Kout Food Group has confirmed the sale of its Little Chef portfolio to Euro Garages.
Kuwait-based Kout acquired the c70-strong estate from RCapital for £15m in 2013.
Euro Garages has established high-profile partnerships with BP, Esso, Shell, Starbucks, Subway, Burger King, Greggs and Spar. Many of the Little Chef sites, which are predominantly based on A-Roads, could be converted to these brands, as the company continues its strategy of developing multi-site destinations.
In December, MCA revealed that Kris Dungey, who previously worked for SA Brain, SSP and JD Wetherspoon, had stepped down as chief operating officer/head of the Kout Food Group UK.
The departure of Dungey, who was previously group head of operations at Brains, came amid speculation that the Kuwait-based business was looking to further reduce its exposure to the UK market.
The group has already placed its Maison Blanc business and Cha Cha Moon restaurant in the market, and MCA flagged up last year that it could be looking at options for its c70-strong Little Chef brand. Starbucks, Costa and Euro Garages had all previously been linked with the roadside brand.
A statement from Kout said: “As part of its commitment to the communities in which it operates, KFG has ensured continued employment for all its roadside employees and is confident that Euro Garages will continue to develop the strength of the people and roadside brands as well continue to serve their road side customers.”
The end of the road for Little Chef? Comment by MCA editor Mark Wingett
Of course we have been down this road before. The summer of 2013 and the iconic roadside brand was again looking for a new investor and the stories ran that Little Chef and its logo “Fat Charlie” would disappear from UK A-roads. In that instance Kout Food Group (KFG) stepped in to acquire the c70-strong business from RCapital in a deal worth c£15m.
The Kuwait-based group’s plan was to reignite the public’s nostalgic love for the brand that, in its 1980s and 1990s heyday, once boasted more than 450 sites. However, from Waitrose to M&S, and Tossed to Pret A Manger our expectations for roadside eating and drinking options, as with many other aspects of the foodservice sector, have moved on at a pace.
Speaking to MCA last summer, KFG’s operations director John Moore said that the brand had been in decline for ‘many years’ but it was Kout’s intention to “turn the business around”. If that was the case it has quickly moved away from that strategy. Little Chef largely populates ‘heavy footfall A roads in the south’, particularly the A303 that runs to Devon and Cornwall, as well locations close to the A1 London to Edinburgh trunk road.
Competition may have sprung up in the form of ‘drive thru Costas and Starbucks as well as McDonald’s’, but Moore insisted a number of Little Chef sites are particularly suited to ‘key anchor brands’ such as Burger King and Subway. In fact, KFG took on its first Subway franchise in early 2014 and subsequently opened six outlets alongside Little Chef restaurants. At the end of last May, Little Chef’s Warminster diner, situated on the A36, opened as a ‘tri site’ with space for both Subway and Burger King. It is the property and the ability for these sites to become mini service stations housing a number of brands that will prove the attraction to the fast-growing Euro Garages.
The company, which shares a backer with Stonegate Pub Company in TDR Capital, was founded in 2001 by brothers Mohsin and Zuber Issa with the acquisition of a single gas station. By purchasing underperforming sites and redeveloping them, the brothers have established Euro Garages one of the UK fastest-growing forecourt operators, quickly becoming known for their innovative approach to forecourt trading and establishing high-profile partnerships with BP, Esso, Shell, Starbucks, Subway, Burger King, Greggs and Spar.
TDR acquired a minority stake in the business in 2015, which valued it at £1.3bn. Last October, it merged with Continental operator EFR to form a group with c1,450 sites and annual turnover of cEuros6bn.
Speaking last year, co-chief executive Mohsin Issa revealed how Euro Garages’ strategy for asset transformation, aggressive partnerships and a focus on people had driven the company’s success. The company’s focus was to create destination locations, which customers will visit for more than one shopper mission. He said that this ambition was “aided by time-starved shoppers, the consumer trend to shop little and often at smaller stores, ample car parking and 24-hour access”.
The group already has a history of acquiring and converting Little Chef sites, having secured c35 in two packages after KFG’s original deal for the roadside brand in 2013 left a number of units with property agents. The majority of the sites were subsequently converted to Starbucks. More conversions can be expected if this latest deal goes through, the question is will Euro Garages believe that the Little Chef brand and offer can still anchor some of those sites? I wouldn’t be surprised if a handful remained but that most would be converted to its existing partnership brands, with perhaps the majority of standalone sites where, development is not available, becoming coffee shop drive-thrus.
In August 2013, Kout was the only bidder prepared to preserve the iconic brand – one that seems to be almost cat-like in the amount of lives it has been given, and in the process 1,100 jobs. Will Euro Garages attempt to breathe new life into the brand or will it be quietly parked on the hard shoulder? It would take an Olympic effort to achieve the former.
