ANALYSIS: The rationale behind TRG’s £559m takeover of Wagamama

The Restaurant Group’s acquisition of Wagamama primarily gives it access to a differentiated restaurant proposition that is aligned to structural growth trends.

Wagamama has a strong competitive advantage as the only UK pan-Asian brand concept with scale, having more than three times the sales of the next largest branded UK operator in Asian cuisine, a category that is fast growing and fragmented.

It is also well-perceived by customers in the UK, as evidenced by consistently ranking in the top three on Net Promoter Score (NPS) among large mainstream brands and achieving high ratings across key customer demographics.

TRG believes that the Wagamama brand is well-positioned to benefit from a number of consumer trends, including the increased focus on healthy options, high interest in Asian food, and the consumer demand for speedy service and convenience through delivery.

The Wagamama brand appeals to customers across different day parts, with a visit split of 1% over breakfast, 35% over lunch, 21% in the late afternoon, 38% in the evening, and 5% in the late evening.

There is also the track record of consistent outperformance to consider.

Wagamama opened its first restaurant in London in 1992 and has achieved more than 25 years of continued estate expansion to 196 directly-operated and franchised restaurants.

In recent years, Wagamama has demonstrated a strong track record of like-for-like revenue growth with 228 consecutive weeks trading ahead of the market. Over this period, the annual like-for-like growth was 9.6% on average, which equates to 8.5% points ahead of the market, according to the Coffer-Peach tracker.

The standalone growth prospects of Wagamama remain highly attractive, too.

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.

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