Brain’s - expanding in the coffee shop market has provided valuable lessons for our pub operation: Wales brewer and retailer SA Brain's has reported that its diversification into the coffee market has provided easier expansion than pubs. The decision to buy the Coffee #1 business took many in the sector by surprise. But the company has argued that the decision has been fully vindicated. Retail director Philip Lay said: “When looking at the Coffee #1 business we quickly recognised that the business offered us an opportunity to move into a new sector that had great growth potential. It was totally aligned to our company mission statement of ‘Delivering outstanding customer experiences, with pride and passion, across the UK.’ We could see how we could expand the business quickly – much quicker than pubs – as the site criteria was clear, there was plenty of space on the high street and new shops were nothing like as contentious as trying to get a new liquor licence. It highlights to me the lack of joined up thinking in government when I can open a new coffee shop within about two months of identifying the site, creating about eight to ten jobs, but if I try to open a new pub creating about 15 to 16, it will certainly take six months and probably a year.” Lay added: “Have we compromised the offer to grow it? Absolutely not. Winning ‘UK coffee chain of the year’, for the fourth consecutive year is endorsement of that if we needed it, but more importantly our customers remain massively engaged with the brand, helping guide any changes that are needed. The focus on social media in Coffee #1 has helped us understand what we need to do better in the core pub business.” See Morning Briefing’s separate Friday Opinion email for Philip Lay's full article

Did you know Pizza Hut, Domino’s and Prezzo have a combined turnover of £665 million? The Propel Info Hospitality Sector Turnover and Profits Blue Book ranks the 200 leading pub, restaurant and foodservice companies in the UK by turnover and profit, provides a five-year overview of performance and lists directors’ salaries. To buy a copy e-mail Jo Charity or Sharon Dickinson on jo.charity@propelinfo.com or sharon.dickinson@propelinfo.com

Borel and Nicholls meet Treasury over VAT cut: Campaigners striving to reduce VAT for the hospitality sector have met with Treasury officials. Campaign leader Jacques Borel and the Association of Licensed Multiple Retailers’ strategic affairs director Kate Nicholls impressed on the officials the implications and benefits of lowering the VAT limit to five per cent. The reduction could lead to the creation of between 290,000 and 670,000 new jobs without a significant dent to the money flowing into the Treasury’s coffers. Nicholls reported: “Jacques Borel asked me to accompany him so that we could together impress upon civil servants the positive benefit a cut in VAT would deliver in terms of jobs and leave them in no doubt that this came top of retailers’ priorities in terms of what it wants and needs from government. Pub and bar operators face an unfair competitive environment compared to supermarkets, which is driving customers to drink at home. What we need is positive action to encourage people to drink in a friendly, safe and supervised environment.” She said officials wanted to know why hospitality should be treated any differently than other industries. “We argued that we were a priority because we generated one in eight of all new jobs in 2011 (according to the Office of National Statistics) and one in six of all jobs for 16-24 year olds. A decade ago, we generated one in five and could deliver the same level of growth if we had a fiscal stimulus. These are jobs in every region, all skill levels and not just low paid, but also management roles.” She added: “I firmly believe no other industry can deliver that and a VAT cut is the quickest and most effective way to deliver jobs and growth.” Nicholls and Borel will be driving these messages directly to ministers and MPs at dinners for members at all three party conferences.

Cask overtakes keg in draught ales market: Cask ale volumes have overtaken keg ale volumes and helped the cask category grow for the first time in 20 years. According to the Cask Report 2012-13, cask accounted for 56 per cent of the draught ale market in 2011 with around 2.2 million brewers’ barrels sold - equivalent to an uplift of 1.6 per cent over the previous year. The report’s author Pete Brown said: “The Cask Report has been analysing the sector for six years and while cask has been outperforming the beer market for most of them, this is the first full year of actual growth. Sales growth during a recession is an impressive achievement, doubly so against a background of declining overall beer volumes and a shrinking number of pubs. This excellent performance speaks volumes for the increasing popularity of cask among consumers, as well as a growing realisation among licensees that cask, as an ‘only in pubs’ drink, can help them drive footfall and sales.” The report also noted that “while cask drinkers remain predominantly male and upmarket, interest from younger and female drinkers is holding steady with 58 per cent of cask ale drinkers say they first tried it when aged 18-24, proving its appeal to emerging drinkers.” Over 50 per cent of cask drinkers say it offers “more variety and flavour than other mainstream drinks”, while its heritage, natural ingredients and local provenance are also cited as strong influences. The report was released today to coincide with the start of Cask Ale Week.

 

Orchid reports turnover up 3.7 per cent to £179.6 million in 2011: Managed operator Orchid has reported EBITA of £40.6 million in 53 weeks to 31 December 2011 with turnover up 3.7 per cent to £179.6m. Underlying gross margin improved by 1.9 per cent to £2.3 million. Chief executive Rufus Hall said: “Our strategy is straight forward by focusing on pubs and people, we aim to be the best at what we do. Food now accounts for over 40 per cent of our sales mix from 28 per cent in 2006. In the three years between 1 January 2009 to 31 December 2011, Orchid operated in a capital-constrained environment with an average core capex spend of just £7.5k per pub. Nevertheless, like-for-like sales declined by less than one per cent in the same period, and this strong performance reflects our continued investment in people, the resilience of our offers and the quality of our teams.”

Mitchells & Butlers ups operating margins: Mitchells & Butlers has reported that like-for-like sales growth improved to three per cent in the nine weeks to 15 September and 2.1 per cent for the 51 weeks of the year to date. Like-for-like food sales improved by 2.7 per cent to 15 September while drinks sales grew by 3.5 per cent. In the first 51 weeks of the year, total sales for the retained estate were up 5.2 per cent. Total company sales, including the impact from the major disposals last year, were up 3.2 per cent. The company said: “Operating margins are showing progress from the half year as anticipated, however full year margins are still expected to be slightly behind last year as a result of inflationary cost increases together with an increased investment in service in our restaurants and pubs.” Executive chairman Bob Ivell added: “Trading has held up well over the summer despite the generally adverse weather. Our business transformation programme remains on track, driving a sharp focus on enhanced guest service and increased cost efficiency.” Former Marston’s chief executive Alistair Darby is due to take over the chief executive’s role at M&B next month.

Kevin Todd hires Alan Yau to refresh Planet Sushi: Kevin Todd, the former Mitchells and Butlers executive who now heads Russian restaurant company Rosinter, has hired Wagamama creator Alan Yau on a consultancy to refresh its Planet Sushi brand, which is one of the 420-site company’s largest concepts with 150 sites. Morning Briefing understands that Yau, who has been consulting for about six months so far, has been asked to launch two re-engineered test sites. Rosinter also runs a number of brand under franchise, including TGI Friday’s and Costa Coffee in Russia.

 

McDonald’s European dominance laid out at European Foodservice Summit: Figures released at the European Foodservice Summit in Zurich show McDonald’s has nine times more turnover in Europe than its next nearest rival Yum Brands. The former has around 18 billion euros of sales while the latter has 2.6 billion euros of turnover. McDonald’s has 7,100 restaurants in Europe, eight per cent up in the last year. Costa Coffee is the largest coffee shop operator in Europe with 1,550 sites, up by 15 per cent in the most recent year. 

 

Prezzo introduces gluten-free pizzas: Restaurant group Prezzo is now serving gluten-free pizzas in all of its Italian restaurants across the UK. Customers can choose a gluten-free pizza from its complete range of 13 classic stone-baked pizzas, which include margherita, spicy beef, quattro formaggi and vegetarian. Prezzo chief executive Jonathan Kaye said: “We are delighted to be serving gluten-free pizzas. Perhaps as many as nine million people in the UK are gluten-sensitive. I am confident that many of our customers will welcome the opportunity to enjoy one of our new gluten-free pizzas in our restaurants or as a takeaway. We undertook a lot of research in order to source what we believe is an excellent tasting pizza base and to develop the perfect gluten-free pizza.” Coeliac UK (the national charity for people with coeliac disease) chief executive, Sarah Sleet, said: “We know that eating out safely is a top concern for people with coeliac disease, who must follow a strict gluten-free diet for life. We are working with the catering industry to help them deliver good quality menu choices for people with coeliac disease and are delighted that Prezzo is recognising the importance of catering for this market.”

 

Victorian Chop House lines up flagship site: Victorian Chop House Company, the privately-owned company founded in 2000 by Roger Ward that already runs three sites, is to open a new £3.5m venue in Manchester’s Grade II listed Memorial Hall in November. The venue will include a function room and boutique hotel. The company currently operates Sam’s Chop House and Mr Thomas’s Chop House in Manchester city centre, as well as a Sam’s Chop House in Leeds. The new venture will be known as The Albert Square Chop House, while the function room will retain the Memorial Hall name. A spokesman said: “This amazing venue will be set across a five-storey Grade II listed building comprising of a lower ground floor 70-seater restaurant, a ground floor brasserie bar with outside seating for a further 50, a large, state-of-the-art function room for 120 and the top two levels will be converted into stunning, boutique rooms providing luxury accommodation in the heart of Manchester.” The Victorian Chop House Company has a turnover of £4.2m with 110 staff.

 

Thurlby Group gets consent for central kitchen: Thurlby Group, the award-winning group of nine Lincolnshire pubs and hotels owned by Michael Thurlby, has been granted planning consent to create a central kitchen in Tallington, Lincolnshire, to provide food for its estate. Thurlby still farms in Tallington and his pubs and hotels serves items produced on his farm such as Tallington Lamb, Lincoln Red Beef and asparagus. His most recent opening was The Lord Nelson in Oakham, which specialises, like his Tobbie Norris, Stamford and Prince Rupert, Newark pubs, in stone-baked pizza.

 

Loch Fyne bosses go back to the floor: Senior executives running Greene King’s Loch Fyne restaurant brand went back to the floor at the Henley branch a fortnight ago. Twelve bosses worked in the kitchen and waited on tables at The Market Place restaurant. Managing director Liz Williams, who worked in front of house, said: “The directors and managers from head office were really excited and I think many of us had been secretly brushing up on our culinary and serving skills at home.” The bosses raised more than £200 in tips, which will be donated to Macmillan cancer support, the company’s charity partner. Turnover at the 42-strong brand dipped to £49,269,447 in the most recent year to 1 May 2011 from £51,355,121 the year before. However, pre-tax profit rose to £1,357,921 from £168,000 the year before. Greene King bought Loch Fyne, which employs 1,352 staff, for £68.1m in August 2007 when it had 36 sites. The company had impairment losses of £1,335,000 in the year. The turnover at Loch Fyne places the brand, if it were independent, as one of the UK’s top 60 companies by turnover in the Propel Hospitality Sector Profits and Turnover Blue Book. The turnover for the year ending 4 May 2008 was £38,585,930.

 

Bravo on expansion trail: Bravo Inns, the acquisitive north west of England operator headed by trade veteran Ken Buckley, has lined up further potential purchases. Buckley said: “We have enquiries out on several sites and I’m quietly confident that we will complete on a couple before Christmas.” Bravo specialises in buying the freehold rights of rundown or closed community pubs and injecting new life into them – many of the pubs are sports oriented. The company, which is backed by Albion Ventures, has 30 outlets, many of which were pubco disposals. Buckley said the company’s preferred route is to purchase packages of four or five pubs at a time, but these aren't coming to market. Instead, it is forced to acquire pubs one by one. The potential additions to the estate have not been disclosed.

 

Host of freeholds hit Allsop auction: A host of freehold properties tenanted by restaurant brands will feature at the forthcoming Allsop auction on 16 October. A site tenanted by Zizzi in Bishops Stortford, where it’s paying a rent of £77,500 per annum on a 25-year lease expiring in 2029 with rent reviews every five year, has a guide price of £1.1m to £1.2m. In Richmond, a freehold let to Ask restaurants on a rent of £117,500 per annum with a lease that expires in 2022, has an asking price of £2m to £2.2m. A freehold in Brighton, tenanted by Nando’s on a rent of £115,000 per annum expiring in 2024, is on the market with a guide price of £1.4m to £1.6m. A freehold let to Prezzo in Arundel, West Sussex, where the company pays £60,000 per annum on a lease with no breaks expiring in 2036, has a guide price of £1.4m to £1.5m. A site in Widnes let to Barracuda, which is paying rent of £62,000 per annum on a lease that expires in 2033 and an upwards only rent review in March next year, is offered with a guide price of £450,000 to £500,000.

 

Illusions Magic Bar to open sister venue in Bristol: Illusions Magic Bar, the Bristol venue devoted to magic performances created in 2007 by Mark Bennett, is to open a sister venue in Bristol next month, Smoke and Mirrors, which will occupy a site formerly called The Bunch of Grapes on Bristol’s Denmark Street. It has a separate theatre large enough to accommodate 50 people, which will allow performances of “some of the world’s greatest magic shows”. Bennett told Morning Briefing: “The aim is to give people what they have asked for.”

 

Domino’s Pizza gets go-ahead for second 24-hour store: The Domino’s site in Hills Road, Cambridge has become only the second site in the UK to get planning consent to open for 24-hours-a-day. It began opening around the clock last night and follows the first 24-hours-a-day site in Manchester.

 

Whiting & Hammond ready for new site search: Whiting & Hammond, the seven-strong operator led by Brian Whiting, will start to look for an eighth site in the coming few months. The company opened its last site, Stanmer House near Brighton, in December last year. Founder Brian Whiting said: “Stanmer House has taken a while to settle in and we’re still looking for a head chef – although we have a fantastic manager, Simon McLoughlin. I’d like to think we’ll be looking for another site by the end of this year.” Whiting said the company, which has Enterprise, Harvey’s and Greene King tied sites, would consider another tied venue along with another free of tie operation.

 

New addition to Giggling Squid estate: Thai restaurant chain Giggling Squid is set to open its sixth site in early November in Henley-on-Thames, Oxfordshire. The 80-seater restaurant joins other outlets in Brighton, Hove, and Crawley in Sussex and Tunbridge Wells in Kent. Giggling Squid, which opened its first restaurant in 2009 in Hove, has established a reputation for its authentic, rustic and fresh Thai cooking with the emphasis on street food and coastal specialities. The lunch menu offers a choice of six tapas-style ‘tasting sets’ that allow diners to sample several of different dishes in a single sitting, costing between £8.00 and £10.50. The evening menu is more extensive with about 40 dishes available. Giggling Squid owners Andy and Pranee Laurilland hope to expand the company to 50 sites over the next five years.

 

Black Dog Ballroom plans January opening for next site: Black Dog Ballroom will open its latest site, a new five-lane boutique bowling alley called The Dog Bowl in the former Cocotoo building in Manchester’s Whitworth Street West in January. Jobe Ferguson, co-owner of the Black Dog Ballroom, said: “You can’t just open a run-of-the-mill bar and expect it to be a success because it won’t. It has to be unique and that’s what we are doing with The Dog Bowl.”

Barracuda returns pubs to landlords: Managed house operator Barracuda is handing 18 of its pubs back to landlords as part of a restructuring package. According to a report in the Times newspaper Varde Partners will give a £10 million loan to the operating business. Which includes brands Smith and Jones and Varsity.

 

Developer puts refurbished Lancashire pub on the market: A pub in Charnock Richard is for sale after a refurbishment. The Dog and Partridge bought by developer Arley Homes last year as part of its Birches development. Fears were raised that the pub may be demolished to make way for new houses, but the developer announced it was to overhaul the tired pub and sell it on. It is now up for sale with first floor living space. John Cosgrave, managing director of Arley Homes, said: “When the site came to market it was a fairly rundown old railway pub. We had the choice of letting someone else buy it, and run the risk it could get worse and thereby have a negative effect on local property values, or redevelop it ourselves.” The pub is on the market with commercial agent Jenics. For information contact 0161 832 2201. 

 

Inmates win top accolade for their restaurant: A restaurant run by prisoners has been awarded the highest accolade for sustainability and joins prestigious outlets including Raymond Blanc’s Le Manoir aux Quat’Saisons and Hugh Fearnley-Whittingstall’s River Cottage restaurants. The restaurant, The Clink, is located inside the walls of High Down prison in Sutton Surrey and has received the Sustainable Restaurant Association’s three star rating. The 92-cover restaurant sources more than three-quarters of vegetables and salad from within the prison walls (where the prisoners are trained in horticulture), and all the meat is free-range. All food waste is composted and the restaurant features rainwater harvesting and efficient dishwashers. The Clink‘s director of operations Alberto Crisci said: “It is so important that restaurants are responsible when it comes to sustainability and it will remain of great importance to us to continually improve how and where we source our produce from, how we can reduce waste and protect the environment.” Earlier this month, Morning Briefing reported on the opening of the second Clink inside Cardiff prison.

 

McDonald’s gets its own TV channel: Burger chain McDonald’s has launched its own TV channel and is trialing the idea in 700 restaurants in the United States. Called the M Channel, the aim is to offer exclusive content to entertain customers. More ambitiously, it also intends to create promotional and sales opportunities for record companies and others who want to tap into McDonald’s vast customer base. The channel will broadcast its news, entertainment and sports on a regional basis.

 

Citywire’s “Income Investor” tips Enterprise Inns bond: The Citywire “Income Investor” columnist has tipped Enterprise corporate bonds. The un-named columnist wrote: “One of my highest yielding corporate bonds is Enterprise Inns 6.5 per cent 2018, so called because it pays a 6.5 per cent coupon and matures in 2018. It currently has a price of around 88p, giving it an income yield of 7.3 per cent and a gross redemption yield of just under 8.6 per cent. (The redemption yield is higher than the income yield because of the potential capital gain.) Not too long ago, because of concerns about banking covenants, the redemption yield was up at 13 per cent. Enterprise Inns is the largest pub landlord in Britain. However, it does not pay any dividends and a look at the share price shows that it is not highly regarded by the market, with a forecast p/e (price to earnings ratio) of just over three. The market is clearly sceptical. This is a ‘non-investment grade’ BB+ security and is inherently risky. However, this bond is a ‘007’ of its class: rather than being a simple loan to the company it is a debenture, secured against a portfolio of pubs. If you check out the covenants on this bond issue in the ‘deed of trust’ the property is valued at ‘fair value’ as opposed to ‘going concern’ and is ring-fenced in a special legal vehicle that must equal one and 2/3rds of the total value of the bond issue plus two years’ worth of coupon. This property is re-valued regularly. Enterprise’s report and accounts noted that they “expect to refinance the £600 million 2018 bond on maturity, bearing in mind that it will always be secured on a portfolio of pubs with an up-to-date valuation of £1 billion and interest cover of two times”. What is more, these pubs are currently generating revenue that covers the bond coupon payments twice over!”

 

Barracuda bolsters senior management team: Barracuda has strengthened its operations team with the appointment of Helen McGregor as director of operations for the southern region. McGregor joins from the Restaurant Group where she was national operations director for the Mexican restaurant brand Chiquito’s. Her previous roles include southern operations director at La Tasca along with senior operational positions within Ha Ha Bar & Grill and Mill House Inns. She will be responsible for 100 pubs in the south including Barracuda’s central London businesses and work alongside chief executive Roger Moxham; operations and HR director Rob Pitcher; finance director Chris Keen; and commercial director Sarah Weir. Pitcher said: “Helen’s operational experience across both the pub and restaurant sectors will help strengthen our food proposition on the high street as well as driving sales growth across the estate.”