Mitchells & Butlers to launch new casual dining concept Chicken Society next month: Mitchells & Butlers is to launch a new fast-casual chicken and duck concept called Chicken Society in Finchley, north London, next month. Chief executive Phil Urban told analysts this morning (Tuesday, 22 November) that the company hoped to open at least one more new concept in its current financial year. Urban said the company did not expect every new concept to work but that having an “experimental ethos” is important. He added that he hoped that Chicken Society would be a branded solution for other underutilised Mitchells & Butlers sites and secondary locations. Urban reported that the company hoped to have another 48 Miller & Carter sites opened by the end of 2017 to hit 100 sites in total. Conversion to the premium steak brand costs between £600,000 and £700,000 but was producing a 40% return on investment in the case of the most recent 12 conversions. Meanwhile, the evolution of its Crown Carvery brand to a pizza and carvery brand called Stonehouse is producing a 25% return on investment – the company expects to grow the brand to 80 sites in 2017 from the 36 sites it had at its year-end in September this year. Urban said it was a prime example of how the company can "optimise assets". Urban also reported that Harvester, the brand most impacted by the growth in fast casual brands elsewhere in the market, is undergoing evolution to a new “Feel Good Dining” template that has a higher level of amenity. A total of 32 remodels have been completed with a further 50 planned for the current financial year – returns are around 25% so far. Urban told analysts that the company had tracked about 4% behind the rest of the market in like-for-like growth terms as measured by the Coffer Peach Tracker but in the last six months had seen a 3% increase and it is now tracking ahead of the market average performance. He added: “But we’ve only just started – we’re back to where we should have been all along.” He argued the current subdued levels of new restaurant market supply, which has seen a slowdown since the summer of 2015, provides “the best chance in recent years” for the company to take market share. Urban reported that circa 20% of company food and beverage procurement, about £100m of non-pound purchases, was exposed to increased costs because of the decrease in the value of the pound in the wake of the Brexit vote – and the company was working to mitigate these increased costs. In total, inflationary headwinds amounted to an “unprecedented” circa 3.5% on a cost base of £1.6bn. The company has begun a wide range of pricing trials, which, Urban said, he thought would become a much more common feature of the market. Urban said the company had now reduced customer complaint resolution to circa 48 hours from the previous average of 11 days as part of a focus on "guest care". As part of this, 54% of TripAdvisor reviews were now being responded to. He reported that early trials with Deliveroo had produced "strong incremental sales"and that he thought there was a delivery opportunity at 25% of company sites. The company has produced a total of five brand apps that have seen more than 400,000 downloads – a loyalty mechanic is to be launched early next year. Urban also reported that 4,500 of its staff are EU nationals, circa 13% of its total workforce and the company would not want to lose access to this important source of staff as part of Brexit. 

Tim Martin – two taxes are killing pubs: JD Wetherspoon founder Tim Martin has argued two taxes are killing pubs. He said: “Two taxes in particular are killing pubs – business rates and VAT. Their effects are far more harmful than the admittedly penal rates of excise duty (alcohol tax), since pubs’ main competitors, supermarkets, pay far less business rates and VAT than we do, whereas they pay the same excise duty. So, industry campaigns that prioritise excise duty help supermarkets as well as pubs. Information supplied by Dalton Philips, former chief executive of Morrisons, indicated that supermarkets pay about 2% of their sales as business rates. Based on an average selling price for a pint in a supermarket of £1.00, excluding VAT, supermarkets are paying business rates of about two pence per pint, and perhaps much less in some cases. Pubs, on the other hand, are assessed for business rates at about 12% of sales and the industry pays about half of that (6%) in cash tax. Assuming an average pub price for a pint of £3.60, including VAT, pubs pay about 18 pence per pint (6% of the ex VAT price of £3). Pub rating assessments are about to increase nationally by an average of about 15% from April 2017, which works out at about 3.6 pence per pint (15% of 18 pence = 3.6 pence). Adding on the same again for margin would result in about a seven pence increase per pint for pub customers. On the other hand, if supermarket business rates increase by the same 15%, they will pay less than a third of one pence in additional tax (15% of two pence = 0.3 pence). In contrast to pubs, an increase of a mere half a pence (0.5 pence) is likely to be enough to preserve supermarket margins. So, once again, as a result of taxes, the pub trade will be forced to raise prices by far more than supermarkets in order to maintain the margins that are essential for any business. Just to rub salt in the wound, at least one of the major supermarket chains has told investors that it is expecting minimal impact from the April business rates revaluation. A second factor will dramatically increase the cost difference between pubs and supermarkets in April – the proposed rise in the ‘living wage’. Judging by Sainsbury’s accounts, supermarket wages are about 10% of sales. So a pint selling at £1 excluding VAT, as above, will have a labour cost of about ten pence. A pint in a pub however, where wages are about 30% of sales, will have a labour cost of about 90 pence per pint (30% of the ex VAT cost of £3 = 90 pence). Assuming the April wage increases go through at 5%, the cost to supermarkets will be an extra half pence per pint (5% of 10 pence = 0.5 pence), whereas the cost to pubs will be 4.5 pence (5% of 90 pence = 4.5 pence). Adding on the same amount for margin and pubs will be increasing prices by nine pence or so to cover this cost. As in the above example, the increase in prices that supermarkets will need to preserve margins is minimal. In addition to these increases is the biggest sword of Damocles over the industry – the VAT disparity with supermarkets. Pubs pay 20% VAT on food sales, whereas supermarkets pay almost nothing – an identical sandwich bought in a pub attracts 20% tax in a pub and nothing in a supermarket. This allows supermarkets to sell food for less, and to subsidise the selling price of alcoholic drink sales – the pub industry is always competing with one arm tied behind its back. The playing field is anything but level. Pubs contribute to society in many ways, including their role as a huge employer and contributor to the exchequer. We understand that society and governments need taxes – and we also want and need to pay our staff well. However, if the pub industry is to survive and thrive in the future, equality of taxes with supermarkets is vital. Many thousands of pubs have closed in recent years and thousands more are shadows of their former selves. Unless there is a sensible rebalancing of the tax regime, so that pubs and supermarkets pay approximately the same tax per drink or meal, the price gap between pubs and supermarkets will continue to widen. This will have inevitable consequences for pubs – and for the country. The message from the industry needs to ring out loud and clear – lower excise duty is important, but tax equality is paramount. MPs, the government and the public want to help pubs, and they generally appreciate their vital role in the economy and society – but, unless the industry explains the maths, which most pub companies have signally failed to do, supermarkets will continue to be the beneficiaries of the tax fog in which our industry flounders.”