Jamie Oliver has decided not to sell a stake in his restaurant business, which includes the Jamie’s Italian chain and Barbecoa concept, but continue its expansion through a self-funded model, M&C has learnt
M&C revealed earlier this year that the high-profile chef had appointed the Royal Bank of Canada to explore options regarding his restaurant group, including a sale of a stake in the business, which is valued at c£200m.
It is thought that the group explored a number of options for future growth, including securing a new investment partner versus remaining self-funding.
It is understood that the group received a significant amount of interest, but that no suitable custodian could be found that matched the values set down by Oliver that any investment partner would need to hold.
As a result, the business will continue with a self-funding model, through a mix of cash flow and royalty income.
M&C Report understands that the run rate EBITDA in the business currently stands at c£20m, which would value it at c£200m. It is thought that funds brought in from any sale would have been used in part to fund the continued expansion of both Jamie’s Italian and the chef’s barbecue steakhouse format, Barbecoa, internationally.
The group currently operates 39 sites in the UK under its core format, with a fortieth set to open at new Ludgate Hill development before the end of the year. It operates a further c20 Jamie’s Italian sites under franchise overseas. The company also operates three restaurants under its fledgling Trattoria format in Richmond, Tunbridge Wells and Chelmsford.
The company, which is set to file its latest full-year accounts this week, reported that its turnover passed the £100m milestone in the year to 5 January 2014, although unadjusted EBITDA fell 9% to £11.9m as the management invested in infrastructure for International expansion, as well as the launch of its new Jamie’s Italian Trattoria brand and the rollout of its Gold Card.
The group currently operates one site under its Barbecoa concept in One New Change, St Paul’s but will open a further site at 194-196 Piccadilly near the end of this year. A site in the Nova development in Victoria is also in the pipeline.
Comment by M&C editor Mark Wingett
A question I will be putting to Simon Blagden, chief executive of the Jamie Oliver Restaurant Group, later this week at M&C’s annual Restaurant conference, is how he handles the double-edged sword that is running a business spearheaded by the high-profile chef. I imagine he will say there are plenty more positives - for example hiring staff, securing sites and entering new countries - than negatives, say the publicity that comes your way if a concept fails (Union Jacks), when others in the industry can sweep it under the carpet. I’m sure that the decision to forgo outside investment to remain self-funded will also get the same treatment.
A phonecall I received last month suggested that all was not well with the process surrounding the sale of a stake in the business, the caller even going as far to suggest that the group had not generated nearly enough interest. Further speculation surrounded the group’s current trading performance, with many suggesting a decline in like-for-like sales over the last year. Put two and two together and here is the reason that the self-funded route is to be continued. But as we all should know two and two rarely makes four in this sector.
Now the flipside, from what I can gather the company had received significant interest during the first round of the process and that had continued into the second, from a number of private equity groups and at least one rival trade player.
As for trading, the brand that many heralded as the saviour of the eating-out market during the recession was always going to find it hard to maintain that level of performance, especially as the market started to play catch up, helped by the emergence of Cote, Bill’s, Byron and re-energised players such as Wagamama and ASK. As for current performance, it is understood that the restaurant business is having a strong year, with double digit EBIT growth so far.
The main sticking point was the group’s uniqueness built around values that Oliver sets high and holds dear. His take is that the brand’s values are unique and don’t fit typical roll out models. Indeed each site is set up to be unique and must hold true to Oliver’s philosophy around food quality. It is thought that Oliver wasn’t prepared to compromise on this key point and therefore no suitable investment partner was settled on. There was also no urgency for a sale as the business is believed to be trading well.
Now I wouldn’t be doing my job, if a touch of cynicism didn’t creep in at this point in regards to the fact that no suitable custodian could be found that matched the values set down by Oliver. However, it is hard to argue against the fact that Oliver stands by his convictions, no matter the stick that comes with that, which is something Tim Martin at JD Wetherspoon can also attest to. Whether he is looking to bring in a tax on sugary drinks or wading into the issue of employing migrant workers (he claimed that if it was not for workers from abroad “every one of my businesses would close tomorrow”), Oliver puts his neck and reputation on the line more often than not, so why should he be any different when it comes to making sure his restaurant business has the best partner to take it further forward?
And this is a business that still has plenty to offer, especially overseas. In the UK, the group has always been clear that it only believes there is capacity for between 45-50 sites under its core brand, especially as each one is capex intensive. It will look to explore further opportunities in market towns for the smaller, less capex intensive Trattoria model, which Blagden told M&C earlier this year was trading well, but is battling for sites in what is becoming an increasingly competitive marketplace.
It will be overseas expansion will the group will focus most of its future expansion plans. The group further strengthened its global presence with new openings in Indonesia, Hong Kong, Australia and Singapore over the summer. At the same time, the company signed a deal with Italian company Food Concepts to ramp up its presence in Europe, setting its sights on Belgium, Holland and Germany. The first site under the franchise deal will open in the Markthal in Rotterdam this autumn. It also has further openings lined up in New Zealand and Canada, whilst Blagden said that an opening in the US remained on the agenda for next year. The power of the brand abroad was summed up when Blagden told M&C that the group’s first opening in Brazil, in Sao Paulo, had quickly become one of the brand’s best performing sites.
So here we have a restaurant group that remains a strong proposition, which is profitable, trading very well, has a strong core UK base and significant potential to expand overseas. It also has one careful owner, a modern day Oliver, who wants that little bit more commitment on the values front - an old fashioned sentiment but one its hard to argue with.
