Honest Burgers, the Active Partners-backed chain, has reported a rise in both restaurant EBITDA and Group EBITDA in the year ended January 2018, driven by the opening of seven new restaurants, including the first out of London locations in Reading and Cambridge.

Honest Burgers, the Active Partners-backed chain, has reported a rise in both restaurant EBITDA and Group EBITDA in the year ended January 2018, driven by the opening of seven new restaurants, including the first out of London locations in Reading and Cambridge

The company saw an increase of sales from £15.6m to £22.3m with restaurant EBITDA rising from £3.3m to £5.1m, offset by an increase in head office costs of £1.1m due to the appointment of key senior heads to support the growth of the business. As a result, group EBITDA rose from £2.2m to £2.9m.

As well as opening seven new sites, the group also invested c£1m in Honest Butchers, bringing the production of burgers in house to “enhance quality and consistency”.

David Foulis, the company’s finance director, said that the current financial year was shaping up to be an “exciting one” with a further seven new openings, including two more sites outside of London.

He said that year-to-date revenue has seen “healthy” like-for-like sales growth, underpinned by “further investment in food quality, as well as a significant piece of work defining and investing in brand values”.

In terms of future strategy, MCA understand that company is looking at leveraging the brand name and have had interest in taking the brand abroad which it is exploring.

The company is to further strengthen its presence in central London, with an opening in Marylebone.

MCA understands that the 28-strong group has secured the Mole Taco Bar site in Picton Place near James Street for an opening before the end of the year.

The company, which recently opened in Brewer Street, Soho, and Great Queen Street, Holborn, has taken a new 20-year lease on the site that will include 50 covers internally and 10 externally.

The group recently further strengthened its 2019 opening pipeline, after lining up openings in Liverpool and Manchester.

The company is set to take on a site at the Petticoat Lane Shopping Arcade in Liverpool’s Bold Street for an opening next year.

It has already secured a site in Cardiff for 2019, at a new development in the city’s Church Street, alongside Pho, Mowgli and New World Trading Company’s The Botanist concept.

In August, MCA revealed that the company was to increase its presence in London, with an opening on The Cut in Waterloo.

The company has secured the Southbank Tandoori site next to the Byron restaurant for an opening on 15 October.

Comment and interview by MCA’s Mark Wingett

The better-burger category has come under scrutiny during the past 18 months, due to the well-publicised travails at Handmade Burger Co and Byron, with the future direction of GBK also coming under the spotlight.

However, recent research from MCA shows the UK branded burger market is set to grow at a rate of almost 6% a year to reach a value of £4bn by 2020, outperforming the wider restaurant market. Its UK Burger Market Analysis points out that several leading brands, including market leader McDonald’s, are opening further stores in the UK alongside rapidly growing newer market entrants that include Patty & Bun, Bleecker and, indeed, Honest Burgers. Beef burgers have also increased their dominance in the food to go dinner occasion, from a 12.5% share of visits to 14.2% (Y/E June 2017 vs. Y/E June 2018), according to the latest MCA Food To Go Tracker.

Speaking to me earlier this year, Phi Eeles, who co-founded Honest with Tom Barton in 2011, said: “When the burger craze goes, if it does, those left will be the ones that focused on product. Our burgers are a bit cleaner, a bit easier to eat. We seem to attract a larger demographic because of that.” The above robust results seem to back this claim up, so does the company’s keenness to build on a position of strength – whether that be reinforcing its management team or investing in its supply chain. The brand clearer believes that survival and success will come from increasing quality rather than reducing it to retain margins.”

Commercial director Harald Samuelsson says: “Apart from the usual hospitality-bashing measures from the government, the biggest challenge has been the setup of our own butcher to the tune of £1m. We were adamant to have more control over the quality of our burger patties and so we had to move up the supply chain. It took a lot of hard work and we are very proud that we achieved LTTC- (Less Than Thoroughly Cooked) accreditation to keep cooking our burgers pink.”

Backers Active, which invested £7m in the company in return for around a 50% stake, valuing the business at the time at around £16m, at the start of 2015, have continued to be supportive, especially in terms of the brand’s expansion, but also the aforementioned butchers and the building of an experienced management team/brains trust. Samuelsson and ex-Gaucho finance director Gary Mann join co-founder Dorian Waite, in providing Barton and Eeles with an experienced sounding board and brand expansion nous, leaving the two co-founders to remain firmly in the business on the front line. As Barton previously said: “We are brand ambassadors, we want to be the ones protecting it. The staff seeing us working the grill or floor is valuable to us and, we hope, for them, too.”

The company will of course taken note of the turbulence in its part of the market, and with a strong pipeline in place – it will open its 30th site soon – it has already started looking at diversifying its offer and brand – a move into pubs being one possible future avenue already mooted. With a name like Honest, some brand stretching is surely possible/inevitable.

With the initial success of Five Guys in Europe, it is thought that Honest may also dip its toe in the continent’s still under developed better burger market.

Samuelsson says: “I think we still have a long way to go in the UK market and there are a lot of locations where we can open but site selection is crucial. Due to the softening of the property market in the last two years, some sites we looked at in the past and were too expensive are now looking promising. We are also looking at leveraging the brand name and have had interest from abroad that we are exploring. To facilitate these new avenues, we have invested in the senior management team in the last year.”

Regionally the brand has been well received and the company will look to build on the start it has made outside the capital, with a further three key openings next year.

“We are now open in Cambridge, Reading and Bristol and in all three locations are performing above our expectations,” says Samuelsson. “It gives us a lot confidence for our upcoming regional openings in Manchester, Cardiff and Liverpool.”

With the prep work in place, Honest should have a good chance of emerging from the UK’s better burger segment as a new market leader. The team behind it are honest enough to know further hard work starts here to make sure they make their own path not follow their peers down a cul de sac.