legal agreement with McDonald’s. Most workers are not directly employed by the company as McDonald’s uses a franchise system, which means individual operators are licensed to run the outlets and employ the staff. Following the BBC’s investigation, law firm Leigh Day said it had been contacted by McDonald’s crew members who instructed it to start legal action on their behalf. Alistair Macrow, chief executive of McDonald’s UK and Ireland said that following the BBC’s investigation in July, he “immediately ordered measures to address critical areas”. He said: “I initiated a company-wide programme of independent investigations, auditing of our complaints processes, reviews of our codes of conduct and, in a number of cases, full disciplinary hearings. At the same time as introducing these new processes, we appointed external employment experts to independently evaluate and report on the effectiveness of our employment practices, safeguarding and disciplinary procedures. This process is underway, and we plan to implement new steps identified by this review as appropriate. While we are confident in the first steps we have taken, I am determined to understand what more we can do, and our efforts will need to be far reaching and constantly evolving. I am personally committed to ensuring all cases brought to our attention are investigated quickly and thoroughly. Where our standards have been breached, or where our processes fall short, I will drive change. I know it takes a great deal of personal courage to speak up and it is my top priority to ensure we act swiftly and decisively on what we hear.”
 
Nightcap completes assignment of Dirty Martini leases, closes Hanover Square site: Nightcap – owner of the Cocktail Club, the Adventure Bar Group, Dirty Martini and the Barrio Familia group of bars – has said it will continue trading in nine of the ten Dirty Martini sites after securing the assignment of leases, with the Hanover Square site closing. Nightcap acquired the ten-strong Dirty Martini business, plus Tuttons British Brasserie in London’s Covent Garden, for a consideration of up to £4.65m in June. Nightcap stated: “We have completed the process of assigning the Dirty Martini leases from the administrator, Leonard Curtis Recovery. When Nightcap acquired certain assets of DC Bars and Tuttons Brasserie Limited, the operator of the ‘Dirty Martini’ chain of cocktail bars and Tuttons Brasserie, a critical part of the process was securing the assignment of leases for the key sites from the administrator, with the consent from the relevant landlords. The company is pleased to announce that this process has now been successfully completed and Nightcap will continue trading in nine of the ten sites previously operated by DC Bars. Eight out of ten leases have been assigned on existing terms (only subject to rent reviews) and these assigned leases have expiry dates between 2030 and 2047. One site previously operated by DC Bars Limited has not been assigned. This is the Hanover Square site, where the company could not agree with the landlord on reduced rental costs to make the site profitable, and therefore no agreement could be reached to keep trading at the site. The company has entered into a new three-year lease for the Tuttons restaurant and Dirty Martini Covent Garden site. This lease covers a restaurant lease as well as the small downstairs cocktail bar. The new lease is on considerably more favourable commercial terms and is in line with Nightcap’s objective to not remain as a restaurant operator in the long term. The completion of the assignments secures 95% of the historic £23.7m of aggregated annual revenue and all of the historic £3.9m annual site Ebitda, based on DC Bars and Tuttons Brasserie’s unaudited management accounts for the year ended 31 December 2022.” Sarah Willingham, chief executive of Nightcap, said: “We are exceptionally pleased with how well the staff across the Dirty Martini estate have embraced becoming part of Nightcap and we are excited by what the brand has brought to Nightcap, both in terms of great locations as well as the overall high quality of the estate.”
 
Andrew Bailey – too early to talk about interest rate cuts: Andrew Bailey, governor of the Bank of England, has warned there are “upside risks” on interest rates and that the central bank is “not talking about” loosening monetary policy. Bailey, speaking at an event hosted by the Central Bank of Ireland, said that policy would need to remain restrictive for an “extended period” to bring inflation back down to the target of 2%, reports The Times. The governor said that the battle against inflation had moved into a “second half” in which tighter interest rates will “have to do the work”. Inflation is forecast to have fallen sharply to 4.8% in October from 6.7% mainly thanks to a favourable comparison with the energy price surge in the same month last year. His comments cut across remarks made by Huw Pill, the Bank of England’s chief economist, this week in which he opened the door to lowering interest rates later next year. Pill said that kicking off the monetary loosening cycle in the second half of 2024 “doesn’t seem totally unreasonable, at least to me”. Bailey said that it was “too early ... to be talking about cutting rates”. The Bank of England is trying to shape financial market expectations about when it will begin cutting interest rates. Last week the monetary policy committee said the UK base rate would need to remain high for an “extended period” of time in order to reduce inflation, which the group forecast would not reach 2% until the end of 2025. Last week, interest rates were held at 5.25% for the second time in a row.
 
Airbnb upgrades its room service with the help of AI and introduces more transparent reviews: Airbnb is trying to persuade customers that its listings are as reliable as hotels by introducing more transparent reviews and upgrades for hosts to improve how they display their homes. The company said the launch of a range of features shows that the platform is punching back against one of its most complained about issues, the complexity of managing its listings, in what Brian Chesky, co-founder and chief executive, said represented a “turning point” for the business. It will label properties with a 4.9-star average rating as “guest favourites”, which will include a total of two million out of the seven million homes on the site, and give guests a photo tour of the place they are renting, using an artificial intelligence tool, reports The Times. At an event in New York. Chesky described the 16-year-old company as coming through its growing pains, akin to “when you were a teenager and you had the body of an adult, but you weren’t yet an adult – I think it was a little bit like that for us”. For example, as part of its latest winter update, and only available in the US and Canada early next year, the business has partnered with automated lock companies in order to give renters bespoke lock codes for their stay. Reviews from customers are now more detailed, with information about who they travelled with and how long for, allowing the website’s destinations to be ranked more clearly. Chesky personally started hosting guests in his San Francisco home last year, which he said opened his eyes to some of the issues on the site. A focus on pricing has dominated the company’s recent actions as the cost of living bites, and Chesky said this remained a concern for the business. He argued costs had risen far less than at hotels in the past year. The company has introduced a “pricing tool” so hosts can compare their prices to listings nearby and monitor trends throughout the year. In September, its services were de facto banned in New York.
 
Chapel Down reports record-breaking harvest and plans move to AIM: Chapel Down has reported a record-breaking harvest and announced plans to move its listing to AIM. Across its 750 fully productive acres under vine, the company said it has delivered a record 3,811 tonnes of grapes. This tonnage is 86% higher than 2022, and 75% higher than Chapel Down’s previous record posted in 2018. The company stated: “This year’s harvest is expected to enable the production of approximately 3.4 million bottles of high-quality sparkling and still wines, underpinning Chapel Down’s ambition to double the size of the business in the five years to 2026. Chapel Down continues to expand its capacity in order to capitalise on the significant opportunity presented by the English sparkling wine market, which grew by circa 30% in 2022. The company planted 118 acres this spring at Boarley on the Kent Downs, taking Chapel Down’s total land under vine to 906 acres, and planning is well underway for 2024 plantings at Boughton Corner, which will take the company’s total land under vine to 1,023 acres.” Meanwhile, Chapel Down has announced its intention to move from an AQSE listing to the AIM to support its growth plans. Chief executive Andrew Carter said: “We are pleased to announce Chapel Down’s plan to admit its shares to trading on AIM, a move which reflects the maturity of the business and the ambitious growth plan we are committed to delivering in the years ahead. Chapel Down has greatly benefited from its AQSE listing over the past 20 years as it has grown from a start-up in an embryonic industry into England’s leading and largest winemaker with a consistent track record of profitable growth. We believe that a move to AIM will attract a wider pool of investors to participate in Chapel Down’s growth as the leading producer in the world’s newest global wine region and as we continue to pursue our well progressed and fully funded plan to double the size of the business in the five years to 2026. Today’s confirmation of a record 2023 harvest, with tonnage 86% higher than 2022 and 75% higher than the previous record posted in 2018, is creating great excitement within our business, and will underpin our strategic ambition to double the size of the business by 2026 as we continue to build Chapel Down’s position as England’s number one and most celebrated winemaker.”

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