High street restaurant chain outlets will be far fewer in numbers by the time most UK high streets reopen, and many familiar names will be different or have new owners and operators.
The casual dining restaurant sector has struggled in recent years and now amidst the Covid-19 crisis has one simple objective, survival.
Cash has always been king in business and now those that have it can also spend it, picking up what look like bargains.
Only a few weeks ago Boparan completed its acquisition of Carluccio’s. The price paid for the brand, the head office, and 30 restaurant outlets was circa £3 million. That, not allowing a value for the brand or the head office, is £100,000 per restaurant. It’s also 3.3% of the value placed on the business ten years ago when in September 2010 Carluccio’s was acquired by Landmark Group for £90 million. A bargain.
There are lots of differences in the comparison timelines, not least just over 40% of the outlets were included in Boparan’s acquisition, compared to 100% in 2010. Nonetheless, the valuations and prices paid are stark by comparison and underline the value available for cash holders.
Administration – CVA – Restructuring – Open to explore options – Open to offers – Tasked to find potential buyers – are now all too common headlines associated with many of the best known UK high street restaurant brands.
In and amongst our recent reporting Cote Brasserie, Pizza Express, Bella Italia, Café Rouge, las Iguanas, Prezzo, Gourmet Burger Kitchen, Byron, Wahaca and Chiquito and many more are among those looking now at if and how they can survive.
There are acquirers in the market, we don’t think Carluccio’s will be the only M&A activity from Boparan this year. Also Whitbread has signalled their acquisition intent loudly as it seeks added liquidity through raising circa £1bn from shareholders.
We have already reported on what we think will be a restaurant acquisition frenzy this year. We are also sure that the frenzy will peak in the weeks and months ahead before some of the potential targets disappear into administration past tense.
What we will see play out will be to the advantage of some and loss of others. Hopefully, a similar volume of restaurants remaining open, if under a new name and owner, will see many people’s jobs retained.
The businesses and people guaranteed a loss are the high street landlords.
If a more flexible approach had been taken with restaurants and their rent payments at the outset of Covid-19, more paying tenants may have survived.
With many acquisitions led by investment banks and hedge funds, doubtless they will be highly selective with how much rent arrears they pick up in growing restaurant portfolios.
Leaving many landlords to reflect on, a bird in the hand and all that…
Landlords may look back
Landlords may look back