Propel Newsletter Archive Page

Black Sheep Coffee to ‘ramp up’ its overseas expansion in 2025, US stores generating higher sales than UK average: Black Sheep Coffee has said it is set to “ramp up” its expansion in the US and GCC in 2025, and that its US stores are generating higher sales than its UK average. The speciality coffee shop operator, which is approaching 100 UK locations, opened its first two US sites last year as well as launching its first four stories in the UAE. Co-founder Gabriel Shohet previously told Propel that the company is targeting 250 shops in the US by the end of 2027, and it plans to open the same amount in the Middle East over a 15-year agreement with Al Farran Investment. In its annual letter to shareholders, seen by Propel, the company said it is “ramping up in international markets”. It said: “US Phase II: The Sun Belt In the US, we will begin our phase II outreach to start on boarding franchise partners beyond Texas and Florida and expect to sign a number of territories throughout the US Sun Belt. GCC Phase II: UAE and Beyond. We are excited to support our existing partner, Al Farran Group, with the next phase of their expansion in the region with a target of an additional 11 shops in the GCC for 2025, bringing the total number of UAE shops to 15. In addition, Mohamad and his team have already started scouting the real estate market in Riyadh, so stay on the lookout for some fresh updates from the Kingdom of Saudi Arabia. In the US, we signed several multi-unit franchise agreements in both of our initial markets of Texas and Florida, with multiple additional partners currently in the process of joining the network. Despite still being in the early phases of sales ramp-up, our new stores in the US are already generating higher sales than our UK average. Based on the most recent trading quarter, all markets now achieve annualised sales per store exceeding $1m per year.” Another new territory Black Sheep Coffee has entered recently is Northern Ireland, with a launch in Belfast’s Donegal Square East last month. “Our first site in Northern Ireland opened in Belfast with an impressive first full week of trading at more than twice the forecasted sales,” the company said. “In 2025, we intend to continue targeting multi-site partnerships that include exclusive rights for specific territories.” In order to keep attracting franchisees said it will this year consolidate its distribution network and transition to a new logistics partner for its UK-wide fresh and frozen supply chain, replacing two existing distributors. It said this will allow franchisees to further invest in new shop openings. “Our goal is to ensure franchisees can clear 18% of Ebitda net of royalties and marketing fees to consistently beat an average payback period of 30 months – to make it crystal clear to franchise entrepreneurs across the UK that Black Sheep is the only game in town when it comes to picking a franchise concept to roll out,” it said. Airports have been another good growth area, with the company taking over a former Starbucks unit at Edinburgh airport at the end of last year to add to its existing airport footprint at Heathrow, Luton Airport and Gatwick (North and South Terminals). “Not only are these locations consistently some of our strongest performing shops, but they also showcase the Black Sheep Coffee brand to the millions of travellers passing through these busy airports each year,” the company said. “We are pleased to report that all airport locations have been profitable since their first month of trading.” It comes following a strong year of growth for Black Sheep Coffee. The company said since 1 January 2024, it has increased run-rate system sales by 74% from $62 to $108m and welcomed 19 new franchise partners into its network. It kicked off a new franchise territory growth model and has signed seven territory exclusivity agreements for a commitment to open a minimum of 63 shops. It saw its largest sustained jump in same store transaction volume to date, keeping an average rate of 19% throughout the second half of 2024. The company increased its UK quarterly average unit volume by 20% from £174,000 to £208,000 and increased weekly order volumes by 119% from 115,000 to 251,000. It said: “We delivered a new all-time record in weekly system sales, smashing through the $2m mark. Christmas and new year, which have historically been slow, saw the strongest trading since we started the company. We also achieved double-digit same store sales growth for five consecutive months at the end of 2024, significantly outperforming the wider UK hospitality sector, where same store sales growth sat in low single digits throughout the year. Our same store sales growth was underpinned by same store transactions growth of 22% in the final quarter of the year, which was driven by several successful new product launches and seasonal ranges.” In terms of franchising, the company said sales are up by 38% from £7.2m (Q2 2024) to £9.9m (Q4 2024). It signed 16 unit franchisee agreements (UFA) in 2024 and its franchise shop number increased from 47 at the end of the first half to 55 at the end of the second half. Black Sheep Coffee features in the UK Food & Beverage Franchisor Database, which features a total of 330 companies, and which is exclusive to Premium Club subscribers. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email kai.kirkman@propelinfo.com to upgrade your subscription.

Premium Club subscribers to receive new searchable and segmented New Openings Database tomorrow: The next Propel New Openings Database will be sent to Premium Club subscribers tomorrow (Friday, 7 March), at noon. The database will show the details of 169 site openings, including which company has opened a site or its plans to open one in the future. The database will have details on what type of site it is and its location, and there will also be a website link to the businesses. The database is published on a monthly basis and Premium Club subscribers will also receive a 10,264-word report on the 146 new additions. The database is segmented into seven categories – cafe bakery, casual dining, experiential leisure, fine dining, hotels, pubs and bars, and quick service restaurants – making it even easier for users to search. The database includes new openings in the experiential leisure sector such as Race Across the World, opening in London, Australian gym franchise Jetts Fitness, opening in Leeds, and King Pins, the state-of-the-art bowling and leisure complex opening in Manchester. Premium Club subscribers also receive access to five other databases: the Turnover & Profits Blue Book, the Multi-Site Database, the UK Food and Beverage Franchisor Database, the UK Food and Beverage Franchisee Databaseand the Who’s Who of UK Hospitality. All Premium Club subscribers will be offered a 20% discount on tickets to Propel paid-for events including Excellence in Pub Retail (May 2025) and discounts on specialist sector reports such as the International Brands report. Operators that are Premium Club subscribers are also able to send up to four members of staff to each of our four Multi-Club Conferences for free. Premium Club subscribers receive their daily Propel Info newsletter 11 hours earlier than standard subscribers, at 7pm the evening before. They also receive videos of presentations at eight Propel conference events two weeks after they are held. This represents around 100 videos of industry insight over the course of the year. Premium Club subscribers will be sent a dedicated monthly newsletter that will highlight key updates in the sector and direct subscribers to all the vital content their membership offers. Premium Club subscribers also receive exclusive opinion columns every Friday at 5pm, which include the thoughts of Propel group editor Mark Wingett and a host of industry leaders from across the sector. A Premium Club subscription costs an annual sum of £495 plus VAT for operators and £595 plus VAT for suppliers. Companies can now have an unlimited number of people receive access to Premium Club for a year for £995 plus VAT – whether they are an operator or supplier. Email kai.kirkman@propelinfo.com today to sign up.

Dalata exploring options including possible sale of the group, reports record revenue: Irish hotel group Dalata has said it is “undertaking a strategic review to explore options available to optimise capital opportunities for the group and to enhance value for shareholders, including but not limited to a potential sale of the group”. Dalata has appointed Rothschild & Co as financial adviser in connection with the strategic review. Established in 2007, Dalata has a portfolio of 55 hotels including 30 owned hotels, which are valued at €1.7bn, including assets under construction, 73% of which relates to hotels in Dublin and London. It also operates 22 leased hotels, the majority of which are on long term institutional lease agreements, with a weighted average lease length of 29 years and rent cover of 1.7x. Dalata also operates three managed hotels. The company said: “The board believes that Dalata offers a highly attractive investment proposition: a leading hotel platform and a dynamic experienced management team, a modern, well-invested portfolio of hotel properties in central locations, two well-established growing brands and strong cashflow generation, with a clear strategy as outlined in its 2030 vision to grow the portfolio. However, the board also recognises that the group faces certain structural challenges, including its relatively small scale in a public market context, its relatively concentrated shareholder register, a constrained capital base in the context of its growth ambition and a share price that continues to trade at levels which the board does not believe reflects the asset base, fundamentals, performance, cash generation, and exciting growth prospects of Dalata. Accordingly, the board has appointed Rothschild & Co as its financial adviser to assist with a review of its strategic options to optimise capital opportunities for the group and to enhance value for its shareholders. As a result of these deliberations the board has determined that it would be in the best interests of the group and shareholders as a whole that it formalise these assessments into the strategic review, which will take into account the views of shareholders. As part of the strategic review, the board will consider options available to optimise capital opportunities for the group and to enhance value for shareholders, including, but not limited to, continuing the group’s existing strategy, further actions to improve shareholder value, returning further capital to shareholders, selling the entire issued share capital of the group. The group confirms it is not in discussions with, or in receipt of an approach from, any potential offeror at the time of this announcement.” Dalata chairman John Hennessy said: “The Board is excited about the 2030 vision that was outlined by our senior management team at our Capital Markets Day in October 2024. However, we are unanimous in the view that the key to achieving that vision is the availability of capital; and that the share price does not reflect the underlying value of the company. We believe that now is the right time to undertake a rigorous and formal strategic review, which will consider options to increase access to capital and also enhance shareholder value.” Dalata chief executive Dermot Crowley added: “Our 2030 vision strategy sets an exciting goal to have 21,000 rooms either operational or under construction by 2030. We have an excellent management platform in place to deliver this strategy but access to capital is essential to achieve our vision. A thorough strategic review will enable us to assess available options to increase our access to capital and enhance shareholder value. During the process we will remain focused on the underlying business – continuing to take care of our people and continuing to meet the expectations of our customers. We have exciting initiatives in place to enhance further our revenues and deliver further productivity – our teams will remain focused on delivering on the objectives that we have set ourselves for 2025.” It comes as Dalata reported record revenue for 2024 of €652.2m (up from €607.7 in 2023) and adjusted Ebitda of €234.5m (up from €223.1m in 2023). Its pore-tax profit fell to €78.7m from €90.2m. Revenue available per room grew from €114.66 to €115.78, while average room rate was up from €142.85 to €143.98 and occupancy increased from 80.3% to 80.4%. The company said its strong performance paves the way to its aim of having 21,000 rooms by 2030. The company added: “The Dalata ambition is to become the leading hotel operator in the four-star segment of all target cities in Ireland and Regional UK with a growing presence in London and Continental Europe. The 2030 vision to reach 21,000 rooms by 2030 (+80%) will be achieved through our disciplined investment strategy, combining acquisitions of existing hotels and development of new hotels and a balanced mix of leasehold and freehold ownership.”

UK business cutting jobs amid ‘loss of momentum’ from autumn budget: Service businesses have shed workers for five months in a row, a closely watched survey showed, amid warnings of a “loss of growth momentum” since the autumn budget. According to the final S&P Global purchasing managers’ index (PMI) for February, service companies have cut employment for the longest stretch since early 2011, excluding the covid-19 pandemic. The drop in employment and hiring intentions has in part been triggered by the chancellor’s £25bi rise in employers’ national insurance contributions, announced in October, reports The Times. Tim Moore, economics director at S&P Global Market Intelligence, said: “There has been a clear loss of growth momentum since last autumn. Less upbeat business expectations and another month of sharply rising input prices led to net job shedding across the service economy in February.” However, some analysts cautioned against taking the PMI reading at face value. Official estimates of the jobs market from the Office for National Statistics show that unemployment is historically low at 4.4%.The chancellor is eyeing up cuts to public spending in the spring statement on March 26 to comply with her fiscal rules. The Office for Budget Responsibility, the UK’s official forecaster, is expected to warn that her £9.9b margin of error has all but vanished since the October budget due to higher government bond yields and weaker economic growth. The final services PMI reading climbed to 51 in February from 50.8 the previous month, above the 50-point mark that separates growth from contraction. However, that was a slight downgrade from the earlier flash estimate. The composite PMI, which tracks activity across the UK private sector, slipped to 50.5 in February from 50.6 the previous month.Thomas Pugh, an economist at the consultancy RSM UK, said that the weak PMI reading “suggests the economy continued to flatline in the first quarter” but added that the survey was probably underestimating the strength of economic activity. Analysts also said that President Trump’s tariffs had weighed on UK economic activity. Rob Wood, chief UK economist at the consultancy Pantheon Macroeconomics, said: “We continue to think the PMI exaggerates economic weakness. It overreacts to uncertainty and asks only how many firms are cutting output or employment, rather than by how much.”

Interest rate cuts might not be ‘rapid’ due to ‘sticky’ inflation, Bank of England chiefs warn, as they highlight ‘substantial’ risks from Trump’s trade war: Bank of England chiefs have warned of a dual threat from sticky inflation and Donald Trump's trade war, reports The Daily Mail. Giving evidence to MPs, the Bank’s chief economist Huw Pill warned interest rates might not fall as fast as hopes because there is still “more work to do” to tackle price pressures. Meanwhile, governor Andrew Bailey told the Treasury Select Committee there is a “major shift going on in the US” which could mean less money in people's pockets. “The risks to the UK economy and the world economy are substantial,” he said. Bailey said that many of the upward forces on inflation were either international or temporary. “I think the underlying path is down...my own personal view is the demand weakness view might be getting a bit stronger versus last year,” he said. Dr Pill said: “There is more work to do to squeeze those domestic underlying inflation out of the system. That entails maintaining some restrictiveness in the monetary policy stance. That points against both larger and more rapid cuts in bank rates at this point.” Dr Pill suggested longer-term shocks from surging energy prices had not completely played out, and it was not yet time to “sound the all clear”. He said: “I personally do not yet have full confidence we have squeezed all that out.” The Bank voted by 7-2 to reduce interest rates from 4.75 per cent to 4.5 per cent last month but expects inflation will increase “materially” in the first half of this year – with rising energy and water costs, and the national insurance rise blamed. In a dramatic shift, growth forecasts were halved for this year from 1.5% to 0.75%, although activity is due to pick up later. In a letter to the committee, Bailey said: “Bank staff estimate that the change works to increase firms’ employment costs by just short of 2%. Firms may choose to absorb this increase in costs within their profit margins, pass on the cost to consumers through higher prices, or mitigate the impact by reducing nominal wages or employment.” Bailey also said there was a “major shift going on in the US” which the Bank would have to “take very seriously”, after he was quizzed about the impact of potential changes to trade policy and new tariffs. “The risks to the UK economy and the world economy are substantial,” he stressed. When asked if US trade policy could lead to people having less money in their pockets, he answered: “Yes, that’s right. We serve the people, and we have to take it very seriously.”