When Danny Breithaupt was appointed chief executive of The Restaurant Group last year, he set out his vision to double the size of the company and find the right strategy for each of the company’s brands. Dominic Walsh talks to him about the potential to roll out new concepts, the public perception of TRG and how he handles competition from young upstarts such as Five Guys.
Q. Most new chief executives tend to ease themselves into the job gently before making any big strategic decisions. Instead, you’ve upped the ante on expansion just as a host of newcomers like Five Guys are starting to compete fiercely on new sites. Is that wise?
A. The market has become more competitive, absolutely, and there are more players in the market now. During the past two or three years we’ve seen an influx of new people like Five Guys coming into the marketplace, many from the States, but recently there’s also been a reinvigoration of some of the existing brands that have maybe got their acts together a little bit.
Does it make it more difficult to find sites? Not necessarily. What it does mean is that you have to be absolutely on your game to make sure that your offer is still relevant and still fresh so that landlords want it and see a reason to put you into their schemes.
Q. But aren’t landlords going to want a sexy new brand rather than old timers like Frankie & Benny’s and Chiquito?
A. What’s happened is that during the years there’s been a real build-up of relationships with landlords. We’ve been there through the bad times as well as the good and, because of that, there’s been some goodwill put into the tank – so when we look at sites and start the negotiations, our brands are still seen as very positive to the development of a particular scheme. In many cases, we get an opportunity to discuss going into schemes quite early on, almost like an anchor tenant.
Q. Are things different in London and the provinces?
A. Well, it’s not quite as fiercely competitive outside London. Landlords are still looking for solid brands with solid covenants.
Q. Is that because some have had bad experiences with some of the businesses that have gone through CVAs to shed sites?
A. Some have had their fingers burned by the businesses that have been reinventing themselves. Because of that they’re less willing to take big risks outside of London.
Q. But they are in London?
A. Inner London is a different story. You could take a space in London, rent it to somebody, they could go bust tomorrow and it could be re-let quickly so the covenant doesn’t come into it. It means the landlords who want up and coming brands can bring them in without too much risk. Apart from a few Garfunkel’s sites, we don’t really operate in central London so it’s not an issue.
Q. But aren’t Five Guys now heading out into the provinces?
A. Well, yes, but actually it’s a different offer. It’s an order at the counter offer and you’re in and out in 25 minutes, so it’s not a restaurant experience. In fact, when you’re putting together a leisure scheme outside London, it probably adds to the balance. You want some fast-casual, you want some family-dining orientated theme, you want something that’s a little bit niche. We don’t fear them because we don’t see them as a major competitor. I’d say the people Five Guys are impacting are the fast-casual takeaway concepts, although it isn’t cheap. It’s an expensive price point.
Q. In some schemes you’re taking two or even three units? Are your brands sufficiently differentiated?
A. Absolutely, we’ve developed three very distinct and different brands. Frankie’s is very much focused on the family market. We’ve repositioned Chiquito in the past two or three years such that it’s one of our best performing businesses at the moment. It’s really aimed at that sort of 18 to 30 market. We’ve brought back the fun, we’ve brought back the vibrancy so it’s a very different offer to Frankie’s. There’s no doubt that it struggled for a number of years, but it’s got its mojo back and it really is performing well. And then we’ve got the Coast to Coast brand, which, looking forward, is TRG’s jewel in the crown.
Q. What does Coast bring to the party?
A. We’ve got 13 now and will have 20 by the end of this year, with scope for a minimum of 100. All of those sites are significantly outperforming our expectation levels. Coast is a more grown-up, adult-dining experience without the children. What you’ve then got is the ability to go to landlords and offer to take three sites, knowing that they won’t impact each other.
Q. Which presumably is why you’ve set those ambitious growth targets?
A. Absolutely. My vision is to double the size of this business. We think we can do that organically within the next eight to 10 years and the reason for that is the balance of the portfolio. There’s plenty of mileage still left with Frankie’s but there’s an enormous amount of untapped potential in Chiquito and Coast to Coast and then we’ve got other brands that we’re working on, such as Joe’s Kitchen, that are creating some new opportunities for us. I think that this group will be huge in the future. I think we really can become a very, very big player in the marketplace.
Q. Frankie’s has played a big part in TRG’s success yet it doesn’t seem to have the profile or recognition of some high street favourites. Does that frustrate you or have you avoided the limelight?
A. It probably is a bit of an unsung hero when you consider that it’s just shy of 250 units. Maybe that’s been a little bit deliberate, but what you do find is that it is a big hero with the general public. The amount of people going through the doors, every single week, is phenomenal. On a daily basis, in Frankie’s, we’re probably serving about 50,000 people. But we think there’s still a lot to more to do with Frankie’s and a lot further to go.
Q. Downstairs, under your head office, is Joe’s Kitchen. Is that a brand roll out possibility?
A. At the moment we’re working on the model and we’ll be testing Joe’s in two or three locations this year and see how we get on. As a business, we want to look at other avenues for growth, but hopefully develop them ourselves. If we’ve got the skill set, which we have, and we’ve got the ability as we’ve proved, then why not grow the business ourselves organically?
Q. Is Joe’s important to reaching your growth targets?
A. You’ll certainly see AN Other brand come to the fore, which may well be Joe’s Kitchen or it will be something else that we will grow. We’ve got huge opportunities in concessions, where we’re working hard on getting into railway stations, where we’re pitching on a number of developments, and we’ve also still also got a number of airports we’re talking to across the country.
Q. So developing another scaleable brand is important for that?
A. What you’ll see is a much more balanced portfolio than we’ve had before and, for me, that’s the key to growing the business.
We’ve traditionally opened 25 or 30 sites a year. Last year we did 40. This year, we’ve steered the market to say that we’ll do between 42 and 50. Next year we’ll see an increase on that again.
Q. But why do you need to keep accelerating the expansion rate? Why not just do 30 or 40 then that gives you a longer period during which you can continue to expand at a good rate of knots. Are you not in danger of reaching your capacity too quickly?
A. I don’t think so. You’re talking about an eight to 10-year plan. At the moment there’s a huge appetite for Chiquito and Coast as well as Frankie’s and it would be crazy to sit back and not expand them. Who knows where the market is going to be in eight or 10 years’ time? It’s about seizing the moment and acknowledging that we’ve got the right people, the right culture, and the right brands to push on at pace. The people who work in the business, really want to see that happen. And I haven’t even talked about pubs; we’re up to more than 50 now and it’s become a big player in our portfolio.
Q. You talk about ‘the people’ wanting to up the pace, but isn’t it really about a new CEO wanting to move faster than his predecessor? Isn’t there an element of ego about all this?
A. Not at all. For me, the one word that nobody would use when talking about me is ego. For me it’s about the team and it’s about people and it’s about creating jobs and opportunities. It’s about looking forward because if we just continue to focus on Frankie & Benny’s then this business would become too one dimensional. My role has got to be to make sure that it’s a much more balanced business and that the opportunities and the growth are across the whole estate. This has been in the planning for a couple of years.
Q. What about international? Could you use your relationship with SSP in the UK to go into foreign airports?
A. Never say never, but at the moment we’ve got enough to concentrate on. Yes, we want to grow the business but we don’t want to do it to the detriment of focus or profit-ability. We’re focused on the UK and we’ve got enough to focus on for the foreseeable future so going international is not on the agenda.
Q. Weren’t you in Spain at one point though?
A. Yes, we had three units in Spain. They were deals that were signed before the current management team and the leases ran out after 10 years and we packed our bags and came back home. It’s not something that we want to do.
Q. So you’re just going to wait until you get to the end of that eight to 10 years then you might start to look at internationalsites again?
A. Who knows where we’ll be at that point? Whether there are franchise opportunities that come up in the Middle East or whatever, I’ve no idea, but, at the moment it’s not on the table and not something that we’re concentrating on.
Q. What about acquisitions? It strikes me that Ed’s Easy Diner, which will soon be coming up for grabs, would make a nice addition… especially given who the CEO is!
A. In general terms, we wouldn’t be averse to a small opportunity that added value, and added something to our current portfolio. But we’re not about to go into the marketplace and make a big acquisition of any kind. If there were a small chain of pubs, or a small chain of restaurants, that fitted with our criteria and was in line with our strategic thinking then, yes, we’d have a look at it. We’ve certainly got the funding to be able to do something like that.
Q. Didn’t you run a slide rule over Strada?
A. Yes, we had a look. My view on a lot of businesses such as Strada is when they’ve been through the mill it takes an awful lot of effort and work just to get it back to a zero point. That’s not for us at the moment in terms of picking up businesses that have been completely broken.
Q. What about businesses that aren’t broken?
A. In those cases, they’re usually asking for huge multiples. It means you’ve got to pedal an awful lot faster just to get your money back.
Q. And presumably you wouldn’t want to do anything that put at risk what’s been created in the past few years?
A. Spot on. For 10 years, Andrew [Page] did an absolutely fantastic job in laying some great foundations and building up a business that went through the recession pretty much unscathed, came out the other side and continued to expand. When he left, it had a market cap of just over £1bn. I’ve come in at the right time to take it to the next step and that next step is growth.
Q. You said you thought Frankie & Benny’s was a bit of an unsung hero. Doesn’t that apply to TRG as a whole, as company?
A. Our brands are very well known and I think if you asked the average person in the street if they’d heard of Frankie & Benny’s or Chiquito or Garfunkel’s then I think the answer would be absolutely yes. I think maybe we’ve not shouted about ourselves in the past, but now we have got something to shout about and the time is right to talk up what we do and what we want to do.
Q. Having come through the recession in good shape, what are your thoughts on the economy going forwards and how it might help consumer spending?
A. It isn’t fixed and I certainly don’t think that the economy is back to how it was in the good old days, but it is getting better. When you see petrol prices coming down the way they have recently, and when you see the supermarket price wars kick in then add a little bit of wage inflation and falling unemployment, you do start to see a little bit more disposable income coming through. We’ve always had pretty good sales through the weekends but it’s the midweek treats that have maybe been lost in the past few years. Now we’re starting to see that come back.
Q. And presumably the strong film release schedule will help your leisure park business?
A. Last year was particularly poor in cinemas, but this year, and next, there’s a real expectation, with some real big films coming out. Some 50% of our business is next door to or associated with a cinema, so we should see a benefit from that.
Q. So overall, it’s looking pretty rosy for you?
A. I think when you add all that together, you should start to see some momentum building this year. We’re quite optimistic that things will improve significantly during the next two or three years and that’s one of the other reasons why we want to expand the business now to make sure that we are benefiting from that.
An abridged version of this article first appeared in The Times
