M&C Report takes a closer look at the full-year results for Ed’s Easy Diner, the 17-strong American-style casual dining chain, and speaks to chairman Stephen Greene who discusses plans to add between 50 and 60 sites over the next five years and to expand further overseas. Greene also discusses private equity interest in the business, reports on brand evolution and reveals that Ed’s has appointed its first operations director.

Like-for-likes, EBITDA, turnover grows
Like-for-like sales grew 12% in the year to 30 September 2012, with EBITDA nearly doubling from £458,000 to £972,000. The firm reported an operating profit of £35,000, a turnaround of more than £200,000 on the previous year. Sales grew 58% to £9.4m as it opened diners in Birmingham, Basingstoke, Cheshire Oaks and Leicester, plus three Shake Stands and two sites in Cape Town, South Africa, under the Joe’s Easy Diner brand. ROCE in the year was 40% on diners. Underlying cashflow was £984,000 (2011: £76,000). Eleven sites were trading at the year-end.

Trading since year end
Like-for-like sales have grown more than 10% in the period to 30 April, the company said. Since the year end it has opened in Swindon, Wandsworth, Bridgend, Southampton, Reading and in the Metrocentre in Gateshead, together with Ed’s Shakes ‘N’ Dogs units in Bluewater, in Selfridges (Oxford Street) and an “airstream” unit outside Cheshire Oaks.

Core brand expansion: UK
Ed’s plans to grow at a rate of 10 per year, with 22 by the end of 2013. It plans to double the estate over the next few years. “Over five years we can see another 50 to 60 units [being added]. We’ve got a good pipeline. Even in tough economic times competition for sites is tough.” Greene said he hoped to increase the number that open each year after the five-year period, “or perhaps a bit sooner”. Ed’s is due to open shortly in Gloucester Quays and Sheffield’s Meadowhall. Norwich and Greenwich had been mooted as possible future locations, but Greene declined to comment on specific sites until they had been secured. “We have a pipeline of probably 15 to 20 sites at the moment, some of which are about to be signed; two to three have heads of terms agreed,” he said. “We’ve even got some signed up and agreed terms for 2015 and 2016.” The company said: “The strategy for the development of the Ed’s brand is to open new diners in high footfall, premium shopping centres, transport interchanges such as railway stations and airports, together with busy tourism centres. We remain encouraged by the potential scalability of the Ed’s brand - and its sister formats - which have proven their timeless appeal with a broad demographic of customers in a wide variety of geographic and trading locations.”

Brand extensions
Ed’s currently operates two Shake Stands in Birmingham and Greene said the company may add two more this year, plus another one or two Shakes ‘N’ Dogs units to add to its current outlets in Bluewater, Selfridges and Cheshire Oaks. He said a lot will depend on the location of the core diners, pointing out that the offshoot brands tend to complement the core premises. For example, both a core and a Shake Stand operate at Selfridges in Birmingham. The Cheshire Oaks site is the first of its “airstream” units, modelled on iconic metal wheeled diners from the US, and Greene said it’s a format that “can be replicated”. In terms of future evolution of the brand, Green said Ed’s was not ready to roll anything out but was “always looking” at possibilities. “The core focus of the business remains the main diners.”

Overseas growth
“I think there’s a good chance we may be in another country by the end of this [financial] year,” said Greene. The company is in “advanced talks” with possible franchisees in the Middle East and discussions are also taking place regarding Germany and the Far East. “The brand strength is such that we are approached all the time by people who want to discuss franchising,” he said. “That could see an exciting period of growth. But the core focus still remains the UK.” The concept already operates under franchise in South Africa as Joe’s Easy Diner. “They are looking for their third site at the moment,” he said. It had been reported that the South African operation could grow to 30 sites, and Greene said: “They think that they can be at that number over southern Africa over a period of time.” He added: “I was down there in February. They are really good quality operations, they are very professionally run.”

Investment
Greene said Ed’s has spoken to “half a dozen” private equity firms about investing in the business, but investment was not needed to expand the brand under its current five-year plan. He said such a move is “not part of the short term plan at all”. Meanwhile, Ed’s has “not had any discussions” with potential trade buyers.

Competitors
Greene said Ed’s carried out market research among 3,500 customers last year. “They say that they didn’t see anybody as our direct competitor and the one they saw as the closest was TGI [Friday’s].” Greene said he didn’t see Ed’s as just operating in the burger category, against operators such as Byron, but across a wide range of concepts competing for people’s discretionary spend. The specific competition often depends on the individual location of sites, he said. More than 90% of those surveyed were regular Ed’s customers and said they would recommend it to a friend.

Personnel
Earlier this year Ed’s appointed its first operations director with the promotion of Reuben Todd, who was formerly group operations manager and before that manager of Ed’s in Bluewater. Greene said the operations team is now in place to lead the group’s expansion in the coming years. Meanwhile, Greene said staff retention rates are “phenomenal”.

Customer numbers
Ed’s served 1m customers in the year, a rise of 57%, and the firm expects to reach 1.5m customers this financial year.

Loyalty club
Ed’s said there are now more than 150,000 members of Ed’s Club, its loyalty scheme that offers exclusive promotions and information on the brand.

Food spend
Average spend per head in the year was £10.70, and Greene said it has risen slightly to £10.90. “We are finding that the price point seems to be right for the current economic environment.”