ANALYSIS: Acquisition to spark the launch of 60 sites and new food-to-go format

The Restaurant Group’s acquisition of Wagamama accelerates the growth potential for both businesses. 

TRG believes that there remains scope for continued like-for-like revenue growth, and that there is headroom to grow the size of Wagamama’s UK estate by approximately 40 to 60 additional restaurants without saturation.

Furthermore, TRG believes that there is an opportunity to accelerate Wagamama’s growth, capitalising on the Enlarged Group’s site portfolio, scale and relationships.

It reckons the enlarged group will be well equipped to address a number of compelling growth avenues, including the further roll-out of the Wagamama brand in the UK, including in the concessions channel and via delivery.

There are also expansion opportunities around international markets and food-to-go.

TRG expects to convert at least 15 TRG sites to the Wagamama brand,  with an expected incremental EBITDA benefit of approximately £7m per annum at maturity.

Furthermore, TRG believes that there is an opportunity to leverage its existing Concessions relationships, including those built through its presence in 14 airports across the UK, to extend Wagamama’s presence in Concessions (currently three sites nationwide).

The TRG Board believes that delivery represents a significant area of opportunity, and Wagamama is already one of the top brands on the online delivery platform Deliveroo.

Following the acquisition, the enlarged group will be well positioned to invest behind structural growth in the delivery space including through delivery-only kitchens (where Wagamama has an early-mover advantage), in digital capabilities and in online brands.

Wagamama has an international presence and proven customer resonance in markets outside the UK. TRG believes that Wagamama can be a ‘calling card’ brand enabling expansion through international Concessions.

Further options for international growth will be explored, considering geographies and customer preferences within each territory, rate of growth and appropriate ownership models, according to the company.

One of the most interesting developments is poised to be around ‘convenience’. TRG believes that pan-Asian food is very adaptable to convenience formats and, as a first step, expects to pilot a food-to-go format in London which would have future application in Concessions.

Following the acquisition, TRG expects that circa 70% of the Enlarged Group’s Outlet EBITDA will originate from high growth segments of the market, namely TRG’s Pubs and Concessions businesses and Wagamama.

The enlarged group will benefit from leading scale, specifically benefiting from buying power, delivery scale, the capacity to invest in growth and market leading operational capabilities.

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