A buried paragraph at the end of a story on GBK facing a CVA, suggested that Cote was exploring a possible merger and had held early talks about a tie-up with a listed company. Mark Wingett looks at what listed company would be a good fit for the French restaurant chain. He also explores what went wrong at GBK and why Gaucho’s new owners have swapped Meakin for Martin (Williams)

“The brasserie Côte is said to be shopping itself around to rivals in the hope of a merger. The 93-site chain, owned by private equity firm BC Partners, is understood to have held early talks about a tie-up with a listed company”. After six paragraphs about the travails at GBK (more of which later) and under the headline “Gourmet Burger chain eyes closures” came the previous paragraph in a story from the most recent Sunday Times. No fanfare, no – meanwhile or at the same time – just a couple of lines speculating about the possible future of one of sector’s main success stories.

Not that there hasn’t been persisted rumours circulating about the Alex Scrimgeour-led company for a while. Let’s be honest in the climate the sector faces itself in, the spotlight was always going to fall on Cote and its former stablemate Bill’s in the “who’s next for a restructure” stakes. Scrimgeour, himself, like his chairman Andrew Page, the former The Restaurant Group (TRG) chief executive, has kept his own counsel. Non-core brand Jackson & Rye has been put on the market, and some cases sites have been closed. There has also been some pruning of its core estate and cut back in its openings programme. Sensible and prudent moves by any good business faced with a downturn.

BC Partners, which acquired the then 65-strong business in the summer of 2015 in a deal valued at c£250m, has continued to be supportive, investing in a further flagship site in London, at Royal Festival Hall, and other selective openings. For my money, the concept is still one of best on the high street, for the offer it provides and the value that comes with it. But like all of its peers it can’t have been immune to the wave of costs and changing consumer trends that have impacted the wider market.

Whether it is struggling or not, the question still remains, where does it go from here? Whilst there is perhaps a wider question, can you evolve an established French brasserie/bistro concept? The latter question is something that rival Café Rouge has been trying to find an answer to for well over a decade.

The acquisition of the Jackson & Rye and Limeyard concepts was meant to help the business diversify and take some of the pressure of the core eponymous brand, but neither took off. Last summer, there was rumours that BC Partners had made a tentative approach to former Cote backer Richard Caring about acquiring Bill’s, but these never got past the sounding out stage.

Which brings us back to who could be Cote’s likely bedfellows? I’m sure Café Rouge’s owner, the Steve Richards-led Casual Dining Group has discussed the possibility of bringing the two brands together internally, if not externally. But it’s the mention of a listed company that has got the old grey cells working, plus who doesn’t like a bit of match making?

Judging from a couple of emails I got following the story in the Sunday Times the initial assumption was that said company was TRG. Excuse the pun, but TRG has got enough on its plate at present in the casual dining space and judging from recent deal evidence and performance, is more focused on adding to its pub estate, with speculation it may be running the rule over Peach Pub Company.

I am more inclined to think it could be Mitchells & Butlers (M&B) or even Patisserie Holdings, the Luke Johnson-chaired, owner of the Patisserie Valerie chain. The latter is still to tie up an expected deal for Gail’s Bakery and there would be some supply synergies to explore with Cote.

However, it is the former that caught my attention. I wrote earlier this year that M&B only had so much more runway to go with key expansion brand Miller & Carter and that with no internal new concept candidate putting its hand up, then surely it would have to return to the acquisition trail.

The group would be aware of the success Mark Derry has had transitioning Brasserie Blanc into a pub environment with his White Brasserie business. James Horler had done something similar with his Mediterranean-inspired concept Ego, and last month entered into a joint venture with M&B, which will see the Ego in a Pub format transferred into more of the listed company’s sites.

What’s to say that M&B couldn’t put a Cote menu into its Premium Country Dining Pubs? There is also the opportunity to convert some of its 25-strong Browns sites to Cotes and perhaps use some Cote sites to scale up Browns. M&B chief executive Phil Urban told me two years ago that the company was exploring ways in which it could scale its brasserie & bar brand.

He said: “The challenge for Browns is how do you scale it? At present if you are only trying to go into heritage buildings in city centres then you can forget it. One of our challenges is whether you can take Browns or a derivative of the concept and make it work in suburbia. If you could do that then suddenly you have a huge pipeline. That is one of our works in progress, one of our NPD ideas, to say how do you make this work in other formats.” Cote could be the answer. It would also provide buying synergies, especially with Miller & Carter.

Then there is the fact that the chairman of the respective businesses, Bob Ivell at M&B, and Andrew Page at Cote, have known each other for a long time and are said to be good friends. Ivell was a non-executive at TRG, whilst Page was chief executive. Both are currently on the board of Carpetright, so they may have found the time to discuss this very scenario. Maybe my argument is flawed and this is more filler than Cilla, but then again, I wouldn’t brush it under the carpet just yet.

Gourmet grief

It has become like a recurring nightmare over the last three years; established sector brand gets acquired, new management team comes in, new openings fail to take off, trading environment worsens, restructuring experts are called in and a CVA is undertaken. Even though sadly this has become an all too regular occurrence, the speed at which it has happened to GBK is still frightening. Coming just two years after Famous Brands, the South African fast food group, acquired it in a c£120m deal.

At the time, Famous Brands said it had ambitious plans to double GBK’s estate in five years time by expanding the burger chain into South Africa as well as continuing to open new sites in the UK.  However, less than a year later there were already signs that the business was coming under pressure. The company cut its openings pipeline for the rest of the year amid disappointing sales at some new openings and declining like-for-like figures.

The then chief executive Alasdair Murdoch told MCA that he was confident the 90-strong business would bounce back and pointed to the company’s prior record of almost six years’ like-for-like sales growth of over 5%. A month later Murdoch, chief operating officer Keith Bird and operations director Karen Stone announced they were to leave this business at the end of 2017. Murdoch was replaced by Derrian Nadauld, who had been with Famous Brands since 2000, latterly as head of Franchising and Logistics for Famous Brands in South Africa. He was joined by his Famous Brands colleague Molla Bonnet at GBK. Bonnet, who was national managing executive at Wimpy, will became GBK’s new operations director.

Murdoch, the former chief executive of Pizza Hut UK and now chief executive of Burger King, joined GBK in 2010 and helped restore the brand to growth, making sure it maintained a foothold in the burger sector after the launch and impressive growth of rival Byron had initially impacted its popularity. The brand was also one of the first established chains to embrace delivery, Roobox – Deliveroo’s precursor to its Edition’s dark kitchens and many of the new payment apps.

As with Byron, GBK has struggled with the question of how does it evolve, an over reliance on delivery sales and a case of over-expansion. There is also a question mark over how well the new management team knows the UK market and its subtleties, with no one left from the original management team, except for finance director Gerard Carolan, to draw experience from.

I understand that a CVA, and there seems an inevitability that the recent appointment of Deloitte, which is still to be confirmed, will lead to one, could see a quarter of the group’s c100 sites closed.

In the US, the better burger market has been impacted by QSR operators upping their game in the burger segment and consumers seeking more value. McDonald’s launch of its Signature Collection may have had a similar impact here, but there has also been the increase in burger operators over the last decade, not only with the arrival of Five Guys and Smashburger, but homegrown success stories like Honest Burgers and Byron. It will be interesting to see how Honest Burgers, which will reach the 30-site mark next year, develops from here; the issues faced by GBK and Byron suggest that it should be looking at ways to diversify its offer.

Like Byron, GBK retains a strong London-based core estate, when the dust settles it will be interesting to see how Famous Brands, or possibly a new owner, builds on it.

Dial M for momentum

He has been very vocal in his desire to get his hands on his former company, and now Martin Williams, ex-managing director of Gaucho and founder of M Restaurants, has had his wish granted. Despite laying out his vision for Gaucho, including launching another diffusion brand, in detail in an interview with our sister title Restaurant, Oliver Meakin left the business yesterday, after the confirmation that the 16-strong steak restaurant chain had been acquired by a new vehicle created and owned by the company’s lenders, Investec and SC Lowy.

Maybe he felt there was good chance he would no longer be at the helm when new owners were secured, especially as Equistone, the former backers of Gaucho, who had hired him had failed in a last minute c£20m bid to acquire the business it had secured for c£100m three years previous, before it entered administration. He can now turn around and say that how would have done it, if that is the path Gaucho eventually goes down.

On Williams’ role, all administrators Deloitte and the company’s new owners will says is that he is “working with the key stakeholders to drive the next stage of Gaucho’s development”. There is no official title or as yet no comment on the make up of the rest of the management team. It is thought that this is on hold until the CVA, which was launched yesterday, has been completed.

Earlier this year, talking about bidding for the business, Williams said: “We made enquiries and put forward a proposal late last year with regard to taking the Gaucho and Cau brands under our wing and leadership team of M.” He told me at the time that he had put forward solution which he thought would help the CAU and Gaucho chains whilst providing “a great expansion platform” for his M brand”. It suggests that some sort of merger will be on the cards, with Williams set to step up to oversee the enlarged business.

The man himself is being unusually quiet on the subject, but I bet he can’t wait to get his teeth into the challenge of getting Gaucho back on its feet again, with only a short window to make an impact before the crucial run up to Christmas. He has talked the talk on where big brands have gone wrong, now he has to back this up.