Big deal for Little Chef

Little Chef had a very special place in my childhood. Throughout the ’70s, my mum, sister, grandparents and I took our annual family holiday in Bournemouth on the south coast. In those days, it was far more pleasant to stay off the motorways and take ‘trunk’ A-roads, and the journey took between nine and 10 hours each way. We ate breakfast, lunch and dinner at Little Chef, always leaving with a full tummy and a lollipop. Hearing that Little Chef was up for sale triggered the same feelings of nostalgia that I’d had, years earlier, for Bradwell’s ice cream.

For me, the main attraction of Little Chef was reflecting on so many happy memories with my family. I knew I wasn’t the only one who felt this way; everybody from the road sweeper to the Prime Minister thought fondly about spending time at this iconic establishment. But, while Little Chef lived on in the memories of millions of people, those memories were beginning to sour. The brand was declining rapidly, now becoming famous for poor-quality food, high pricing, and the run-down state of the buildings. What was acceptable in the austere, post-rationing ’60s and ’70s was now dowdy and outdated.

So that’s when [business partner] Simon Heath and I came into the picture (in 2005). One of the hard-to-quantify elements that influenced my decision to go for it was that there was an extraordinary, sentimental persistence of the vision of what Little Chef should be in the British imagination. In 2001, the Compass Group tried to introduce meals by Harry Ramsden, which they owned, in a cross-branding exercise. In theory, adding fast-food fish and chips to Little Chef’s menu and image made sense – the clientele was remarkably similar. However, the public roundly rejected it and the brand was withdrawn.

The trouble with Fat Charlie

Another failed attempt to modernise Little Chef’s image happened just before the opportunity arose for me to buy it. In August 2004, Little Chef’s chief executive Tim Scoble announced plans to change the logo to a slimmer version of Fat Charlie, the chain’s mascot. Scoble said Little Chef’s management was getting complaints from the public about Fat Charlie being, well… fat. Others said that Fat Charlie was, in fact, a small child, who should not be carrying hot food, as it was dangerous. A new logo was unveiled. Honestly, you can Google it. It wasn’t even that radical – they just slimmed down his waistline a bit. But, oh my goodness, people hated it! Some 15,000 customers actually took the trouble to complain. The evidence was undeniable; there was something deep and enduring in the Little Chef brand, if only someone could identify, honour and nurture it. I believed in my heart that people would prefer breaking their journey at Little Chef over Starbucks if changes were made to modernise the cherished institution and make it more appealing. I decided that was my mission.

It helped, of course, that this was yet another Mission: Almost Impossible. Simon and I both knew it was going to cost a lot of money to buy Little Chef, and we didn’t know where we would find that much money, but we went down to London to make a bid anyway. When we presented ourselves to the Travelodge board, we knew we were competing against some of the biggest private equity houses in England. Before we got there, during, and after the meeting, we could tell that we were low on the list of buyers. It seemed fair enough – the other bidders already had all the money they needed to make the purchase, and we didn’t. Travelodge knew that perfectly well. They were dealing with some serious players. It was hard to put us in the same category, frankly. But we gave it our best shot.

After the meeting was over, Simon and I came out a bit downtrodden. In our rather subdued state of mind, we decided to just grab a sandwich at the café opposite Travelodge’s head office. Minutes after we sat down, the CEO of Travelodge, to whom we had just been presenting half an hour earlier, walked in with his daughter. I invited them to join us at our table, and offered to buy them lunch. As we got to chatting, I found out that his daughter was going backpacking. Now, this was an area where I could go toe-to-toe with the best of them! I spent the next 45 minutes telling her about where to go, what to do, and what not to do. She was really engaged, even taking careful notes. I honestly offered it in the spirit of passing forward the kindnesses I had from fellow travellers all over the world, without thinking of any payback. But, of course, her father witnessed the whole thing – including not only my enthusiasm and adventurous nature, but my genuine concern. He had been worried about his nearest and dearest going off on her own. Now, he was sending her on her way with some sound advice. He was very grateful.

Finding the money

I’m not honestly sure what it was – the presentation, my convincing words at lunch or my travel tips – but we ended up becoming the chosen party. It was fantastic news, and Simon and I rejoiced for a good five minutes before asking ourselves where on earth we were going to get the £60m we’d agreed with Travelodge.

At this stage, we didn’t know how much money we could borrow from the bank against the Little Chef business. So the first thing we did was get the restaurant properties valued by CBRE, the world’s largest valuer. That evaluation came in at £55m for the freeholds, which were the restaurants that didn’t need to pay rent because the buildings were owned by the company.

Simon started to talk to some private equity houses, since I didn’t want to deal with them personally. Then we met with David Coffer, the agent from Davis Coffer Lyons, a specialist adviser to the leisure property sector in London. He said, “I think I can get £40m for you from Anglo Irish Bank.”

David Coffer has been incredibly influential in my life for a number of reasons. Coincidentally, he had also been involved in selling Little Chef for Travelodge and was one of the people who must have told the board, “Wosskow’s your man; I’ve worked with him for a few years.”

I believe he significantly influenced their decision to choose me. And now, when I really needed him again, here he was, stepping up for me and putting us in touch with Anglo Irish Bank to get the financing to buy Little Chef. He’s been quite an important person throughout my career, and – trust me – he’s had plenty of return on his investments.

Simon and I secured a meeting with Anglo Irish Bank. Considering the £55m evaluation from CBRE, they agreed to lend us £39m. So now we knew that we had that much in the bag towards the purchase, regardless of what the figure ended up being. I decided that if we were going to really take this on, I needed to visit as many Little Chefs as I could, to get a comprehensive picture of the health of the business.

So I created a plan to visit 234 Little Chefs scattered throughout the whole of Britain in 60 days. Permira, the holding group, had put together a sales pack with pictures of each individual unit, an address, and a bit about the unit. I used that as the basis, alongside a Little Chef atlas of Britain, which was sold in every Little Chef. From that, I was also able to plan my routes; I was going to visit five a day.

I had a checklist of five aspects for each visit:

1. I had all the turnovers, costs and profitability of each unit from the sales package that Permira had given us.

2. I wanted to get a feel for the manager, the assistant manager, and the head chef of each unit from a personnel point of view.

3. I wanted to ascertain how the unit was trading, how good morale was, and how they thought business could be improved.
4. I wanted to talk to the customers in each unit to find out how far they travelled, where they were from, what they thought of the food, and their general impressions of Little Chef.

5. I wanted to find out the condition of each building. At each one, I took photos of the main restaurant, the outside of the building, the roofs and the toilets.

So what did I find? Not surprisingly, I found a brand that was in serious decline. It had been used and abused for a long time. All the previous owners, over the preceding 15 years, had treated it like a cash cow. They’d all had bigger businesses that meant their true priorities were elsewhere, not with Little Chef. They’d taken money out to put into other divisions and put no cash back into this one.

I found a community of employees who were simply inured to the fact that no-body seemed in the least bit interested in what was going on. None of their superiors cared about the future of the business. But, funnily enough, just like every-one else in the country, because of the enduring place Little Chef occupied in people’s hearts, this community of people still wanted it to work.

Bid revision

I found that a lot of the food was not up to the standard it should have been, and there were more customer complaints than positive feedback. Some sites had signs that had blown over. Some restaurants had damaged roofs that allowed water to leak into the kitchens, and toilets that had not been refitted for many years.

It was disgraceful; it was enough to put anybody off. A normal human being would have said to themselves: “Do you really want to take this on?” But then, there was my hunger for a near-impossible challenge – the guts, the spirit, the fight, the love, the joy, and, of course, the adrenaline. What I told myself was that a few leaking toilets and roofs weren’t going to stop me from my noble mission to reclaim an iconic brand that people still wanted to believe in. What I should have recognised, instead, was that I was just pushing the adrenaline throttle ever harder in order to overcome the panic attacks being caused by my ever-worsening underlying anxiety.

While I travelled across the Little Chef empire visiting these sites, Simon Heath was back at the office, looking through all the financial data that had been provided by (private equity owners) Permira. He found a number of holes. In all these business deals, numbers can be read to say whatever you want them to say. Simon was reading them one way; they were reading them another. We knew that Permira was a very large company, and that its main focus was Travelodge. Little Chef was a sideshow for them. We also knew about the line-up of buyers that they had on hold because of us, and that we were number one at this stage.

After performing all this due diligence, we were the sole buyers, which is normal in the due diligence period. We, therefore, knew that the other potential buyers had probably disappeared by now. With the holes in the numbers exposed, we determined that we weren’t going to pay £60m – the amount that we bid to become the sole buyer.

We had to decide, in that case, what we were willing to pay, what Permira would accept, and at what number we could meet to make it worthwhile for both parties. We’d already spent £1.2m on lawyers, accountants, evaluations and everything the banks required. They had probably spent £1m as well. So we were both wedded to each other. They had – probably mistakenly – already announced the sale to the press. So this was a big deal; it was featured in every single newspaper in the UK and on television.

It would be very difficult for them to back out now.

A week of intense negotiation followed, at Travelodge’s head office in London. In the final negotiations, we said, “Whatever you think, you can’t get blood from a stone. That’s all we’ve got.”

We settled on £51.5m, which was an £8.5m reduction from our initial bid. Those visits to restaurants all over the country had been worth it, because a good portion of the money saved would be needed to repair roofs and address all the other issues we found.

The ‘personal guarantee’

Then, three days before the deal was to be completed, I was at a charity event for the children’s hospital in Sheffield when Anglo Irish Bank rang me. I took the phone call purely because I recognised the number. It was bad news. They said they had changed their minds; they wanted another £3m personal guarantee from me.

This really pissed me off, because we’d already made a deal, and I never forgave them for that. Since I had spoken with them on a weekly basis, they knew that we had already spent £1.2m on costs and were clearly committed to the deal. They used that opportunity to screw an extra £3m guarantee out of me, which was unacceptable behaviour. It was particularly annoying that they asked for a personal guarantee rather than cash. They knew I could give it to them because it wasn’t going to cost me anything unless it went wrong; I didn’t have to immediately come up with the cash.

So I had to put up £5m in cash and a £3m personal guarantee. I reluctantly agreed because I had no choice. I was absolutely sure I was going to turn Little Chef around. I was fully committed, hook, line, and sinker. We completed the deal in the early hours of one morning in London. We were off and running, the proud owners of an iconic British brand, with all the stress it was going to bring.

■ This is an extract from Little Chef: The heart of the deal by Lawrence Wosskow, published on 28 November. All royalties will be donated to charity