Panera Bread founder – greatest threat to your business is losing long-term competitive advantage; argues the case for conscious capitalism: The founder of the US’s most successful foodservice business of the past decade, 1600-unit strong bakery café chain Panera Bread, has argued that losing long term competitive advantage is the biggest threat to any business. Ron Shaich, who was addressing the European Foodservice Summit in Zurich, said: “The most significant risk to your business is losing long-term competitive advantage. If you don’t have long-term competitive advantage you have no reason to exist. If you lose the spirit of entrepreneurialism, you end up having a problem.” Shaich told delegates that 42 per cent of the US top 50 restaurant brands in 1991 have disappeared from the current list because they have “withered, been bought or disappeared”. He said the key metric of company health was average unit profitability. Panera Bread had conducted intensive research and found only one in five of the top 32 US restaurant brands had increased unit profitability in the past five years. Two out of three of the top 32 companies had seen sharp unit profit declines, with the average drops a “startling” decline of 21 per cent. Only four US operators in the $1bn plus per annum sales category - McDonald’s, Chipotle, Buffalo Wild Wings and Panera Bread – had been able to increase average unit profitability by five per cent or more in this time. “That’s the reality of the US restaurant business today,” he told delegates. “It’s infinitely harder to create competitive advantage today.” Shaich said he believed there are three criteria for out-performance. Operational excellence “gets you in the game” and offering “new and relevant solutions to consumer needs” is also a prerequisite to success. However, Shaich said that he believed in the need to create a “deeper connection with consumers though purpose”, a philosophy he called “conscious capitalism”. “Profit can’t be the end – it’s the by-product of the quality of your relationship with customers. Everybody wants to be part of something that makes a difference.” Panera Bread unit sales are $2.4m each on average producing “very high Return on Investment”. The company is guided by a strategy formulated in 1995 that is based on “higher purpose” and creating trust with customers turning away from commodified products. The company serves artisan bread products made overnight on site from fresh dough. “Humanity and authenticity” are Panera’s central values – it now runs three Panera Cares sites where customers decided what they want to pay. “The best kind of public relations is getting caught in the act of doing something good. Our stock is up 60-fold since 1999 – we are the best-performing restaurant stock in the past decade. It’s based on our commitment to the philosophy of conscious capitalism – benefits for shareholders is the by-product.” Propel Info’s visit to the European Foodservice Summit was in association with the ALMR and CPL Training.

Propel Opinion by Paul Charity: Ron Shaich’s figures on average unit profitability decline for the major US restaurant companies reflect, no doubt, the intensely competitive nature of foodservice in the US, where discounting and value-offers operate at least one ratchet up from the UK market. (US operators would kill for the price-points of Domino’s UK or the margins of Greene King managed). But Shaich’s analysis is an indication of what’s coming down the track in the UK. The battle for consumer spend will only intensify, placing margins under greater pressure as companies become ever more aggressive in the mainstream value market. Figures published by Propel Morning Briefing recently show JD Wetherspoon, which issues the most transparent site profitability figures available in the sector, suffering a circa 11 per cent site profit drop since 2007 as costs (not least those imposed by government) have risen and turnover increases have been insufficient to cover them. Monitoring unit profitability is indeed a useful index of brand health. Last Friday, the ALMR's Kate Nicholls wrote an opinion piece for the Propel Friday Opinion section that looked at the rent environment for operators. She referred to 12 per cent of rent as a percentage of turnover as a pivot point – it indicates broadly average profitability and the further below that a company achieves, the more profitable it is likely to be. Or to put it the other way, achieving very high turnover, compresses the rent ratio. It is another barometer of health worth watching closely. I asked Ron Shaich, after his Zurich presentation, what the Panera Bread figure is – rent as a percentage of turnover comes in at an industry-leading figure of six per cent across 1,600 units. 

Did you know that Jamie’s Italian is the most successful UK branded restaurant launch of recent years with turnover of £72m, placing it 42nd in the Propel Turnover list? 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

Propel Info to launch Propel Quarterly magazine: Propel Info, the publisher of the Propel Morning Briefing, is to launch its own magazine, Propel Quarterly next month. The magazine will take a step back from the daily newsflow by examining key trends affecting the pub, restaurant and foodservice market with analysis, opinion pieces and interviews with key players. Propel managing director Paul Charity said: “Our Morning Briefing has been going for seven months now and has grown its distribution at a phenomenal rate. It is now read by swathes of the key multi-site operators in the UK market. The feedback has been incredible with hundreds of unsolicited testimonials sent to our office. Many operators have told us that the Morning Briefing has become the first and often only thing they read each morning. The logical next step is to produce a high quality quarterly magazine that becomes a must-read and must-keep overview of the key trends in our exciting industry.” To enquire about advertising in the Propel Quarterly contact Jo Charity on jo.charity@propelinfo.com or Sharon Dickinson on sharon.dickinson@propelinfo.com.

McDonald’s property ownership key: A key part of McDonald’s dominance in foodservice can be linked to its unique approach to property ownership, Foodservice Europe editor Gretel Weiss has argued at the European Foodservice Summit. Weiss reported that at least 60 per cent of company sites are owned by McDonald’s. She said: “Only the church owns more of its locations than our (foodservice market) leader. Property ownership makes a brand as independent as possible.”

Foodservice phenomenon Eately becomes New York’s fourth most popular tourist destination; in negotiations on Covent Garden site still: Eately, the concept that offers seven styles of Italian eating and foodservice retail on the same site, has become New York’s fourth most visited tourist destination with as many as 26,000 people visiting on a Saturday, co-owner Joe Bastianich has told the European Foodservice Summit. The New York Eately, a 50,000 square foot site, took $80m in its second full year with sales split 50/50 between food and retail sales. Bastianich said the concept taps into turning the wonderful cuisine of Italy into an “experience” akin to a modern day piazza. “How can anyone compete with the wonderful parade (of dishes) that Italy has to offer?” he asked. Eately opened originally in Turin, Italy and chalked up $40m of sales at its first site. Bastianich told Morning Briefing a site will open in Chicago in September 2013 – and negotiations are ongoing over a site in Covent Garden, London.

Negus to leave Fleurets: Richard Negus is understood to be leaving property agent Fleurets after nine years working for the firm. Negus is head of the restaurants division and has been replaced by Graham Campbell. Negus worked for Greene King before joining Fleurets.

Europe raise questions over minimum pricing: The European Commission has raised an objection against minimum pricing in Scotland. The European Commission has joined five European Union nations in submitting legal questions over the controversial legislation, which was passed by the Scottish government in April. A spokesman at the EC's Industry and Entrepreneurship Directorate said the plan to introduce a 50p minimum price caused difficulties in terms of compatibility with the EU Treaty. “We are in a process aimed at finding a solution to the legal problems,” he said. Earlier this month, it was revealed that Bulgaria has raised an objection to the legislation. It has now been joined by France, Italy, Portugal and Spain. The objections mean the consideration period for the proposals will be extended for a further three months to 27 December.

Landlords insolvency rent plea: Property landlords have called on the government to alter insolvency laws to make it easier to retrieve unpaid rents from companies that have entered administration. The British Property Federation said that “many tenants” are being placed in administration just after quarterly rents are due, which allows the company to avoid paying rent for three months.

Chipotle Mexican Grill reports losses so far in the UK: Chipotle Mexican Grill, the UK arm of the hugely successful US chain, has filed abbreviated accounts at Companies House that report losses in 2011 and 2010 as it establishes itself. It stated: “The company made a loss in the current year (to end of December 2011) and prior years and subsequent to the year end has incurred costs relating to the set-up of three new restaurants. Chipotle Mexican Grill has indicated that it will continue to provide future financial support to enable the company to trade as a going concern for a period of at least 12 months.” The company, which is planning its sixth site in the UK, is too small in this country to have to provide turnover figures but filed accounts show it had cash in hand at the bank of £1.43m at the end of 2011 (down from £3.49m the year before) and that its US parent company made an additional £3m equity investment in January this year.

Collyer – M&B could be down to fifth or six place among peers: Deutsche Bank analyst Geof Collyer has claimed that Mitchells & Butlers may have slipped to fifth or sixth place among its contemporaries in terms of like-for-like sales momentum. Collyer said: “Mitchells & Butlers hasn’t had any real kicker from the Olympics unlike Greene King (598p, buy) or Spirit (54p, hold) – both of which have a much greater southern bias to their retail estates. With Marston’s trading update due next week, it is quite possible, in terms of latest reported trading, that M&B could have slipped down to fifth/sixth place amongst the major pub retailers. As we have repeatedly stated, it is difficult to compare the pub groups given that they nearly all have different year ends – you have to look at the longer term trend.” 

Burger King franchise company reports turnover and profit drop after weak promotional activity: Caspian UK, which runs 55 Burger King franchises in the UK, has reported turnover dipped to £43,675,000 for the 52 weeks ending on 1 January this year from £44,527,000 the year before. Pre-tax profit was £371,000 compared to £1,447,000 the previous year. Caspian said 2011 was a difficult year for the company “with circumstances such as the poor weather and weak promotional activity adversely affecting the group”. Net debt increased from £2.21m to £3.81m because of a “significant investment in a store refurbishment programme”. The company said the risks to its business are mitigated by the development of Burger King’s bean to cup coffee and enhancements to the Whopper range. The company, which employs 1,300 people, closed a store during the year. The dividend was down to £19,200 from £2,019,200 the year before.

Peach Pub Company opens sixteenth pub: Peach Pub Company, the award-winning gastro-operator led by Hamish Stoddart and Lee Cash, has opened its sixteenth pub – and its first this year. The company has re-opened The Star and Garter in Leamington Spa, which is located just off the town centre on Warwick Street. Refurbishment work costing £500,000 has added a kitchen to a pub that previously traded as a wet-led community pub. Peach’s pub estate is two-thirds freehold or free-of-tie – it’s the fourth Greene King pub in the Peach estate.

Orchid Pub Company opens two more Pizza Bar Kitchen sites: Managed operator Orchid is converting two more pubs to its Pizza Kitchen & Bar format – The Gate in Wood Green has already opened and the Red Lion in Oxford opens this Thursday. The conversions are part of a £20m, three-year capital investment programme. The spend will involve repositioning investments – moving wet-led pubs to food-led offerings - and “shine spends” where the retail offer is evolved. Chief executive Rufus Hall stated on Friday: “We currently have six businesses on site and by the end of this year, Orchid will have invested £1.9m in 19 repositioning and shine investments.” 

Gordon Ramsay opens Los Angeles gastro-pub: Chef Gordon Ramsay has opened a gastro-pub in Los Angeles, The Fat Cow at The Grove. The 200-seat venue sports exposed brick, bare Edison bulbs, reclaimed wood, communal tables, unpolished metal, tufted booths, and “vintage flea market items”. Meanwhile, the bar sells California wine and local craft beer, in addition to fresh fruit cocktails. The venue will open Moo Bar, a retro ice cream counter by its entrance selling soft serve ice cream, ice cream sandwiches, froyo, milkshakes, and pastries in the near future.

Third Pesto in the Pub opens next week: La Tasca founder Neil Gatt will open the third Pesto in the Pub next week (Monday 8 October) – and the first site in Yorkshire. The new site is the third Punch pub converted to the concept – the new site is the former Prune Park Inn pub in Allerton. He said he and business partner Sara Edwards picked the Prune Park Lane site because it was a “great building in a fantastic location”. Asked about how the restaurant will differ to the pub, Gatt said: “It has a different sort of feel to it in some respects. It has the same sort of layout – it still looks and feels like a pub – but there’s no pool table anymore. That’s been replaced with a dining area.” The venue will be Pesto’s seventh restaurant since the company was formed in 2006 – all three most recent openings have taken place at Punch pubs.

Bank of Scotland to sell Northern Ireland pub portfolio: The Bank of Scotland is selling 14 pubs and a Portadown hotel. The 16 properties have a combined worth of about £7m. Bank outsourcing firm Certus is winding down Bank of Scotland (Ireland)’s loanbook.

Former Vaux boss to invest £400,000 in iconic Sunderland pub: Former Vaux brewery director of retail operations Magnus Wilson is to invest £400,000 in Sunderland’s Ivy House after acquiring it. Wilson, who also owns The Borough pub in the city centre and The Cottage in Cleadon, said The Ivy House had been desperate for the cash injection. He said: “The Ivy House is an iconic pub in this city but unfortunately, it has had a significant lack of investment in recent years which it badly needs. The investment programme we’re implementing here will give the pub the attention it deserves and the people in the area a neighbourhood pub they can enjoy.”

B&T Brewery posts increases in turnover and operating profit: B&T Brewery, the Shefford, Bedfordshire-based brewer and retailer has posted a 5.1 per cent increase in turnover for year ending 31 December 2011. Turnover rose to £1.84 million compared with £1.75 million for the previous year. Operating profit advanced to £39,170 from £3,001 in 2010. B&T was founded in 1982 by Martin Ayres and Mike Desquesnes and its business model is that of a classic vertically-integrated brewer/retailer. It operates six pubs showcasing its ales. Four are located in Bedfordshire, one in Cambridge, and recently it added an outlet in Rugby, Warwickshire. One of the pubs, The Albion in Ampthill, Bedfordshire, is a joint venture with Everards and is part of the Leicester brewer’s Project William programme, which allows B&T to stock its own ales on a free-of-tie basis. 

Dinish Restaurants increase turnover by 2.6 per cent: Dinish Restaurants, the two strong group headed by Sam Harrison and backed by celebrity chef Rick Stein, has reported a turnover of £2.74m for the year ending 31 March 2012, an increase of 2.6 per cent over the previous year. The company, which operates Sam’s Brasserie & Bar in Chiswick and Harrison’s in Balham, made an operating profit of £110,000 (up 47 per cent) on a gross profit of £923,000 (up 3.1 per cent). Emoluments to the four directors – Harrison, Stein, Luke Tait, and Rebecca Mascarenhas – amounted to £99,960. The accounts, lodged with Companies House, show that Harrison, Tait and Mascarenhas have personal quarantees of £17,000, £17,000 and £67,000 respectively. Stein’s involvement with Dinish follows Harrison being the general manager at one of his restaurants in Padstow. Sam’s Brasserie opened in August 2005 and Harrison’s opened in October 2007 after Dinish acquired the site from Soho House.

Hare Inn wins Enterprise Inns’ community hero award: The Hare Inn, Leighton Buzzard, Bedforshire is the national winner of Enterprise Inns’ newly introduced Community Hero award scheme. The pub run by Jim and Naomi Wooley, who have received a cheque for £10,000 to further help their chosen charity. The citation praised The Hare Inn for being “a true community pub in a variety of ways, from organising local events to benefit services personnel and the homeless, to allowing local teams and committees to use the pub as a regular meeting place”. The Hare was the first pub to be recognised as a ‘Pub Hub’ by PTSD Resolution, a charity that strives to help veterans suffering from post-traumatic stress disorder. So far the pub has helped 150 local veterans and raised over £20,000 for the cause. The Hare Inn beat 17 other regional winners to the title.