The top of the year’s Zolfo Cooper Profit Tracker again highlights concepts and companies that are underpinned by the quality of their teams and offer. While parts of the upper echelons of the index are populated by the spread of small and fast-growing businesses, where clearly, each successful opening can have a dramatic impact on profit, there are now signs that new sector powerhouses are emerging.
Businesses such as Cote, Loungers, Drake & Morgan, Jamie’s Italian and Bill’s, which have all been developed and invested in over the past seven years, are becoming regulars in the top 20 of the list. It is no coincidence that both CÔte and Drake & Morgan changed hands last year, acquired by Close Brothers Private Equity and Bowmark Capital respectively.
The top 10 also highlights the growth of the fast-casual movement, with operators such as Tortilla, Itsu and Leon representing the sector. All three have strong expansion plans in place for the next few year, with the re-energised Leon, the healthy fast food chain, recently restating that it could grow to more than 100 units across the UK. The 15-strong group plans to double in size by the end of the year, by when a third of its sites will be outside London.
It would be no surprise to see more companies from this category enter the index next year, especially with the likes of MeatLiquor, Five Guys and Barburrito still set for expansion.
New entries
While it is hard to predict anything in the current climate with certainty, last year we put forward a handful of operators that we were sure would climb up the table if they continued their current success. Last year, we put forward Tortilla, Le Bistrot Pierre and Hawksmoor, all three made the top 10.
Last summer, Graphite Capital took a stake in Hawksmoor, the operator of the eponymous high-end steak restaurant chain, which currently operates four sites in London under its brand, plus new more casual-dining concept Foxlow, valuing it at around £35m. The deal provided an exit for the friends and family investors who funded Hawksmoor’s early expansion. It is currently in talks on a second site for Foxlow in Soho and is thought to be looking at further expansion opportunities for its eponymous brand.
While Tortilla received backing from Quilvest at the end of 2012, it is thought that the next 12 months could see Le Bistrot Pierre come under the renewed gaze of private equity players. the highly-rated French restaurant chain, led by Robert Beacham and John Whithead, secured a new multi-million pound financing deal earlier this year that will see it double its current 11-strong estate over the next four years.
Other noticeable new entries that are sure to come under the gaze of suitors during this year are Banana Tree, Busaba Eathai, ETM Group and Las Iguanas. The latter, Bowmark Capital-owned group just fell outside the top 50 last year, but made a strong entrance in this year’s list and is believed to have appointed advisers to review its options. Newly led by former Wagamama chief executive Steve Hill, the 34-strong group is putting a strong pipeline of new openings in place and had received interest from international franchisees.
Alan Yau’s casual-dining Thai chain Busaba Eathai has recently returned to the acquisition trail, with plans to double its estate over the next three years, with two more London openings in 2014 and an extra focus being placed on further expansion outside of the capital. The Phoenix Capital Partners-backed group is also seeking a new managing director, further adding to speculation that Phoenix is gearing up for an exit.
Far from last orders
Signs last year that life was returning to the UK’s pub market have been reaffirmed by a number of regional group’s making their first appearance in the index and of several bar group’s enjoying strong showing’s, including Davy’s, further highlighting that the Tracker is not just the preserve of younger, meteorite brands.
BrewDog continues to lead the way for the wet-led operators, but a look at those near the end of the list shows that traditional players, who in the majority have kept their powder dry in terms of mass expansion, are starting to reap the benefits of this strategy. Everards, Joseph Holt and Frederic Robinson also prove that you don’t have to be London or south-east-based to continue to grow profits.
Indeed, the geographical spread of the list proves that, while having an estate-based in the south-east has undoubtedly been an aid during the downturn, stability in the regions is returning and leading operators to increasingly explore expansion opportunities away from the high-rental levels found in the capital.
2015 Profit Tracker
We are excited to be partnering Zolfo Cooper in producing the UK eating and drinking-out market’s first Profit Tracker, which has become a major talking point in the industry and the key indicator for those seeking to identify the companies that are leading the market in terms of profit growth.
Next year will see further movement on the Tracker, especially as the recovery in the economy gains more traction, which will undoubtedly provide additional talking points and shed more light on those groups shaping the industry.
If you would like to take part in the 2015 Profit Tracker, please get in touch either on 01293 846553 or at mark.wingett@wrbm.com. I look forward to hearing from you and hopefully seeing your company in next year’s list.
