Banks releasing funds to finance next phase of chain expansion

Yo! Sushi

The banking community is beginning to put its faith in the hospitality sector again, which is welcome news for operators looking to finance expansion programmes and new kitchen projects. FEJ looks at how two chains from opposite ends of the foodservice spectrum are plotting to use the funds they have just secured from agreeing new multimillion pound banking facilities.

Every chain operator is constantly scrutinising their capacity to expand, but irrespective of any towering aspirations for growth they may have, the ability to be able to open new restaurants invariably comes down to a numbers game. The good news for those with the right business plan and a convincing track record is that the appetite for lending is growing enormously.

Itsu, the healthy Asian food chain created by Pret A Manger co-founder, Julian Metcalfe, is just one high-profile example of a group with renewed financial firepower to enlarge its operations after securing funding from HSBC worth £40m. Having recently announced record financial results for 2014 and 2015, the news couldn’t have come at a better time for the business.

The investment will allow the company to forge ahead with what it calls an “ambitious expansion plan” and give it the financial clout to open even more sites. Soaring consumer demand for healthier food choices on the high street has been echoed across regional launches outside of London, taking the once capital-focused chain to a broader audience.

Itsu intends to open 10 new sites across the UK in 2015 and, in a move that signals its long-term plans to become an international player, will kick-start overseas expansion over the next three years. This will all be made possible by the funding released by HSBC, which believes in its philosophy of providing healthy food options at affordable prices. The refinancing package replaces two previous facilities from HSBC worth more than £20m.

“Itsu is a dynamic fast food retailer with high growth prospects, a respected brand and ambitious goals,” remarked Amanda Murphy, HSBC’s UK head of corporate after the deal was announced.

“We are proud to be able to support them with their international expansion plans. As one of the largest international banks, we are confident in our ability to help Itsu enter new markets and look forward to continuing our long-standing relationship.”

The refinancing package is vital for our company’s continued success in the future, and our ability to reach new customers”

Financial results for 2014 show that Itsu’s turnover increased 21% to £68m, with like-for-like retail store sales up by 7%. Margins improved significantly with after-tax profits increasing year-on-year to £1.7m and EBITDA rising an impressive 33% to £7m.

Landen Prescott-Brann, CFO of Itsu, said the tie-up with HSBC is crucial for the business to move to the next level, arming it with the capital to be able to embark on new store projects. “We see a lot of opportunity in the healthy-food market both here in the UK, outside of London, and internationally,” he says. “Consumers increasingly want healthy food options while on-the-go — and we can provide this. The refinancing package is vital for our company’s continued success in the future, and our ability to reach new customers.”

Itsu is not the only foodservice group to be boosted by investment from the banking community. Gordon Ramsay Group, which operates 31 restaurants globally, including 14 in London, has secured a £13m financing agreement with Barclays. The company says the five-year banking facility will provide it with a strong financial platform to continue to drive the business forward and aid further expansion.

The agreement comes after the Gordon Ramsay Group revealed that sales for the year ending 31 August increased 13% to £50m. Revenues from its UK restaurants accounted for almost £47m of that figure, as like-for-like domestic sales crept up by 4%. Group EBITDA increased by 39% to almost £6m.

Managing director, Stuart Gillies, says the company is pleased with the growth in sales and EBITDA over the past year. “We are particularly encouraged by the performance of Heddon Street Kitchen, which opened in November 2014, together with our two new Maze Grills that opened in the spring,” he comments.

“These brands provide strong growth opportunities in the UK and internationally. Bread Street Kitchen in Hong Kong and Singapore have both opened and are trading above expectations. Barclays’ commitment to us through the new banking facilities that have been put in place will further strengthen the group going forward.”

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