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Morning Briefing for pub, restaurant and food wervice operators

Wed 27th Feb 2013 - Brewhouse & Kitchen, Fuller’s and Restaurant Group

Story of the day:

The Restaurant Group reports like-for-like sales up 6.5% in eight weeks to 24 February; tips Coast to Coast as growth brand: Frankie & Benny’s operator The Restaurant Group has reported a strong start to 2013 with like-for-like sales up 6.5% in the eight weeks to 24 February. The company is to increase openings in 2013 to between 28 and 35 new sites – it opened 28 in 2012. Chief executive Andrew Page said: “The Restaurant Group (TRG) produced another strong performance in 2012 with all parts of our business in growth. Like-for-like sales were up 4.5%, we delivered a 10% increase in earnings per share and a 13% increase in free cash flow. Last year, 28 new restaurants were opened; these are trading well and are set to deliver excellent returns. We are fortunate to have an outstanding team at TRG and, yet again, they worked diligently to deliver these superb results. 2013 has started well, with like-for-like sales 6.5% ahead, and the TRG team is focused on building further on this to secure another year of profitable progress.” Chairman Alan Jackson said: “Our new development activity was busier than the previous year and, having opened eight new restaurants by the end of the first half, we saw a significant increase in pace during the second half, opening a further 20 new sites. Much of this development took place in the final eight weeks of the year when we opened 12 new restaurants. We are very pleased with the performance of our new restaurants and we are confident that they are set to deliver superb returns. The performance of our new Coast to Coast restaurants gives us particular pleasure. This brand has a distinct and scaleable offering, and represents the start of what we believe is a significant new leg to our leisure business.” Sales grew to £533m in 2012 and pre-tax profit rose 33% to £64.6m.

Restaurant Group brand performance:

Frankie & Benny’s (217 units): 
The company stated: “Frankie & Benny’s performed superbly in 2012, with strong performances across all the key metrics – like-for-like sales, revenues, margins and profits. We opened 12 new restaurants of which six were on cinema sites. Trade at the new openings has been strong and they are on track to deliver excellent returns. We anticipate opening between 13 and 17 new Frankie & Benny’s restaurants in 2013. The enduring appeal and consistent success of the Frankie & Benny’s brand gives us a great deal of confidence that the ongoing roll out potential for this brand is significant.” 

Coast to Coast (5 units):
The company stated: “The performance of our new brand, Coast to Coast, has been outstanding. Our first Coast to Coast restaurant opened alongside an existing Frankie & Benny’s restaurant in Brighton at the end of 2011. During 2012 we opened four new Coast to Coast restaurants in Stevenage, Newcastle, Solihull and Gunwharf Quays in Portsmouth and four of our Coast to Coast restaurants now trade alongside existing TRG restaurants. We are very encouraged by the fact that not only are our Coast to Coast restaurants trading very well, and are set to deliver strong returns, but also that there has been no detrimental impact upon the adjacent existing TRG restaurants. We are planning to open four to six new Coast to Coast restaurants in 2013. We believe that the Coast to Coast brand could have significant roll out potential – it has broad appeal and is distinct from TRG’s other brands meaning that it complements both Frankie & Benny’s and Chiquito. We have identified several dozen locations where we are confident that a Coast to Coast restaurant would trade well and the process of building a new site pipeline is well in hand.” 

Chiquito (69 units):
The company stated: “Chiquito delivered a good performance in 2012 with sizeable increases in revenues, profits and margins. No new Chiquito restaurants opened during 2012, although we anticipate opening between four and six new restaurants in 2013.” 

Garfunkel’s (25 units): 
The company stated: “Garfunkel’s traded well during 2012. Although the impact of the Olympic Games upon Garfunkel’s trade was adverse, from late summer onwards the pick-up in trade was significant and this meant that the brand delivered like-for-like sales growth for the full year and a good level of profits. We opened two new Garfunkel’s in 2012 which are expected to deliver good returns.” 

Pub restaurants (45 units):
The company stated: “Our pub restaurants business enjoyed a good year in 2012. With the conclusion of the programme of ex-Blubeckers site conversions behind them, the team has been able to capitalise on the opportunities to grow the business and this has produced a very good level of performance. Turnover, margins and profits were well ahead on the previous year and the four new openings are performing significantly ahead of our expectations and are set to deliver strong returns. We expect to open three to five new Pub restaurants this year and, looking forward, we believe that this business has the potential to grow significantly. This strong performance was capped off with the news that we had won the Good Pub Guide’s “Pub Group of the Year” award for 2013 – a fitting testament to a dedicated crew. 

Industry news:

Propel Morning Briefing celebrates first birthday: Today marks the first anniversary of the launch of the Propel Morning Briefing. The circulation has grown by 615% since it was launched a year ago – and has grown by 20% since the start of 2013. Managing director Paul Charity said: “We have had tremendous feedback from the day we launched our Morning Briefing, especially from operators, many of whom tell us it’s their one-stop source of morning news. We’ve developed our service during the year to include a stand-alone Friday Opinion section, breakers, a quarterly magazine and a conference series – all free for operators. I’d invite readers to drop me a line to give me their thoughts on our service – I’m on paul.charity@propelinfo.com.”

Super-strength beer move in Cambridge defeated: A drive to end the sale of super-strength beer and cider in Cambridge would “hit the innocent as well as the guilty”, licensing chiefs have concluded. Labour city councillors proposed the introduction of a voluntary code under which retailers would agree not to stock high-strength alcohol – linked with street drinking and anti-social behaviour – warning of its devastating impact on health. But ruling Liberal Democrats rejected the idea, stating the existing power to review the licence of premises that are linked to disorder was sufficient.

Darden’s – price premium on casual dining getting harder to justify: Darden Restaurants is pulling back on price increases and the pace of new restaurant openings in the US for its flagship Olive Garden chain. Darden will open about 15 new Olive Gardens annually for the next couple of years, down from the 36 per year that it had been opening. The number of new openings a year could fall even lower after 2014 if business conditions worsen, the company said. To focus on attracting more customers, Darden will also hold down price increases to about 1% at its three biggest chains, which include Red Lobster and LongHorn Steakhouse. It had previously hiked prices by about 2% to 3%. “The price premium attached to casual dining is getting tougher to justify,” Drew Madsen, Darden’s chief operating officer and president.

Retail Week – retail parks major focus of expansion for leisure operators: Retail Week magazine has reported that retail and leisure park sales growth has eclipsed in-town performance and has encouraged more leisure operators to expand their out-of-town locations. Research for Retail Week by Trevor Wood Associates revealed that nearly half of the UK’s 964 out-of-town retail and shopping parks and mixed retail and leisure sites now have a coffee bar, restaurant, fast food outlet, pub or takeaway. The most common tenants are Burger King, Costa Coffee, Frankie & Benny’s, KFC, McDonald’s and Pizza Hut. Other widely found tenants include Domino’s Pizza, Nando’s, Starbucks and Subway. In larger schemes, leisure operators tend to be clustered in groups of up to five or six. Of all UK retail parks, 29 have a cinema as part of the scheme, some 24 have a bowling alley and 88 incorporate a health and fitness centre. Many other parks are near to freestanding leisure developments but were not included in the research.

Frozen burger sales down 43%: Sales of frozen burgers have slumped by 43% in the wake of the horsemeat scandal. Frozen ready meals by 13% since traces of horse DNA were first found in products on sale in Britain on 16 January. National Farmer Union research has found that 78% of UK consumers feel supermarkets should sell more food from British farms.

Whitbread to take legal action against Brakes and Paragon Quality Foods: Whitbread chief executive Andy Harrison has revealed that the company will take legal action against Brakes and Paragon Quality Foods over the supply of products that contained horsemeat. He said: “We are taking a wide variety of action to guarantee the integrity of our food. Brakes are in breach of contract and we will take legal action.” He added, though, that the company would continue to buy food from Brakes.

Harvester withdraws Paragon burgers: Mitchells & Butlers Harvester brand has withdrawn all 6oz burgers supplied by Paragon Quality Foods as a precaution. The move was described as ‘a precaution’ after Paragon burgers tested positive for horse DNA two weeks ago. A Harvester spokesman told The Sun: “We will test samples from all new batches and this will take a few days to complete.” Harvester will still offer a “gourmet burger”.

Company news:

Provenance Inns adds sixth site: Provenance Inns, the high quality food-led operator led by Michael Ibbotson, is understood to have bought the freehold of the former Black Bull Inn, in the North Yorkshire village of Moulton, near Richmond. The pub is a substantial property, on 1.3 acres, with parking facilities. It had been renowned as a food-led business and includes a spacious bar, kitchen and accommodation facilities. Ryan Lynn, who handled this sale for Christie + Co, said: “The Black Bull Inn is in a perfect location. We sold it to a multiple operator for continued use. We received a high level of interest, with ten potential buyers particularly interested and many making an offer. As a result, the pub was sold above its asking of £300,000. The business is a fantastic opportunity for the new owner to make it very successful.” Among the Provenance Inns sites are The Durham Ox, Crayke, The Oak Tree Inn, Helperby, The Carpenters Arms, Felixkirk, The Punch Bowl, Marton cum Grafton. The Carpenters Arms will re-open in July this year after ten new bedrooms have been added. Ibbotson co-founded Provenance Inns with Chris Blundell.

Whitbread boss – costumers have switched to chicken: Whitbread chief executive Andy Harrison has reported that sales have not been impacted by the horsemeat scandal but customers have switched proteins. He said: “We haven’t seen any impact on sales but customers have been shifting to chicken-based products.” On testing of menu dishes by the Food Standards Authority, he said: “There are quite a number of high profile restaurant brands that don’t appear to have submitted any samples.” Harrison argued that it had been very hard to get a true picture of underlying performance in its pub restaurants, which saw sales edge up by 0.2% in the 11 weeks to 14 February. “We had a very good Christmas but a lot of that was lost in the snow.” Asked about increased competition in the coffee market for Costa Coffee from the likes of Greggs and Harris + Hoole, he said: “There are many, many competitors. A few more isn’t going to make any discernible difference. We’ve said we’ll get to 2,000 stores (in the UK) in the next four to five years - that remains true.” Whitbread reported that it planned to install another 500 Costa Express machines in the coming year, the majority of which will be in the UK. 

300 people apply for 40 jobs at McDonald’s: Almost 300 people have applied for 40 jobs at McDonald’s restaurants in Bolton. A franchisee is creating the jobs at four Bolton restaurants, which are enjoying strong trade boosted by sales of coffee and wraps. Last week, it was revealed that 1,700 people recently applied for just eight positions at a Costa Coffee shop in Nottingham.

Max Alderman – Antic problems arose through over-expansion: Max Alderman, the boss of Gregarious Limited, which bought 12 Antic Limited pubs out of administration last week, has broken his silence to explain what went wrong. Alderman is the former company secretary of Antic Limited and operations director for Antic London, its parent company, which runs 24 pubs that did not go into administration. Alderman told a local newspaper: “The opportunity arose to take control of a group of pubs that I had an intimate knowledge of over the years. All are great local pubs much loved by their regulars and we want to continue to deliver great beer, food and service in the slightly quirky manner that all have become known for, whilst ensuring they have a bright and safe future.” Antic’s financial problems were the result of an over expansion “which compromised cash flow,” he said. “The units that have come across to Gregarious will be entirely ring fenced and self-sustaining, and will not encounter the same problems.”

Fuller’s to re-open Hampshire pub with local brewer ale partnership: Fuller’s is to re-open the Links Tavern, on Portsmouth Road in Liphook, Hampshire on (Friday) 1 March with a new ale, “The Links Tavern Ale”, created by the head brewers of Fuller’s, John Keeling and local brewery Ballard’s. The ale combines a Ballard’s ale with Keeling’s selection of high quality Goldings hops. Manager Matt Jarrett said: “I can’t wait to open the doors again on Friday, and I think our customers are going to be delighted with the new look. The brand new hanging sign and our own ale are just a hint at some of the significant changes we’ve made.”

Leeds restaurant changes name after legal threat: A Leeds restaurant has been forced to change its name after being threatened with legal action. Italian ‘gastro wine bar’ Vineataly, at Granary Wharf, has agreed to drop the brand after a company with a similar name threatened to sue for brand infringement. Owner Mattia Boldetti, who is facing a £10,000 bill for rebranding, said: “We are a small, independent company run by passionate people, but we have had to bow to pressure from a much bigger brand and agree to change our name, despite having followed the proper legal procedures. We found this process shockingly unfair. Considering the average inclusive litigation costs for a patent infringement suit can be in excess of £150,000 we ask ourselves: what is a small company to do?” Local sources suggest the legal threat came from Vinitaly, the world’s largest wine fair. Boldetti is now offering a 50% discount – and a dish named in their honour – to the person who comes up with a new brand.

Randall’s Brewery looks to re-develop pub: A Guernsey brewery has submitted plans to demolish a traditional pub and re-develop it. Randall’s Brewery wants to knock down the Coq du Nord pub and replace it with a modern pub and eight houses. Ian Rogers, Randall’s managing director, said the Coq du Nord was a “very tired pub” and replacing it with new premises was a “no brainer”.

Stonegate to rebrand Yates’s in Glasgow as The Merchant with beer from Scottish craft brewers: Managed operator Stonegate is to re-open its Yates’s site on West George Street this Friday (1 March) as the Merchant. A £300,000 investment will see a completely new food offer and an enhanced cask ale range offering some of the best beers from craft brewers in Scotland and the opening up of the first floor which was previously used for private functions, helping creating an additional 60 covers in the pub. Merchant general manager Paul Donaldson said: “We are hoping to broaden the appeal of the pub to a wider audience, whether its people looking for a quick bite to eat in their lunch hour, a place for shoppers to relax after hitting the shops, somewhere to enjoy a drink after work or a place to celebrate the weekend in real style.”

YO! Sushi plans first opening of 2013 in Leeds: YO! Sushi will open its first site of 2013 in the brand new Trinity Shopping Centre located in the heart of Leeds and the only major UK retail development to open this year. The restaurant, which officially opens on 21 March, will feature 57 covers. Chief executive Robin Rowland said: “YO! Sushi is an elegant pit-stop for shoppers which will fit in perfectly within the hotly anticipated Trinity Leeds Shopping Centre. We are delighted to be opening our second restaurant in the city and looking forward to serving our delicious and healthy Japanese inspired dishes to savvy shoppers and local residents alike in Leeds.”

Pub operator Buccaneer Holdings sees profits drop to break even: Pub operator Buccaneer Holdings has reported pre-tax profit of £611 in the year to 12 November 2012, compared to £129,231 the year before. Turnover rose to £6,387,482 from £6,024,426 the year prior. The company stated: “The lack of profit was almost all (linked) to one unit not performing. This has now been rectified and is fully operational again. Due to the lack of profit the directors have made a decision to pay a small dividend of £6,344.” 

Bravo Inns faces £10,000 paint job bill: Bravo Inns faces a bill of £10,000 if Bolton planners decide a paint job is not in keeping with the Shakespeare Hotel in Farnworth’s grade II listed status. The company painted panelling blue in a refurbishment last May. The Campaign For Real Ale (Camra) has called on the planning committee to act. Secretary Graham Walsh argued: “Of the 54,000 or so pubs in the UK, we estimate fewer than 2% have escaped drastic internal alteration in recent years. The inclusion of the Shakespeare in our national inventory of historic pubs shows the importance of the interior fittings. The painting of this panelling has clearly had a major detrimental effect on the interior.” It will cost £10,000 to treat the wood with a special chemical to remove the paint. The planning committee will make a decision at its meeting at Bolton Town Hall on 28 March.

Brewhouse & Kitchen targets three openings in 2013 after £4m fund-raising: Brewhouse and Kitchen, the Enterprise Investment Scheme (EIS) company headed by Simon Bunn and Kris Gumbrell that will open its first brewpub next Monday, has raised just under £4m to fund the roll-out of the concept. The company will re-open a former JD Wetherspoon pub in Portsmouth, the White Swan, as a pub producing a range of cask ales together with a complementary fresh food offering. The company has agreed heads of terms on a second site and is looking at several other prospects. Bunn told Morning Briefing: “If we can open three sites this year, I’ll be very happy.” Investments in the Brewhouse & Kitchen EIS have ranged from £5,000 up to £200,000 – and a second round of fund-raising will be launched soon. Up to 2,800 pints of malt, nutty, brown and other types of beers and porters will be made a week at the first site, which customers can drink on site or take away in five-litre containers. There will be seven staple beers to choose from and monthly seasonal ones. Bunn said: “The site was on radar a long time – we see it as a very good prospect in a town with a growing student population. The theatre next door is receiving a £4m investment.” The company is targeting gross turnover of £18,000 per week per site with a 40/60 food and drink split. Target average freehold acquisition cost is £800,000 to £1m per pub with an additional refurbishment cost of £250,000 per pub. The first Brewhouse & Kitchen will stock around bottled beers. The management team has collaborated with a vessel fabrications company to produce a bespoke microbrewery. The company states: “The equipment itself is not only aesthetically pleasing but is intended to be sited in a prominent position within the pub. The equipment has been designed to be cost efficient and easy to operate. The less attractive constituent parts such as rubber hoses have been replaced with polished steel, partly for visual impact but mainly for hygiene and ease of cleaning. These units are of a high specification and are capable of producing considerable volumes in order to serve demand.” Brewhouse & Kitchen sites offer a tasting table, where customers can enjoy ‘the ambience of ale and food from a matched menu or the spectacle of the brewery in front of their eyes - the philosophy of Brewhouse & Kitchen is to involve the customer’. The freehold of The White Swan was acquired for less than its asking price of £700,000 – it is one of five Wetherspoon pubs brought to market through agent Christie + Co last July.

Spirit – apprenticeship scheme 27% above national average: The latest figures released by the Data Service, an independently managed organisation established and funded by the Department for Business, Innovation and Skills and supported by the Skills Funding Agency, have shown Spirit Pub Company’s apprenticeship programme results are 27% higher than the national average for apprentices completing and passing their training by the agreed deadline, with overall success rates for the programme 14% above the national average. Spirit currently has over 550 apprentices either working towards or already graduated from level 2 and level 3 qualifications. The apprenticeship programme has demonstrated its value within Spirit, with retention rates of 89% and progression within the business at 49%. The aim is to have an apprentice in every one of its 791 managed pubs, in both operational and managerial positions.

Award-wining brewpub plans vintage motorbike museum: Licensee Vito Logozzi, who runs the award-winning Goodmanham Arms in East Yorkshire with his wife, Abbie, wants to add a vintage car and motorbike museum to his pub. Many of the items already adorn the pub, just north of Market Weighton, and now Logozzi wants to showcase the rest of his collection –appealing to bikers as well as the hikers from the nearby Yorkshire Wolds. The Logozzis added a microbrewery last summer and won the 2012 Village Pub Of The Year award from the Hull and East Yorkshire branch of Camra. Vito said: “I want to create a little 1920s-style garage with the cars and bikes in – then we will have a brewery, a country pub and a museum as well. It is my hobby but it could draw people in.”

Punch license goes multi-site: Tom Varney is to open his second site, The Thistle Tavern in Dunfermline on Saturday (2 March) after a major joint investment with owner Punch Taverns. Situated in Baldridegeburn, the pub was closed for three weeks whilst a refurbishment was carried out. Varney, who also runs The Denn Inn in Leven, said: “The pub needed an investment like this to maximise its potential as a family-friendly community pub and it looks fantastic.”

Worcester Whitehouse Hotel comes on the market for £4.95m: The 84-bedroom 4-Star hotel Worcester Whitehouse Hotel has come on the market for £4.95m. Net sales for the year ending 31 October 2012 are over £2.1 million. Gavin Wright, director of agent Christie + Co, said: “The Worcester Whitehouse Hotel presents a rare 4-Star hotel investment opportunity in this most charming part of the country.” The freehold to the Worcester Whitehouse Hotel is available at offers in excess of £4.95 million.

Greene King pub allowed to join Society of Independent Brewers: Greene King has given permission to its The Red Lion pub in Skipton to stock local ales. The pub has grown its cask ale sales over the past 18 months and house manager Gary Cummins has now persuaded his bosses to allow the pub to join the Society of Independent Brewers. The first two local breweries invited on to the bar will be the town’s own Copper Dragon and Ilkley Brewery. Cummins said: “Now when visitors ask which is a local brew we can finally be proud to say this one is brewed just down the road or over the hill. Our locals can look forward to sampling more from others in the area as the months go on and our biggest coup is to run our very own beer festival during Skipton Beer Festival.”

Urban & Country Leisure mulls options after multiple approaches: Urban and Country Leisure (UCL), the Lazy Cow operator headed by Ross Sanders, is mulling its options after receiving three approaches. The company is understood to have been approached by a managed operator, a brewer and a private fund – two of the approaches have centred on taking a stake in the company while the third is linked to setting up a new joint venture. Sanders is meeting with his corporate advisors next week to decide on the company’s next strategic step. UCL operates four Lazy Cow sites and three smaller pubs and the company is currently looking at two further Lazy Cow sites in Chester and Alderley Edge. The company opened two Lazy Cow sites - Stratford and Solihull - in the four weeks before Christmas. Sanders said: “They both traded at £45,000 per week through December.” UCL is looking to exit its two smaller country pubs. Negotiations are under way with a local buyer for The Plough in Cobham, Surrey, and it has received an offer for the Auctioneer in Banbury – both are Star Pubs and Bars sites. The company has indicated it plans to retain The Telegraph near Putney, which underwent a £100,000 refurbishment a few weeks ago. “It’s a free-of-tie privately owned lease that has produced phenomenal sales and profits for years,” said Sanders. The first Lazy Cow was opened in Warwick in October 2010 at the former Globe Hotel - the site has been averaging around £50,000-a-week in takings. The company opened a second TLC site in Salisbury in September 2011.

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