SPECIAL REPORT: How Casual Dining Group has turned under-performing assets into profitable gems

Bella Italia 2

There is a street in Manchester down which you will find a Bella Italia, a La Tasca, a Belgo and a La Vina, all within close proximity to one another and all owned and managed by the Casual Dining Group.

The prospect of inter-company sales cannibalisation would make most operators feel uncomfortable about such a neighbourly arrangement, but for CDG it perfectly encapsulates the essence of what the group is about today. “Dominating diversity and being able to capture market spaces is actually really interesting for us,” explains CEO Steve Richards, who hammers home the point that its various brands are disparate enough to trade side by side by revealing that one of the latest leisure and cinema complexes it has signed up to will incorporate all three of its flagship brands: Café Rouge, Bella Italia and Las Iguanas.

Multi-brand leasing agreements with property holders clearly offer a powerful enough financial incentive of their own for CDG to locate sister restaurants close to one another, but it simply wouldn’t be operationally practical were it not for the fact that each brand has its own identity, a specific focus and is managed as a standalone business.

“There are lots of tunes you can play with this scale and diversity as opposed to just doing one kind of thing, and obviously it leads you into innovation and thinking about different shapes and sizes, and different models for those brands as well,” continues Richards, who was speaking at the recent Casual Dining Show.

Richards himself sums up CDG today as a “large-scale restaurant business, which owns a collection of diversified brands targeted at different locations and customer demographics”. The core trend that unites all of these businesses is an emphasis on rapid growth. Over the next 12 months, CDG plans to create 4,000 new jobs on the back of opening 37 new sites across the UK and carrying out 40 major refurbishments. It predicts that its profits will more than double over the next two years.

Steve Richards, CEOCDG presently operates 302 restaurants in the UK, which isn’t too many more than the number it acquired from Tragus three years ago. However, this figure disguises the true extent of the restructuring that has taken place. In that time the Strada business has been offloaded, Las Iguanas and La Tasca have been acquired, and a huge chunk of the rest of the estate it inherited has been reformatted.

“What I would say is that if somebody from what was Tragus three years ago walked into Casual Dining Group today, they would only actually recognise 42 sites because everything else has been rebranded, sold or is completely new. And of those 42 sites that are still in the same brand or format as they were three years ago, we will be working on either changing them into something or reinvigorating them over the next 12 months. So change has gone all the way through the business. It wasn’t a top-down process — it was all about building the business from the bottom up. When we talk about the transformation of a business at granular level this is exactly what we mean.”

It would be easy to assume that the group might feel it is time to slow down and take stock of what it has assembled. But that’s simply not part of the ethos — “our strategy is one of growth in the UK”, notes Richards.

If somebody from what was Tragus three years ago walked into Casual Dining Group today, they would only actually recognise 42 sites because everything else has been rebranded, sold or is completely new”

Over the next 30 months, CDG plans to launch 90 new restaurants, including 37 this year alone. These will mainly be in leisure parks, next to cinema centres, as well as in transport hubs and prime locations on the high street. It is working extremely hard to grow its footprint outside of London, with a string of large investments being made in the Midlands and north of England as it expands the business geographically. International growth is also part of the agenda. Café Rouge Dubai is trading strongly, the first Bella Italia has just opened in India, and signatures have been exchanged on 25 more sites across the Middle East.

It is all a long way from the tired-looking and stagnating business that CDG picked up in spring 2014, although even back then Richards says he and the Apollo investors were convinced of its potential. “We thought it was a classic ‘good business, bad balance sheet’ situation that we could really take hold of and rejuvenate,” he said during his keynote. “What we saw within that Tragus business was a number of cracking sites, an unbeatable footprint and some of the best leasehold property in the UK, and that really attracted us. It had a fantastic core, but there was also a huge tale of under-performing assets hiding those gems and that is a clue to how we saw the business. We wanted to create what we called a ‘Goodco’, so to do that we had to go through an exercise of shedding that skin.”

CDG long-term store targets

The business it owns today is very lowly geared and the growth is all self-funded, so it isn’t burdened by borrowing and interest. Debt, meanwhile, has reduced from £254m to £91m. During the course of the first 12 months in which Apollo took over, the head office was completely reorganised, while limited companies were created for each of the brands in order that they could be managed on an individual basis.

“From the outset we wanted to create a flexible operating platform where we could acquire different brands and grow them and add group value perhaps through property, finance, purchasing or operational skills, but ultimately let each brand management team run their brand’s business.”

Restaurant shot 1Additionally, CDG partnered with top chef Alain Ducasse to create a food development centre and increased the training capabilities for its chefs, while its efforts to explore new formats have led to a grab-and-go version of Café Rouge. “A lot of heavy lifting was done in those first 18 months,” says Richards.

The group now regards itself as the fourth largest casual dining operator in the UK — and the second if you remove Pizza Express and Nando’s (both single-brand operators) from the equation. “We have got ambitions to grow on that position,” insists Richards. “Our vision for the group, and where we are going, is that we think we could be a 600-restaurant business in the UK. We get north of 30% return on the capital that we employ and actually in some of our brands it is higher than that. We like having diversity and brands.”

In the CEO’s words: Café Rouge

“This is actually our top-performing brand at the moment in terms of growth. We haven’t repositioned Café Rouge because we thought its positioning was spot on. It’s been all about improving it and making sure it delivers on its promises. We did some research when we acquired the brand and customers had fond memories of it and said they always used to go there but don’t go back now.

“Food quality had slipped, service was only okay and obviously it was very tired and a bit run-down. Basically it had dropped off the agenda, particularly with lots of new stuff on the block. But we thought it was a much-loved brand that we could do something with. We have done 60 makeovers so far. They are expensive because we are not just doing front-of-house, we have put a whole new cooking platform in the back, a new supply chain and new staff training. We have worked really hard on the cooking platforms as well as thinking about its USPs in terms of classic French dishes.

“The number one seller when we took the brand on was a burger and they had hot dogs on the menu, so there has been a lot of time spent getting this right. The whole lot has changed from the front to the rear, but it is not repositioned. It is all about all-day bistro dining aimed at the same customer base. Our number one customer is called Jenny, she is 46, she has got two children. One of them is 10 and one of them is 12. She loves Café Rouge — and we love her!”

In the CEO’s words: Bella Italia

“We have repositioned Bella and moved it much more towards the themed dining end. It was sitting in that deep discount, overly-supplied pizza business. We wanted to develop an experience brand where people could come in for a main meal, a snack, a coffee and buy into something a bit different than just £7.99 for a margarita. Pizzas now are around 20% of the sales mix. The grill section is equally as large as the pizza section these days.

Bella Italia Beckton 1“I am not kidding when I say that Bella makes more profit than most of the high street brands you’ve heard of. It is a massive, massive profit machine. It has been around in its various forms for 37 years and it is a fantastic operation, much-loved and really well-known for good value. But when we bought it there was limited food quality and service was a bit tired. Part of the makeover has involved refreshing it and making it modern. We have completed something like 75 refurbishments now and there are only another 20 to go. The internals are now very vibrant, bright and highly relevant for today’s market.

“One thing we are focusing on is authentic ingredients and we are going over to Italy and doing deals with Italian makers and bringing that freshness and quality to the mainstream UK. Our USP is being built around filled pasta and fresh pasta ranges, and we are spending a lot of time in terms of improving our pizza as well as our grilled section. The business is in double-digit growth, delivering great returns for us, and staff turnover is massively down.”

In the CEO’s words: Las Iguanas

“We put together a strategy of which businesses we would like to own and Las Iguanas was always our number one target, so when it came on the market we were determined to get it. Las Iguanas is 25-years-old but up until 10 years ago there were still only 10 of them, so most people think it is a new brand, but it has been handcrafted, literally, by the founder over all that time. BOX 3 - Las Iguanas

“We kept [chief executive] Mos Shamel, who was there from when there were five sites, and we kept the management team in place. Las Iguanas is very heavily being pushed towards the themed dining side of casual dining, and internally they call it ‘energy dining’. It is all about the experience — yes the food is fantastic, but it’s great at cocktails and great for its ambience and buzz. It is not a cold experience. It is very much a broad Latin brand, not Tex-Mex at all. It is really authentic, most of the food is imported directly from suppliers in Latin America and we actually have our own distillery for spirits in Argentina.

“We employ Brazilian chefs to make our main dishes, so the heart of this business is about food, and around it we create a great, buzzy environment. We have opened seven since we bought the business, so there has been rapid growth, and we have got 15 to come in the pipeline. The big thing is taking this brand into leisure parks. That is the next piece of the brand strategy for Las Iguanas.”

Only 14 La Tasca sites left standing by summer

Just 14 La Tasca sites will remain standing by this summer as its owner, Casual Dining Group, pursues a strategy of replacing them with its flagship brands, its CEO Steve Richards has confirmed. CDG is reported to have paid £25m for the La Tasca business last September, but more than two-thirds of the 40-strong estate that it inherited have been converted into branches of Bella Italia and Las Iguanas.

BOX 4 - La TascaRichards said that CDG is “doing quite a bit of work on what the future looks like” for La Tasca. He noted that while the chain is well-spread geographically, it only operates four sites in London. “We bought La Tasca for sites primarily, but actually as we got our hands around La Tasca there is only going to be 14 of them left by the summer because we have converted them into Bella Italia and Las Iguanas,” he confirmed.

However, Richards did not go as far as saying that the La Tasca brand would disappear altogether. “What we have discovered is that core La Tasca business is actually very, very good and so hence we put it into the ‘incubator’ part of our business,” he commented.

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