Propel Newsletter Archive Page

McDonald’s plans between 1,500 and 1,600 new restaurants in 2014 – UK reports high single-digit growth: McDonald’s plans between 1,500 and 1,600 new restaurants around the world in 2014, with capital expenditure of between $2.9 and $3bn. Around 1,000 existing locations will also be re-imaged. Expansion comes despite a 1.4% drop in like-for-like sales in the fourth quarter in the US. For the quarter, Europe generated like-for-like sales growth of 1% and increased operating income by 3% (flat in constant currencies), as strong performance in the UK, Russia and France was partially offset by Germany. The UK saw high single-digit sales growth over the quarter and attracted an extra 68 million customer visits over the year – UK sales was boosted by smoothies and frappes in the summer, which sold 21 million units. However, UK sales growth was slower than in 2012. UK chief executive Jill McDonald said: “When you generate growth of the volume we saw (in 2012) it’s always going to be hard to match, which is why we are beginning to open new restaurants.” Chief executive Don Thompson said: “As we begin 2014, global comparable sales for the month of January are expected to be relatively flat. While near-term challenges remain, we are intent on strengthening our brand to further differentiate McDonald’s and become an even bigger part of our customers’ lives.” McDonald’s reported $7.09 billion in fourth quarter revenue, a 2% increase over the same quarter in 2012 but under consensus predictions of $7.14 billion. Fourth quarter net income came in at $1.4 billion, flat compared to the same time in 2012 but resulting in earnings of $1.40 per share, a penny higher than what analysts were calling for. The company also said that it expects to return approximately $5 billion to its shareholders through dividends and share repurchases in 2014.

Industry News:

Starbucks’ Howard Schultz – December was a turning point in shopper habits: Starbucks chief executive Howard Schultz predicted that December 2013 would go down as the turning point in the way consumers shop. “People spent much more time on the web than ever before,” Schultz said. Overall US online sales in the period between 2 November and 23 December grew 10% compared with a year earlier, according to data firm comScore. US shopper traffic at brick and mortar stores fell 14.6% during the holiday season. Schultz pointed to the Americas region’s 4% traffic increase in the latest quarter as proof that Starbucks would successfully weather the change – in large part because online sellers can’t replicate the experience of having a croissant and coffee at one of its shops. World-wide like-for-like traffic was up 4% and Europe, the Middle East and Africa saw a 50% jump in operating income. Schultz said the first-quarter results demonstrate that a “unique combination of physical and digital assets positions us as one of the very few consumer brands with a national and global footprint to benefit from the seismic shift underway”.

Tim Martin – industry VAT campaign is gaining momentum: JD Wetherspoon founder Tim Martin has reported that the campaign for a VAT reduction in the hospitality sector has gained momentum after a string of big industry names gave it their backing. He said that a range of big backers had joined the Jacques Borel VAT Club campaign in the past few weeks, giving it extra momentum ahead of the next election. New supporters include Matthew Clark, the coffee brand Lavazza, Magners cider producer C&C, and Villa Maria wine. Martin told The Guardian: “About a dozen have joined in the last six to eight weeks. There’s a realisation that the tax system for pubs is unfair and overly burdensome and is contributing to their closure. We’ve reached the end of the beginning. The first step was to galvanise publicans and suppliers behind the campaign. Over the next 12 months we will be trying to persuade politicians that if you want pubs, an active high street and jobs, then you need change.”

Star Pubs & Bars launches 136 business rates appeals: Star Pubs & Bars is lodging business rates appeals for 136 of the pubs in its 1,300 strong estate in the first quarter of 2014 on the basis of an external material change of circumstances. Appeals will be made by chartered surveyors Gerald Eve who together with Star Pubs & Bars undertake a biannual review of the company’s pubs to see if lessees could be eligible for business rates cuts. Star Pubs & Bars has made 355 such appeals since 2010 with a success rate of over 40%, generating average savings of nearly £2,500 a year for lessees. The company has a further 196 appeals outstanding, a quarter of which have gone past their target date for review by valuation officers. “While we welcome the changes announced by the Chancellor to business rates last year including the commitment to eliminate the backlog in outstanding reviews, we believe a root and branch reform of the system is needed,” said Chris Jowsey, Star Pubs & Bars trading director. “Current rateable values are based on how pubs were performing in the boom time of April 2008 before the downturn.”

Company News:

The Chinese Buffet to open eighth site in Bradford – 18 more planned: The fast-growing Chinese restaurant chain The Chinese Buffet is set to open what will be the first of three new outlets in 2014. The chain, which opened its first 11,000 sq ft restaurant in Bolton in 2006 and has opened six more since 2010 in Wigan, Wakefield, Preston, Wrexham, Halifax and St Helens, has agreed to take a site in the Centenary Square development in Bradford. It is now fitting out the 6,000 sq ft unit, which will accommodate 180 diners and is due to open during March. Other occupiers at the development include Nando’s, Starbucks, Forsters Bistro and JD Wetherspoon. Richard Baker of the property company Rushbond said: “We considered several options from a number of potential tenants, but we’re confident that The Chinese Buffet, which has enjoyed plenty of success in other towns and cities throughout the region, has a great formula that is hugely successful and will complement the other businesses and organisations at Centenary Square.” The Chinese Buffet, led by managing director Peter Wu, has plans for more than 18 new restaurants across the north west within the next five years, including an outlet in Blackpool later this year, with a national franchise in place by 2015. Its current outlets are all served from a centralised kitchen facility in Wigan.

Mitchells & Butlers changes mind on Harvester opening: Mitchells & Butlers has withdrawn from a plan to open a Harvester in the new Dolphin Square development in Weston-super-Mare, Somerset after delays and a change in acquisitions policy. Investor McLaren Life has lined up a replacement after Harvester decided it no longer wanted to be a part of Dolphin Square. Harvester signed up to the £45m scheme almost three years ago, when McLaren Life expected the shops and restaurants to be completed by spring 2013. Delays mean building work has not started on the leisure sector. Harvester’s spokesman said: “After our initial interest, and then the subsequent delays in the project process, our acquisitions focus has changed and therefore we are no longer planning a Harvester at Dolphin Square.” McLaren Life said: “Harvester decided it wasn’t going to be a part of the scheme but we are very, very close to finalising an agreement for a like-to-like replacement.”

RBS receives £3.19m of £4.3m owed from Powder Train collapse: Administrator Begbies Traynor has reported that Royal Bank of Scotland has been paid £3.19m of the £4.3m it was owed in the wake of the collapse of Powder Train, the gastro-pub operator with links to Marco Pierre White. Of the company’s five properties, four have been sold for £3.61m. The final property, the Anchor, Warminster, is still being traded while awaiting a sale, although the proceeds are thought not likely to cover the bank debt. There will be no funds to enable a distribution to the second charge holder, Jack Bowyer. Powder Train collapse into administration in February last year. A small trading profit has been achieved at the Anchor after costs.

CG reports like-for-likes up 7.5% in December – plans four more sites in 2014: CG Restaurants & Bars has unveiled record December trading figures, with like-for-like sales up some 24% at its flagship Dirty Martini in Bishopsgate, London and a 7.5% increase in like-for-like sales across the group. Pre-booked business increased 29% on the previous year, and made up 63% of sales in the bars across the Christmas period. Investment in marketing and sales resources, coupled with a continued focus on digital and social channels were key contributors to the pre-booked results and are expected to fuel further substantial growth in 2014. Dirty Martini launched the Bishopsgate bar, its third, in Q4 and with trading in December 41% up on budget, the venue has beaten all hopes. The group plans four more units in London in 2014. CG chief executive Scott Matthews said: “December trading surpassed all expectations and capped a watershed year for CG. We managed to combine a focus on enhancing existing units with a commitment to expansion throughout 2013, providing a fantastic platform for us to continue to expand in 2014 and beyond.” Matthews confirmed that negotiations are currently under way on two new Dirty Martini sites, scheduled to open in the first half of 2014.

Douglas Jack – we expect strong trading at Fuller’s: Numis Securities leisure analyst Douglas Jack has forecast strong trading when the London brewer and pub operator Fuller Smith & Turner reports its third quarter results next Thursday. He has an ‘Add’ recommendation on its shares with a price target of 1050p. Jack said: “Managed like-for-like sales (up 7.9% in H1) should have remained strong and ahead of our 5.5% full-year forecast assumption, with tenanted and brewing broadly in line. We expect to hold our forecasts, although the risk to numbers remains firmly on the upside. Overall, we believe forecasts have further upgrade risk, although the greatest potential upside would derive from faster expansion, which the company has brand, management and financial firepower to exploit. The company’s low gearing, high asset quality and leading track record in the sub-sector justifies the premium rating in our view.”

The Stable to open sixth site in Newquay: The gourmet pizza and cider brand The Stable is to open a site in Newquay, Cornwall, investing £350,000 in the former surf shop Quiksilver on the top floor of the Fistral beach complex. The new site will create 60 jobs and open in April. The brand already has sites in Bristol, Bath, Bridport, Weymouth, and Poole. Meanwhile, former London financier Andy Jenkins is spending more than £1m to create an American-style barbecue smokehouse called The Bullpit at the old Level 3 club on Beach Road in Newquay. News of the two openings comes as work begins on the restaurant hub at the Old Bus Station site, where Prezzo and Frankie & Benny’s will join a third brand, rumoured to be the chicken chain Nando’s.

Gastro-pub entrepreneur plans US-style barbecue in Bracknell: Carlos Maidana, whose PS The Pub Company runs gastro-pubs in Oxfordshire and Buckinghamshire, is planning to open an American-style barbecue restaurant called Blue’s Smokehouse in a currently closed pub in Bracknell, Bucks. Plans have been submitted to Bracknell Forest Council for changes to the listed Red Lion in Bracknell High Street, and Maidana said he hoped to have the restaurant open by Easter. He said: “Barbecue is something which hasn’t really taken off yet, but it’s such a fantastic way of eating. The whole family can sit around and really enjoy eating it – you can participate and all try a little bit of something. It’s got to be really authentic – we have got three new smokers on their way from the States which should be arriving any day now. Smoking is about taking big pieces of meat and cooking them slowly for anything from 18 to 24 hours. We will have brisket, pulled pork, beef and pork ribs and the most slow, smoked, juicy chicken. It’ll all be done properly overnight and I hope there will be lots of sticky fingers.” Maidana’s three other outlets are a pair in Oxfordshire, The Bull & Butcher, Turville and The Hart of Harwell, Didcot, and The Grouse and Ale in Lane End, Bucks.

Manchester venue will mix clubbing and culture: A new Manchester nightclub, based in a former abattoir, will mix clubbing with culture. The former slaughterhouse in Bengal Street is being transformed into a nightclub and arts space by the DJ and promoter Vince Vega and his business partner Simon Bullows. Vega said: “It won’t be your average nightclub experience – it’s going to be used for a multitude of things. There are no rules as long as it’s within the licence of the law. We’ve got a great line-up of DJs, a good mix of bands and all sorts of people coming in to us to do all sorts of obscure events.” The downstairs area will be used for visual arts and film screenings, while upstairs, artwork will be hung from meat hooks, in a nod to the building’s past.

Falmouth nightclub closes four months after opening: The Vanilla nightclub on the Moor in Falmouth, Cornwall has closed only four months after opening its doors to the public. A notice pinned on the door, dated January 15, states that the landlord, Greendale Leisure of Exeter, had re-entered the property and forfeited the lease to Penswood Inns, which also runs Vanilla in Truro. Greendale Leisure was previously the operator of the club when it was called Remedies, and leased the premises to Graeme Scrimgeour of Penswood Inns in June 2013, allowing him to open Vanilla in September. Scrimgeour said: “It had become clear in the last few weeks that for a number of reasons, the style of operation that we operate in Truro does not fit with Falmouth.”

Douglas Jack moves M&B price target up 25p: Numis Securities’ leisure analyst, Douglas Jack, has added 25p to his 500p target for Mitchells & Butlers’ share price ahead of next Thursday’s first-quarter trading update. He said: “We expect like-for-like trading to have picked up over the last two months, partly due to an improved sector backdrop. However, following recent strength, we are moving our recommendation to ‘add’ from ‘buy’. Our revised target price (525p, up from 500p) is consistent with our 10.7x EV/Ebitdar target valuation for the sub-sector, supported by M&B’s estate quality and growth potential. We expect to hold our 2014E forecasts, which assume 1% like-for-like sales and flat ebit margins. Over the medium term, we believe there is good scope for the shares to recover through like-for-like sales picking up, expansion accelerating, dividends resuming (this autumn) and the £0.6bn pension deficit falling.”

Vapiano set to start work on £2.1m third restaurant: Vapiano, the Italian fresh casual dining restaurant group, is to start building work on its new restaurant on Monday (27 January). The restaurant, which is being developed on the site of a former nightclub and restaurant in Wardour Street, Soho, central London, is set to open in June. Vapiano is spending £2.1m on the new restaurant, which will have a customer area of 7,000 square feet and room for up to 250 diners. The restaurant will be managed by Alex Fisher, who has been general manager of Vapiano in Great Portland Street, central London since 2010. The company’s existing restaurants in London are at Great Portland Street and Bankside. Vapiano’s managing director, Phil Sermon, said: “We are looking forward to developing a fantastic new restaurant in the heart of Soho. This is just the start of our expansion and highlights our intent to open many more Vapiano restaurants in prime positions across London and the UK.” Vapiano serves fresh pasta, pizza and salad, all prepared and made in house to order by chefs interacting with customers.

Heron & Brearley to close two Isle of Man pubs: Heron & Brearley is to close two pubs on the Isle of Man, The Ship, in Castletown, and the Britannia, in Ramsey, from February 1. Estates director Steven Taylor said: “It is always sad to see any pub closed. Compared to the UK, where pub closures are currently up 50% to 26 a week, the island has proven quite resilient. However, trading for these pubs has been tough for some time and so the difficult decision has been made to close them. Across the British Isles, people are going out to drink less often. As such, our focus is on listening to our customers and, where our pubs enjoy a loyal following, we are making investments in both cost-effective refurbishments and improvements to our offer.”

Young’s –’Bull and Gate is safe with us’: London pub retailer Young’s has insisted that The Bull and Gate in Kentish Town, acquired last year, is to receive a sympathetic refurbishment, after a vociferous local campaign seeking to protect its heritage features. A spokesman for Young’s said the company was spending a “significant” sum on upgrading the pub and would do what it could to keep as many of the original features while revamping it. The spokesman added: “We have been working alongside local heritage planners in order to ensure the significant investment we are making in The Bull and Gate pub is done in a way which safeguards its authentic Victorian charm. As a result, the work we are planning will be carried out in a sympathetic manner and with the goal of retaining as many of the original features as possible, making The Bull and Gate one of north London’s most iconic pubs once again. Young’s has been a proud guardian of London’s pub heritage for nearly 200 years and we look forward to welcoming customers through the doors of the rejuvenated Bull and Gate as soon as it is back up and running.”

Douglas Jack – Wetherspoon results familiar story of like-for-like sales ahead and margins behind: Numis Securities’ leisure analyst, Douglas Jack, has issued an ‘Add’ note on JD Wetherspoon with a target price of 925p after yesterday’s trading update. He said: “Year-to-date like-for-like sales have strengthened to 5.2% and H1 margins have fallen to 8.1% (from 8.3%) partly due to increased IT, training and additional operating personnel ahead of a step-up in expansion. Although we are increasing our like-for-like sales assumption to 4.0% (from 3.0%), we are cutting our 2014E PBT forecast by 4% to reflect the fall in margins and slightly higher interest costs. We are holding our 2015E and 2016E forecasts. 18 new pubs opened in H1, with 40-50 expected to open over the full year. Of these, 65% of sites are likely to be freehold (versus a 44% company average). As a consequence, net debt is likely to increase by £40m-£50m this year, but the company can look forward to maturing swaps reducing interest costs by £12.5m between 2015-18E. £550m of new forward-starting interest-rate swap agreements (2018-2023) have been entered into at a fixed rate of circa 3.80%. Our 925p target price, equivalent to 16x p/e on next year’s earnings (unchanged), reflects stronger growth prospects (faster expansion and falling swap costs).” Simon French, of Panmure Gordon, who has a ‘Buy’ recommendation and a target price of 875p, said: “We think the group will be a beneficiary of the recent increase to £100 jackpots on Category C gaming machines found in pubs.”

Agent sets first-round deadline for 4-star hotel pair: Unprecedented demand for two 4-star hotels, one in London, the other in Bromsgrove, brought to market by agent Christie + Co earlier this year has led to the setting of a first-round offer date. Christie + Co was appointed to market the Crowne Plaza, Ealing, London and the Holiday Inn, Bromsgrove on the instructions of the administrators for Pedersen (Ealing) Ltd and Pederson (Bromsgrove) Ltd. Offers for the 131-bedroom freehold Crowne Plaza and the 110-room Holiday Inn should be made by 12 noon on Friday February 14 in writing to david.creamore@christie.com or by recorded delivery to David Creamore, Christie + Co, Whitefriars House, 6 Carmelite Street, London EC4Y 0BS. Christie + Co has placed an asking price of £16.5m on the Crowne Plaza, Ealing and £3.95m on the Holiday Inn, Bromsgrove.

New coffee concept launched in Sheffield: Nick Pears, who formerly ran the mobile coffee wagon Matore, has partnered Matt Cottrill to launch a new coffee concept, Steam Yard Coffee Co, in Division Street, Sheffield. Pears said: “I’m really into custom motor-cycles, denim, and blues music [and] I wanted to bring that kind of laid-back vibe to Sheffield, while still concentrating on quality coffee.” Steam Yard has installed a La Marzocco coffee machine along with two grinders: one stocked with the company’s own triple-origin blend, roasted by Pollards, and the other with a guest coffee. Pears said: “It’s really caring about what goes in the cup that makes us different. The coffee depends on the origins, how the beans are roasted – and the barista.”

Greene King offers licensees exclusive deal on Sky Sports: Greene King has offered its estate an exclusive deal to reduce what they pay for their Sky Sports TV package, saving licensees thousands of pounds. Hundreds of licensees have benefited from the offer, which was open to everyone in Greene King’s tenanted and leased division, including those currently signed up to Sky Sports, as well as new customers. Simon Longbottom, managing director of Greene King Pub Partners, said: “We all know that sport and pubs often go hand-in-hand, so it was very important for us to help our licensees access an affordable and comprehensive Sky Sports package. It is another big year for sport, and football fans will want to go to their favourite sports pub to watch the World Cup.” The Greene King offer is part of a drive to help licensees make more of televised sports and in turn boost trade. As a result of the offer, many of the new Sky customers have joined the Greene King Sports Club, which offers specific marketing support and advice to help licensees maximise sport in their pub.

Java & Co closes Maidenhead site ahead of Starbucks arrival: The three-strong coffee shop brand Java & Co is closing its site in Maidenhead, Berkshire ahead of the arrival of Starbucks. Owner Andrew Bowen said the lease was expiring for the Java & Co cafe in the High Street, which has been trading for two years, and he wants to spend more time focusing on his two other branches, in Abingdon and Oxford. Bowen ran a franchised Coffee Republic in the same unit in Maidenhead for four years before setting up Java & Co, which also serves its own coffee blend. He said: “People do prefer independents. Running any independent business is about appealing to the customers to make things new and exciting for them, that is where the chains struggle.” Work on Starbucks, to go into the empty Cafe Franco unit, will begin on Monday and is due to be complete by the beginning of March.

D&D Restaurants unveils details of US menu and head chef at Avenue in St James’s restaurant: D&D Restaurants has unveiled details of the “New American” cuisine created by head chef Michael Blizzard, previously at Bar Boulud at the Mandarin Oriental London and the Dirty Habit in Hollingbourne, Kent, at its Avenue restaurant in St James’s, central London, which is re-launched next month. Avenue will stock an extensive range of American wines and its bar will feature both cocktails and US and UK craft beers. The menu covers “New American” dishes such as corn crab (fried soft shell crab with avocado, arugula and chipotle mayo); lobster mac (macaroni with chopped lobster and sauce); clam chowder (served in sourdough with littleneck clams and paper bag “crumbled” bay crackers); and pig “loaf” (winter truffle with caraway and smoked tomato sauce). There will also be a selection of sandwiches and burgers on offer. Sharing dishes for two from the Josper Grill will include beef cuts such as KC suckling pig butt (served with spiced bacon, pecan cabbage, turnip and sweet potato bake). Desserts will include cookies and ice cream with malted chocolate sauce; New York cheesecake with English blackcurrants; and donut holes, served with cinnamon sugar, Hershey melt and bourbon custard.

Steelite management take control of the business: Catering manufacturer Steelite International’s management team has taken 100% ownership of the business after securing a new debt facility. The package from debt financing firm HIG WhiteHorse and Lloyds Banking Group will support a wider strategy to strengthen and grow the business. It aims to capitalise on Steelite’s acquisition of Royal Crown Derby in December 2012, as well as funding the expansion of its Stoke manufacturing facilities, creating 250 jobs. Nick Dodd, head of KPMG’s regional debt advisory practice and lead adviser on the transaction, said: “Steelite is a great example of a successful UK manufacturer with strong export credentials, run by a very high quality management team. This is an excellent deal for the company, enabling it to expand its production facilities and deliver its strategic growth plans both in the UK and overseas.”

Carlsberg launches Tapster’s cask ale range: Carlsberg UK has launched its 2014 Tapster’s range of cask ales. The Tapster’s “permanent” range consists of 47 ales available nationwide and year-round, supported by regular promotional activity and in-outlet point of sale mechanics such as try-before-they-buy. Brewers featured in the 2014 range include Tetley’s, Adnams, Camerons, Greene King, Hook Norton, Marston’s, Robinsons, St Austell and Thwaites. The Tapster’s “Extra Choice” range comprises more than 100 additional lesser-known ales, available on monthly rotation, often seasonal and picked from breweries across the UK, available through Carlsberg UK’s monthly deals brochure. Each of Carlsberg’s 12 distribution depots holds Cask Marque accreditation.

Burger King hires Weber Shandwick for UK consumer brief: Burger King has appointed Weber Shandwick to handle its UK and Ireland consumer PR after Cohn & Wolfe declined to fight to keep the work in the wake of personnel changes at the chain. Weber was awarded the retained business after first triumphing in a competitive pitch for a piece of project work. Emma Thompson, MD of consumer marketing at Weber Shandwick, said it has been working on “a significant project for the UK market” and has since been appointed as agency of record. However, its remit does not include the public affairs work awarded to Cohn & Wolfe two years ago, which was the first time it had gone to a UK agency.

Busaba Eathai plans expansion into the regions: Busaba Eathai, the Thai chain founded by Alan Yau, is looking at sites in Manchester, Leeds, Liverpool and Bristol for openings in 2015. Development director Joel Falconer said: “Busaba achieved like-for-like sales growth of 5.8% in the fourth quarter of 2013, with several of our more mature sites continuing to show double-digit growth on the previous year. As the performance of the Busaba brand continues to exceed our expectations, we feel that the Naamyaa site at Angel would better serve our business as a Busaba Eathai. As a result we are now in the process of remodelling this site and expect to launch Busaba Eathai in Angel later in the year. In the meantime we will be opening a Busaba Eathai on the riverside in Kingston-upon-Thames early in the summer, with a further site in Shoreditch to follow shortly afterwards.”

TCG launches new dishes on King’s Feast menu: Managed pub and bar group TCG is updating its successful ‘big value’ King’s Feast menu later this month, with the addition of new dishes that reflect the latest casual dining trends. These include burritos, hot dogs and ribs, along with new burger varieties. The new dishes are showcased in a refreshed King’s Feast promotional calendar: Monday is a Chicken Fest, Tuesday is now Mexican Night, offering a choice of burritos or chilli, Wednesday offers a hot dog or burger and Thursday is Ribs Night. On each night, selected main courses are packaged with a related drink at a promotional price, or are offered with a free drink or dessert. The new events complement established successful promotions such as Fish & Chip Fryday. The King’s Feast promotions have been integral to the success of the concept, which was launched in 2011 to build food trade in wet-led community pubs. Nine sites now trade under the King’s Feast banner. Nigel Wright, TCG chief operating officer, said: “At all King’s Feast pubs, food revenue has grown from below 10% of total sales to an average of 25% post-conversion to the format, alongside an uplift in wet sales as the pubs expand their customer base within the local community.”

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