Leon secures £19m funding towards expansion

By Mark Wingett

- Last updated on GMT

Leon secures £19m funding towards expansion

Related tags: Fast food

Healthy fast food chain Leon is set to open 50 new sites over the next four years after securing a new funding deal worth £19m from bank OakNorth, according to BigHospitality's sister site MCA.

Leon, the John Vincent-­led group, which currently operates 37 sites in the UK and one in Amsterdam, plans to invest the new funding on openings in the UK and Europe, creating 1,000 new jobs in the process.

The company, which is set to break through the £50m­ turnover mark in its current financial year, has doubled its number of sites and increased some store sales by up to 50 per cent over the last two years. It is has a long­-term goal of operating 500 sites by the end of 2026.

Last month, the company opened its first overseas site in Amsterdam’s Schiphol Airport, the success of which has encouraged the brand to open a second site at the transport hub next February.

The group hopes to make its debut in the US next year and earlier this spring signed a five­-year deal with SSP to open sites across UK train stations, the first of which will be at Liverpool Street.

It has further openings lined up in the capital in Eastcastle Street, Brunswick Square and in London Bridge Station. The group also hopes to add to its regional pipeline, with an opening in Manchester mooted.

Commenting on the new funding deal, Vincent said: “We are so happy that people across the country ask us to bring Leon to their towns and cities, and that we have seven hundred young people working with us who want to grow and progress."

Last year, Leon secured a funding package worth £11.5m from new banking partner, HSBC​ to aid national and international expansion, as well as allowing the group to restructure existing debt, but it has now switched to OakNorth.

Unlike many traditional lenders that are currently retrenching from the market since the Brexit vote, OakNorth – which offers business loans – said it was using it as an opportunity to increase its lending efforts and gain market share from larger rivals.

Rishi Khosla, co-­founder and chief executive of OakNorth Bank, said: “When we launched less than a year ago, we did so with the intention of shaking up the UK lending market and challenging the status quo. We wanted to offer the country’s entrepreneurs a banking experience that was dramatically different to that which my business partner and I had encountered as entrepreneurs trying to secure growth capital for our previous venture. We’re therefore delighted to be supporting Leon in its next phase of growth – an ambitious and entrepreneurial business.”

Booming market

The contemporary fast food segment, in which Leon is a key player, is expected to grow outlets by 20 per cent in 2016 and increase turnover by 25 per cent, MCA data has shown. 

MCA’s Contemporary Fast Food Analysis shows the segment is set to be worth £607m by the end of the year, from 497 outlets. It is driving growth in the total branded fast food market, which is due to grow by 5.1 per cent in terms of outlets and 7.1 per cent in turnover by the end of this year.

The segment’s rapid expansion is in contrast to the more sluggish growth of traditional fast food, where a 5.3 per cent turnover increase is almost flat on last year and outlet growth of 3.7 per cent has fallen one percentage point.

The research shows that, while still predominantly London-­centric, the key contemporary fast food brands are increasingly targeting regional expansion. Six out of the top ten brands are expected to have net openings in the regions this year.

Five Guys and Leon continue to drive outlet growth among the leading brands, while the former is threatening to overtake Itsu as the leading brand in terms of turnover if it keeps growing at its current pace.

Contemporary fast food is defined as food served quickly at the counter with a healthier or new cuisine focus or a differentiated take on traditional fast food.

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