Inside Track by Mark Wingett
It came as little surprise to see Brasserie Blanc’s acquisition of the Chez Gerard chain tip Paramount Restaurants into administration, as the eight-strong brand was by far the jewel in the crown of the troubled operator’s estate.
Two restructures in two years, which included its debt written down from an eye-watering £120m to £65m and then earlier this year to around £25m, tell only half the tale of a flawed acquisition and operational strategy.
As with the ongoing saga with Luminar, it is the role played by the company’s banking group, Barclays, HSBC and the Royal Bank of Scotland (RBS), and the erosion in value of a company that Tragus was understood to be willing to pay around £35m for last year, which has come under the spotlight.
On the back of the Chez Gerard deal, the decision not to take up the offer from the Strada and Café Rouge operator looks a poor one and that’s putting it lightly.
Here is a deal that has seen Brasserie Blanc, which everyone knew had £20m burning a hole in its back pocket, acquire eight restaurants in the key trading areas of the City of London and the West End, for a sum around £9m.
To put that in context, the key site in the whole of Paramount’s estate, Opera Terrace in Covent Garden, which generates a seven-figure turnover, was rumoured to be on the market in 2010 for around £6m on its own. Even with another £4m thrown in for refurbishments it still stacks up as an excellent acquisition.
The deal, which will see all eight sites converted to the Brasserie Blanc brand at the start of next year, is in the same league as Giraffe’s acquisition of 11 former Tootsies site in 2009 – transformational.
In one swoop Brasserie Blanc has gone from a regional player with one site in London to having a significant operational and brand presence in the capital. It even has the Chez Gerard name in its pocket if its fancies toying around with relaunching the brand in years to come.
Before Paramount took its second debt haircut and while the Tragus bid was being rejected, it sold around 38 sites to numerous branded rivals to further pay down debt for less than £10m. So that’s around £19m recovered so far.
Numerous operators from the restaurant and pub sector are now picking over the remains of Paramount’s portfolio, which comprises 17 Brasserie Gerards, four Livebaits and three Bertorellis and is being overseen by administrators Deloitte.
First out of the blocks was former Paramount chairman William Rollason, who has joined forces with Richard Muir, owner of the Edinburgh-based Café Fish, ironically the name of a former Paramount brand, to acquire the Livebait site in Manchester under new vehicle SBG Restaurants.
Muir has previously talked about targeting further sites in Leeds and London for further expansion, and it is not a leap of faith to suggest that the Livebait units in both those locations are already on his and Rollason’s radar.
However, he may have to move quick to pick up the Livebait in the Cut scheme in Waterloo, as M&C hears that the prime unit which delivers sales of £400,000 a year is already under offer to a pizza concept operator.
A deal for a group of four Brasserie Gerards is also thought to imminent.
M&C Report understands that there are around seven sites that are currently not under offer, mostly under the Brasserie Gerard name and located outside the capital. A deal on the Livebait site in Covent Garden is also thought to have fallen through, placing the unit back in play.
Even if all these sites are picked up, my bet is that the final total retrieved will not come in anywhere close to the £35m Tragus offered just over a year ago, providing an unsatisfactory full stop to the life of Paramount Restaurants and to another unflattering episode for the banks.
What have you done for me lately
Last week the UK’s hospitality sector announced that it was to do its bit to help the Government combat the increasingly high level of unemployment, which is set to rise by 8.7% next year.
Marston’s started the ball rolling by saying it will create 1,000 jobs with the continuation of its successful new-build opening programme next year. Rival Greene King upped the ante slightly by putting forward a three-year vision of 3,000 new jobs being created through the addition of 150 sites to its managed estate.
At the same time, Starbucks unveiled plans to open 300 new stores, including 200 drive-thrus, across Britain over the next five years, creating 5,000 new jobs.
So that’s a possible 8,000 new jobs to be created by three leading players in the hospitality sector. How grateful the under-fire Government is for this was shown by the response of the Prime Minister himself who called the coffee chain’s plans “a great boost for the British economy”.
As the sector’s campaign to have VAT cut continues to gathers pace, our sister publication The Publican’s Morning Advertiser’s petition now has just under 4,000 signatures, while the number of leading companies backing French force of nature Jacques Borel’s fight for a reduction is edging towards 50, I wonder if this job creation will be rewarded.
Unfortunately, the depressing growth forecasts and cuts flagged up by the chancellor George Osborne last week suggest that VAT will not be budging from the 20% mark anytime soon. Perhaps a quiet word with Westminster Council about its unpopular plans to introduce new parking charges in peak trading times would be a start. David over to you.
