Managed branded pubs trading well
Established managed, branded pub and restaurant chains are holding off stiff competition from supermarkets and tightening consumer spending with sales increasing in May.
The Peach Factory survey of 12 major chains, including Mitchells & Butlers, Punch Pub Company (formerly Spirit Group) and Barracuda, revealed that like-for-like sales for May had increased 0.6% on last year and 3.7% on April. But the independent sector is feeling the squeeze.
"It is hard to say if this is down to increased promotional activity, more sophisticated marketing, better value, consistent quality and service, the reassuring strength of brands or even an increase in consumer confidence about going out," said Peach Factory founder Peter Martin.
"The bottom-line is that these established restaurant and pub groups are working harder and continuing to maintain custom."
Jonathan Leinster, head of European leisure and tobacco research, at UBS Investment Bank, added: "The performance of the branded operators varies but the key to success appears to be a consistent value offering of which promotional activity is certainly a point.
"However, increased discounting and promotions have been at the expense of margins and we would expect promotional activity to continue going into the summer season."
However, Trevor Watson, director of Davis Coffer Lyons, a specialist in the valuation of pubs and restaurants, warned that trading was still difficult.
"The combined effect of discounting, the forthcoming impact of increases in the National Minimum Wage and the treatment of service charges, higher oil prices, and VAT increases will continue to put a lot of pressure on profit conversion for most operators over the next 12 months," he said.
Independents struggling
While the branded chains seem to be holding their own, the smaller independent sector appears to be struggling, according to KPMG's head of travel, leisure and tourism Richard Hathaway. "We are seeing smaller players struggling more as they can't command the same economies of scale to support significant discounting," he said.
"They are also more vulnerable to the impacts of factors such as their location, less brand recognition and pressures of financing, particularly if they own their own property.
"We have already had experience of insolvencies in this part of the sector and are likely to see more."
Peach Business Tracker is backed by the Coffer Group, UBS and KPMG. The companies surveyed are: Mitchells & Butlers, Whitbread Restaurants (including Beefeater, Brewers Fayre and Table Table), Punch Pub Company (formerly Spirit Group), Gondola (owner of Pizza Express, Zizzi and ASK), Tragus Group (operator of Bella Italia, Strada and Cafe Rouge), TGI Fridays, Barracuda Group (including Smith & Jones and Varsity), Wagamama, Carluccio's, Paramount Restaurants (owner of Chez Gerard, Bertorellis and Caffe Uno), Novus Leisure (operator of Tiger Tiger) and Gaucho Grill.
