South African restaurant group Famous Brands will draw on its nine years’ experience owning Wimpy in the UK as it plots a growth path for Gourmet Burger Kitchen.
The group announced last week that it was shelling out £120m to acquire GBK, which operates 75 sites in the UK.
Kevin Hedderwick, group strategic advisor responsible for M&A activity at Famous Brands, says its experience of running Wimpy has given it an understanding of what it takes to succeed in the UK market.
“As far back as 2007 when we acquired the Wimpy business in the UK, the group is on record as saying that we would use our foray into the UK as a beachhead to expand our presence in the market as and when suitable opportunities presented themselves,” he said. “Our investment in the Wimpy UK business has given us invaluable learnings in terms of an understanding of and insight into the local market.
“More recently we have stated our intent to pursue opportunities which will enhance our existing income stream with hard currency earned outside of Africa; the GBK acquisition achieves that goal, and simultaneously up-weights Famous Brands into a substantially higher league.”
The takeover of GBK is the largest that Famous Brands has ever made in terms of scale and scope, and is described as a “game-changer” for the group by Hedderwick, who reveals that GBK emerged as the frontrunner from a list of potential targets it had sized up.
“In the process of identifying a suitable acquisition target, we scrutinised a wide range of prospective assets over recent years, but none of the other potential targets met our investment criteria, or were aligned with our SA business model,” he said. “GBK ticks all the boxes; so much so, that we can transfer many of the brand’s best practices back to SA. The GBK team has built an outstanding infrastructure and their processes are world-class.”
In terms of the contractual agreement, GBK’s team will continue to manage the business. No changes to personnel are planned, and the intention is for the transition in ownership to be affected seamlessly, with no disruption to operations, according to Famous Brands.
It said the deal had been “enhanced” by the substantial devaluation of the Rand since it commenced negotiations with GBK earlier this year.
GBK boasts a well-invested estate, with locations including shopping centres, high streets, city centres and residential areas. 93% of the restaurant portfolio has either been refurbished or opened in the last five years.
The business recently concluded an agreement to re-acquire the franchise rights to own and manage the five GBK restaurants in Ireland, which Famous Brands said provides an immediate platform for growth and a significant overseas footprint.
Furthermore, there is opportunity to export the brand to South Africa, which would give it representation in the premium burger fast casual dining category where it does not currently compete. “In this context, we are confident that the existing business model has the potential to double GBK’s restaurant footprint within the next five years,” concluded Hedderwick.