Taking Away the Competition: Boparan Restaurant Group rescues half of Carluccio’s struggling sites in £3.4m buyout
June 27, 2020
2 min read
What's going on here?
Carluccio’s, one of the first casual dining chains to fall into administration due to the pandemic, has been purchased by Boparan Restaurant Group (“BRG”). Around 30 of Carluccio’s 70 UK sites will be acquired, keeping 800 jobs. The remaining staff will be laid off, and sites closed or sold.
What does this mean?
BRG is part of a group of companies that includes 2 Sisters Food Group (a major chicken supplier of UK caterers and supermarkets), Fishworks and Ed’s Easy Diner restaurants. It believes the acquisition is in line with their growing restaurant group and they are allowing the 30 sites acquired to operate under Carluccio’s brand.
The deal is surprising, considering both BRG’s restaurant business and Carluccio’s have struggled over the last few years. High operating costs including rent, and increased minimum wages, combined with a surplus of casual dining chains, such as Prezzo and Jamie’s Italian were competing for market share, which depleted their profit margins.
BRG’s holding company also reported a 17.4% decline in annual revenue and expects a major debt refinancing ( replacement of an existing debt with another debt that has better terms and conditions) in 2021. So, their acquisition of Carluccio’s during hard times is unexpected.
What's the big picture effect?
Restaurants and pubs across the UK have been reluctant to reopen during the pandemic due to social distancing. Consumers are likely to remain reluctant to return until the declaration of a vaccine or a universal tracking and testing programme, for fear of infection. Also, with mandatory requirements like face masks and six-foot social distancing, eating out is more of an inconvenience than a leisure activity. BRG will have to redesign its layouts for Carluccio’s restaurants, designed for speed and compactness, to meet governmental distancing requirements.
More importantly, operating costs continue to remain substantial despite government funding to keep wages being paid, whilst the fall in consumer spending, due to fewer customers eating out, means revenue is low. Reopening dine in facilities is not possible nor profitable during the crisis, and some restaurants have reopened as takeaway only.
This is why BRG’s acquisition of Carluccio’s is questionable. The acquisition could place pressure on BRG’s already strained financial position with its struggling restaurant operations. The upside however, is that the strategy is likely to create long-term gain. Carluccio’s is a well-branded restaurant chain with a loyal customer base. After the pandemic clears, consumer demand for its dine-in facilities will rise once more, allowing it to employ more staff and re-expand its number of outlets. This in turn may give BRG the turnover boost required to pay off debts and increase its share in the casual dining market.
Unless BRG can adapt Carluccio’s outlets to re-instill confidence in consumers, and market the Italian chain in a manner that demonstrates health and safety is incorporated into their operations, the future for their casual dining chains may look bleak.
Report written by Evania D’souza
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