Spirit outlines expansion plans for managed estate
The information has been provided in a note from Numis analyst Douglas Jack, following a site visit for analysts, where plans were also discussed to segment the leased estate into 200 franchise sites and 100 operating under a retail agreement, along with 50 premium sites and the same number of stand-alone leases, while the remaining 59 “should be sold”.
Jack said the 791-strong managed estate has been “transformed, on a self-financed basis” over the past three to four years.
“Since 2010, in managed pubs: like-for-like sales are up 11.9%; EBITDA per pub is up 35%; EBITDAR margins are up 390 basis points; 86% of the estate is now invested; return on investment is above 25% and improving; and guest advocacy is up to 73% (from 65% in 2011). Despite this, there is still plenty of upside.”
Cakeaways
Jack said Fayre & Square has the potential to grow to 250 sites. Developments include extending its ‘two for £x’ offers into starters, desserts and meal trade-ups, with drinks to come next. He added every Fayre & Square should eventually have a Wacky Warehouse; 80 currently have one. Wacky Warehouse adds £4,000 to weekly sales, he said.
“Cakeaways have been introduced in three sites and could be rolled out through the rest of the estate by November,” Jack added.
He said Flaming Grill has the potential to grow from 84 to 225 sites. Jack said: “Paid TV is in 45 Flaming Grill pubs, but this number is about to rise to 75; renegotiations with Sky are almost complete. Food is in strong growth; driving up drink sales is the next opportunity aided by better event management.”
The first trial of the smaller Flaming Grill template (1,200sq ft rather than the standard 3,000) started eight weeks ago and is “proceeding very successfully”.
A further three trials will commence in August. Jack said that in the leased estate, there have been 80 “transformational” investments costing £10.6m in 2013 (estimated), achieving a return on investment above 25%.
