Restaurant group Fulham Shore winning tug-of-war with landlords

Franco Manca owner Fulham Shore has revealed its decision to delay recent new openings has had the “side-effect” of improving its cash position and lessening peak borrowings.

Some of its planned launches have been postponed by as much as six months as the company has held out for better deals from landlords, thus protracting lease negotiations, but chairman David Page insists it is the right move.

“These delays have had the beneficial side-effect of improving our cash position and lessening our peak borrowings,” he explained. “We will keep under review our opening programme for the rest of the current and following financial years. We intend that our new restaurants will be selected to give us an average return on capital at the higher end of the scale previously recorded. We will achieve this with more rigorous site selection and increased contributions from landlords thereby lowering our costs, in cash terms, for new sites while at the same time negotiating rents off the lower levels which are increasingly evident.”

Mr Page said the group also intends to commit to sites which follow its returns requirement rather than to sign up purely to fill a “formulaic pipeline”.

In its half-year results, published on Friday, the group said it had opened one branch of The Real Greek restaurant in Bristol and two Franco Manca pizzerias in London and Bristol since September.

This takes the number of restaurants operated by the group to 58 in the UK, made up of 16 The Real Greek, 41 Franco Manca and one Bukowski Grill. It expects to open a further one or two new restaurants by the end of the current financial year to 25 March 2018.

Half-year revenues grew to £27.5m in the first six months of its financial year, up from £19.5m the year before, while headline EBITDA increased to £4.5m, versus £3.8m the prior year.

In its results, Fulham Shore also revealed it now has a Franco Manca franchise pizzeria in Salina, Italy, and spent £200,000 purchasing a minority equity investment in Made of Dough, a new pizza concept, as part of Franco Manca’s pursuit of “best-in-class” pizza operations.

Mr Page concluded by saying that the group believes the slowdown in the UK retail and restaurant sector is principally the result of rising inflation, poor consumer confidence and a weakening economy.

“These factors, together with a number of rising costs, means that our pre-2017 estate, while profitable, is contributing less, on an average site by site basis, than last year,” he said. “We will respond to the economic climate in the next 24 months as we find it, as we believe these factors will continue to affect the restaurant sector in the coming years, limiting our visibility for the second half and beyond.”

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