Whitbread has announced plans to exit 126 branded restaurants over the next 24 months, and convert a further 112 branded restaurants into new hotel rooms.
The Premier Inn operator’s branded restaurants have been impacted by a reduction in footfall from non-hotel guests, and have struggled to meet their targeted levels of return.
Whitbread will invest £500m in the plan, which will incur £100m in impairment charges, up to £25m in cash costs, and involve the loss of 1,500 job roles.
The group said its Accelerating Growth Plan (AGP) aims to optimise Whitbread’s F&B offer, unlock 3,500 room extensions and drive increased margins and returns.
Where branded restaurants, which include Beefeater and Brewer’s Fayre, are converted into rooms, a new “tailored, integrated” restaurant will be built inside the neighbouring hotel, in line with the format available at 387 existing locations.
In FY24, the branded restaurants earmarked for conversion generated revenue of £121m and loss before tax of £19m.
The restaurants earmarked for exit will continue to operate as they do now, so that they can be sold as going concerns.
Whitbread has already agreed to sell 21 of these restaurants for £28m.
In FY24, these 126 restaurants in aggregate generated revenue of £147m and a loss before tax of £9m.
The proceeds from these disposals will be used to help fund investment in building integrated restaurant in the hotels, as well as the construction of new hotel rooms across the estate.
Whitebread said the majority of its sites, including its existing 387 integrated restaurants, and its remaining portfolio of 196 higher returning branded restaurants, will continue to operate as normal and are not affected in any way.
Where changes are made to how F&B is delivered, Premier Inn’s breakfast and meal choices will continue to be available.
The construction of new integrated restaurants will commence shortly and be completed over the next few years.
The company said this would result will be a “more efficient, integrated F&B offering in these locations that is better tailored for the needs of our hotel guests”.
The plan will require c.£500m of investment over the next four years which will be funded through existing annual capital expenditure programme.
The changes outlined are expected to result in a one-off reduction to UK adjusted profit before tax in FY25 of between £20m-£25m.
With the removal of lower-returning restaurants, the adjusted PBT impact in FY25 is expected to be fully recovered in FY26 and by FY27, as further restaurants are sold and the addition of new high-returning hotel rooms starts to come through, the plan is expected to deliver a net incremental adjusted PBT benefit of between £30m-£40m
The group expects to incur further net impairment charges and write-downs including accelerated depreciation within adjusting items totalling between £80m-£100m over the next three financial years.
The group also expects to incur future cash costs presented within this adjusting item across the next three financial years totalling between £20m-£25m.
The plan will result in the reduction of around 1,500 roles out of a total UK workforce of 37,000.
Whitbread said these plans are still subject to consultation, and that it will seek alternative opportunities wherever possible through the roles created by this plan and its existing recruitment process that makes c.15,000 hires each year.
The company said it expects to retain a significant proportion of those affected who wish to remain with us and we will be providing dedicated support to our teams.
Whitbread chief executive Dominic Paul said: “We have delivered an outstanding set of results in FY24, led by the strength of our UK hotels business. “In addition to our strong commercial programme, we plan to optimise our F&B offer at a number of our sites to unlock up to 3,500 room extensions that will enhance the service for our hotel guests and deliver increased operational efficiencies. “We recognise our transition will impact some of our team members so we will be providing support throughout this process and we are committed to working hard to enable as many as possible of those affected to remain with us.”
