The sobering full-year update from Tasty, the Kaye family-backed operator of the Wildwood and Dim T brands earlier this week, was the first one (apart from The Restaurant Group, which could be argued was more self-inflicted) that I think gave a truer reflection of where the market actually is, with the real hard yards set to kick in. It also again highlighted the battlefield market towns have increasingly become, even for a family seen as the kings of that circuit.
Rewind 10 years or so and if you were eating out in Tunbridge Wells, there was a good chance you would be spending your money in a Kaye-backed restaurant concept. Within a half-mile radius there were five restaurants - ASK, Zizzi, Prezzo, Dim T and Il Giardino - that the family either own, founded, or held a stake in. The family had found a winning formula for expanding affordable, mid-market concepts across the country from Arundel to Cramlington. Indeed, it was once said that if you drove through any town their restaurants would invariably be in the best location.
Over five decades, the family - brothers Philip and Reginald, and their sons Adam, Sam and Jonathan, have floated half a dozen successful groups and opened more than 600 sites. Five of their companies have been sold on for a total of more than c£800m in real terms, the last being Prezzo’s acquisition by TPG Capital for £304m in 2015.
The family is currently trying to repeat the trick with Tasty and, more recently Richoux, the operator of the Villagio concept, with which Jonathan has recently joined as chief executive and Philip a long-time shareholder. The family is also one of the main reasons, some would argue THE reason, Comptoir Group was able to successfully float last year, such is their impressive track record.
Indeed one of the great strengths of an investment in Tasty was the firm’s experienced management team and shareholder group. The directors were not cutting their teeth on the expansion of the business - they’ve done it all before, and very successfully. Now the law of averages suggest that at some point everyone is due a blip, but it seems one of the family’s great strength’s, site selection, could turn out to be a problem, not just for them but for those who have acquired businesses from them.
From being one of three or four restaurants in town centres their brands – current and historic - are being joined by five or more operators. The cake (population/spend) remains roughly the same, but the slice is increasingly shrinking. New variants on traditional cuisines and an expanding consumer palettes are also now reaching regions coupled with newly invested and up-to-date concept designs.
For example, here is an anecdote from my own experience. I currently live in Horsham, an affluent, commuter belt town in Sussex. In the space of 300 yards along the town’s East Street, there is now a PizzaExpress, Strada, Wagamama, Giggling Squid (already churned once as it was previously a Giraffe), Nando’s, ASK, Wagamama, Bill’s and Buenos Aires steakhouse. Around the corner, on its own in what was an old bank site, and what was a prime location, sits a Prezzo, now easy to miss or not even get to depending on your direction of travel. To top it off, planning is in for two new boutique cinema-led scheme, which will add three further restaurants each if given the green light – this for a town with a population of c55,000.
Market towns are no longer a secret anymore. Businesses such as Loungers, Bill’s and Giggling Squid have prospered expanding into them over the last few years, others have followed, put off by London’s high rental levels. It has led to operators being even cuter with their rollout plans, shying away from big schemes or the traditional locations. The likes of Turtle Bay staying clear of London and the south east, for the most part, to open in Preston and Blackburn, with Plymouth and Middlesbrough to follow. Bistrot Pierre, the Livingbridge-backed group has been a master of this approach over the years, and whilst its more established sites in Harrogate or Leamington Spa have been squeezed by new supply, they have stayed ahead by focusing on traditional tertiary locations such at The Mumbles, Swansea and Kidderminster; with the likes of Preston, Stockport and Bolton earmarked to follow.
Last year, Tasty undertook a comprehensive review of its estate and recognised impairment charges against a number of sites. It said: “Turnaround strategies have been implemented at these sites in an effort to bring performance of these restaurants in line with the rest of the estate.” It is thought a small number of the 63 sites – seven Dim T and 56 Wildwood - the group currently operates will come to the market.
Another staple of the Kaye’s approach - alongside simple, affordable food in quality surroundings – is small head office teams. Its reaction to the challenging environment it admitted it was facing has been to strengthen its infrastructure – including changes to the central kitchen infrastructure and upgrades to a number of key systems. Appointments have been made across the group in: operations, marketing, finance and HR departments to support future openings and expansion.
These plans were not enough to stop the group’s share price falling nearly 40% to 70p on the back of its update despite revenue increasing 28% on last year to £45.8m and operating profit standing at £4.8m up from £3.9m. The drop in the share also wiped millions off the value of the Kayes’ stock. Sam Kaye,chief executive, saw £4.8m lost from the value of his shares while brother Adam, a non-executive director, lost £3.2m.
Whilst Adam and Sam attempt to right the wobble at Tasty, cousin Jonathan is at the start of kick-starting growth at Richoux. He is falling back on a tried and tested formula – with fledgling, stripped backed, Italian restaurant format Zintino. At the same time, TPG Capital is understood to be still getting to grips with the direction they wish to take Prezzo in, which includes disposing of some marginal sites and, if speculation is right, a couple of flagship London locations.
In a rare interview with the FT more than a decade ago, Philip Kaye described his business “as one of the most straightforward and tidy ones you could find. We just run restaurants”. It is an approach that has bred loyalty from shareholders, employees, landlords and suppliers alike, and one that has built restaurant empires, that have delivered returns time-and-time again. They cornered the market on market towns, now they will need to turn another corner to break free from the pack again.
