The Restaurant Group Plc has kept its operations teams busy by delivering an increase in new site launches every year since 2009. This year is set to be no different, with the group revealing that its targets for 2015 will involve the development of more kitchens than at any stage before. FEJ reports.
Any business with aspirations for expansion needs to base their plans on solid foundations, and nowhere is that truer than in the national restaurant sector where prospective investment in new sites must be supported by evidence of likely success.
In the case of the Restaurant Group Plc, owner of brands such as Frankie & Benny’s, Chiquito, Coast to Coast, Garfunkel’s, and numerous pub restaurants, evidence that the company’s forthcoming growth plans are built on the right credentials comes in the form of its latest post-close update.
The Restaurant Group will unveil its annual results to the market at the end of this month, but the update it gave recently suggests its saw a solid trading performance last year. The year to the end of December delivered an overall 10% increase in turnover, while on a like-for-like basis sales improved by almost 3%. Crucially, business over the two-week Christmas period — always an important barometer for a chain or brand’s popularity — climbed 5% year-on-year.
With that growth behind it, the group has set its sights on ramping up its activities over 2015, which will include the launch of even more restaurants than it is understood to have ever managed in a single 12-month period. This is not just a jerk reaction to seeing its turnover increase, however. A look at its store opening programme over the past few years reveals a pattern of consistent growth that has contributed to the top-line improvements. During 2014 it opened a total of 40 new restaurants, compared to 35 the previous year.
Management claims to be “very pleased” with how those sites are trading and insists they are set to deliver “strong returns” moving forward. Since 2009 it has increased the number of openings each year and fully expects to keep that run going in 2015.
“We have excellent visibility on the composition of this opening programme and anticipate opening between 42 and 50 new restaurants during 2015,” it stated in its update.
The Restaurant Group presently operates 450 restaurants, so its store plan will take the estate to more than 500 units by the end of the year.
While it hasn’t yet disclosed which of its brands are likely to drive the bulk of the growth, the company’s buying and operations teams are undoubtedly primed for a busy year that will involve significant levels of kitchen design and system specification.
This is a terrific platform for the further growth of the business, and I am looking forward to building on this and leading the company through its next phase of development.” Danny Breithaupt, chief executive, TRG
The strategy will be led by Danny Breithaupt, who was brought in last year as TRG’s new chief executive.
He said he was taking on the leadership of a group whose business was in great shape. “TRG has a clear strategy, successful brands and a great team of people,” he stated at the time of his appointment. “This is a terrific platform for the further growth of the business, and I am looking forward to building on this and leading the company through its next phase of development.”
Investors will be encouraged that this step-up in activity comes with a strengthening balance sheet. TRG says its full-year results are expected to be within the range of market forecasts, with material growth in both earnings and cash flow versus the prior year.
“The outlook for 2015 and beyond is very positive with growth in disposable consumer incomes, an increasing number of new site openings and a considerably improved outlook for UK cinema performance,” stated the company.
That last point is particularly noteworthy given the proximity of TRG sites to leisure park and cinema locations. 2014 saw the weakest year for cinema admissions for many years, but 2015 and 2016 are expected to show “significant growth” as a result of much stronger film release schedules, according to the company.
“After five years of decline, we are now starting to see increasing real incomes, a trend which is expected to become more strongly established during the course of 2015,” it stated.
“These factors are all clearly positive for the future prospects of the group and underpin our confidence in delivering further profitable progress in 2015 and subsequent years.”
TRG: Store expansion criteria
The Restaurant Group’s key criteria in determining where to invest its capital is to operate restaurants in locations with high barriers to entry, good growth prospects and where it is confident that it can secure high returns on investment. Its focus is on edge-of-town, out-of-town, rural, semi-rural and airport locations, where it looks to occupy leading market positions in such segments.
The group says that the footprint it occupies in edge- and out-of-town leisure and airport locations is “very formidable” from a market positioning perspective. It claims it would be virtually impossible to replicate this footprint from scratch and therefore considers itself well-placed to roll out more restaurants.
TRG: Group brands
– Coast to Coast
– Frankie & Benny’s
– Also operates around 50 pubs and 60 concessions