Big Table takes on ‘substantial risk’ with TRG Leisure estate

The Big Table Group’s latest acquisition has a rather different profile to the one that preceded it last year.

While Banana Tree was not a new concept – it was first founded some 30 years ago by William and Anne Chow - it’s one that is still considered ‘one to watch’, with its on-trend pan-Asian cuisine based out of nine high-footfall locations offering plenty of headroom for growth.

The Restaurant Group’s (TRG) 75-strong Leisure estate, which Big Table agreed to acquire earlier this week, is very much a collection on the wrong side of the growth curve.

Having operated out of some 350 locations just a few years ago, its glory days are considered long behind it. The division has been subject to successive restructures and downsizing, its core Frankie & Benny’s brand condemned as having lost relevance to contemporary consumers.

The worth of the business – or lack thereof – was summarised by analyst Peel Hunt, which gave it “zero value”. Indeed, such is the heavy baggage of the division - which includes c£50m in rent liabilities - TRG is paying Big Table £7.5m to take it over.

Described by Numis as akin to TRG removing a “poison pill”, the markets welcomed a stronger, leaner, more profitable TRG.

So what exactly is in it for The Big Table Group?

While the deal is clearly not without its risks, many commentators see it is a property play, which gives the Las Iguanas operator an opportunity to expand its strongly performing brands.

Having been through various restructures itself in recent years, the group has an experienced management team, fresh investors in Epiris, and a debt-free balance sheet. Earlier this summer, CEO Alan Morgan told MCA how Big Table was “the best capitalised restaurant group in the UK.”

Following news of the deal, Morgan kept his powder dry about his next steps, telling MCA: “In time, as always, we will review all the properties to understand best fit across the portfolio to make sure we have the right offering to suit each location.”

Industry commentators agree the acquisition gives plenty of scope for further estate management and conversions. 

Conversions or disposals?

“I would expect Big Table to be evaluating what is the optimal brand proposition in each of the sites to grow profitability,” Graeme Smith, managing director, AlixPartners, tells MCA. “This may include rebranding, re-investment or the evolution of the existing offers in each of the sites.

“Big Table will, I’m sure, consider all its options to maximise value from this estate under its ownership. This may include further disposals but I would expect the main focus will be on how to optimise the profitability of each site.”

Taking over 75 sites from TRG may fit in well with a conversion process than has been ongoing for some time, before and after the 2022 acquisition of Banana Tree.

“Big Table has been actively managing its estate,” Smith adds. “This acquisition adds further scale to its business and expands the opportunity to take advantage of any brand conversions.”

Meanwhile, MCA contributing editor Peter Martin underscores the standout brands within the Big Table portfolio, offering prime opportunities for conversions.

“Las Iguanas is doing great, probably the best acquisition [Big Table] has ever made. Banana Tree is the one to watch. The deal does give them some more sites to play with for those brands.”

Langton Capital CEO Mark Brumby tells MCA there will “probably” be further disposals on the cards – albeit there remains a possibility that sites continue to trade under Leisure brands, with a revamped offer.

“[Disposals are] not certain,” he says. “But it’s unlikely that all 75 sites will be a seamless fit. They should, however, be amongst the better units.”

Breathing new life into Leisure

New ownership could give the division, which has seen 35 closures in the last six months, a new lease of life. 

“There could be some Frankie & Benny’s revamps,” Brumby says. “That’s assuming Big Table has the brand as well as the units. Chiquito, not so sure.”

Martin similarly asks the question: has the group bought brands or has it bought sites?

“Essentially, you’ve got 75 sites with investment capital tagged along with that money that TRG are paying,” he says. “With the brands they acquired, which ones are they going to keep?

“There’s been question marks raised for years over brands like Frankie & Benny’s and Chiquito’s, as to whether they’re still relevant.

“Its strength as a family brand was 20+ years ago, is that still relevant? Or do you move on?

“Those brands still have a following, but it’s a matter of their future.”

The brand nevertheless works well in airports, so the case for continuing its legacy may be determined on a site-by-site basis. For other Leisure brands it may be a different story.

“There’s been a fair bit of work done on Chiquito’s recently, does that fit?” Martin questions. “How well is that trading and is that connecting with a new audience now?

“Firejacks was essentially an opportunity to redo a Frankie & Benny’s site. Coast to Coast, nothing much has happened there for years.

“They will take a view on those and individual sites… we could all have our view about how strong or how weak the brands they’ve acquired are.”

Still, Brumby warns these sites – and brands – come with risks.

“It’s got to be a substantial risk, which is reflected by the £7.5m dowry payment,” he says. “TRG is a professional operator and it’s not, for whatever reason, been able to make the sites work.”

The challenge ahead

For an experienced management team with a list of successful brands under its belt, falling into the casual dining trap of complacency is unlikely.

“During due diligence, Big Table will have taken a view on the rental liabilities [c£50m],” Martin says. “They’ll have money to reinvest in those sites, rebrand them or possibly reinvigorate some of the brands.

“They are the mid-market brand operator now.”

“There have to be major challenges. Hence the £7.5m,” Brumby adds. “I think the structure of the deal might allow Big Table to exit some sites after a certain period of time.”

Despite the recent history of the business, Smith emphasises that a number of groups underwent restructuring activity during and after the pandemic.

“Given this disruption was sector-wide, the focus is likely much more around making sure the brands and site propositions are aligned as well as possible with current consumer needs and wants – everyone in the sector has this focus.”

Still, Brumby takes a cautionary view, acknowledging the scale of the challenge that lies in wait.

“I would imagine many sites, if not most, will be rebranded. To not do so would imply Big Table thinks it can make something work that TRG could not.

“That’s possible, but hard to see quite why or how.”