Investor interest in fast-casual restaurant chains set to soar

By Stefan Chomka , 01-Aug-2011

Related topics: Business, Trends & Reports, Restaurant Trends, Restaurants

A fresh round of investment is expected in the hospitality industry over the next 12 months, in particular in small-to-medium fast casual restaurant chains, with private equity companies and investors acknowledging the sector’s growth potential.

Small fast-casual restaurant groups like Gail's are attracting investor interest

Small fast-casual restaurant groups like Gail's are attracting investor interest

Despite the continued tough trading climate, investors have significant funds at their disposal following a number of years of inactivity and many have earmarked restaurants as the best businesses in which to inject cash.

Recent deals in the sector include Luke Johnson's acquisition of a substantial minority stake in The Draft House , the three-strong London-based pub concept founded by Charlie McVeigh.

The serial investor has also recently bought a majority stake in Ego, later merging it with pizza operator Rocket Restaurants , and a majority holding in the London-based Feng Sushi. In May Johnson also took an undisclosed share of The Bread Factory owner Bread Ltd, which operates London-based bakery and café concept Gail’s.

Similar deals are expected to become more prevalent in the hospitality sector in the coming months as like-minded investors look to take small concepts to the next level of rollout.

“The market is vibrant with new and exciting concepts that have the potential for significant rollout and these businesses in particular are exciting for private equity groups,” says Paul Hemming, partner at corporate advisory company Zolfo Cooper. “We expect to see a marked rise in deals in the next 12 to 18 months.”

Formats most enticing to investors include those operating in the fast-casual arena, particular in city centre locations, that have high turnover and margins.

Restaurant magazine

The August issue of Restaurant magazine speaks to key investors in the sector, including Johnson and Paul Campbell, founder of investment fund Hill Capital, to discover what they look for in a restaurant chain when considering making an investment.

It also offers advice to businesses seeking additional funds on the pros and cons of getting involved with private investors.

Other features in The August issue include an in-depth feature with two-Michelin star chef Nathan Outlaw looking at how the chef has grown to become the leading cook of fish and shellfish in the country, and an interview with one of America’s most famous chefs, Wolfgang Puck, on the opening of his first restaurant in Europe, Cut at 45 Park Lane.

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