Tak­ing on the lo­cal chippy

Wimpy’s recipe for suc­cess heads back to UK

Finweek English Edition - - Companies & markets - ANA MON­TEIRO

FA­MOUS BRANDS (FBR) has been look­ing to en­ter the UK mar­ket for over two years, but has never wanted to go in by open­ing one restau­rant af­ter an­other, as com­pa­tri­ots Spur and Nando’s did.

The listed restau­rant and food man­u­fac­tur­ing busi­ness – par­ent of sev­eral brands in­clud­ing Steers, De­bonairs and House of Cof­fees – has bought a 75% stake in Wimpy UK, the com­pany that started it all.

“We prob­a­bly get at least one re­quest ev­ery two weeks to bring the Steers brand to the UK, but open­ing one restau­rant af­ter an­other is a very dif­fi­cult and slow strat­egy that takes a long time to yield re­sults,” says COO Kevin Hed­der­wick. FBR also con­sid­ers the De­bonairs Pizza brand to be highly ex­portable.

Opt­ing for the Spur and Nando’s approach would have been more ex­pen­sive as the out­lets would be ser­viced from SA, and FBR wanted to be on the ground and man­ag­ing the busi­nesses from day one. “This approach gives us a head of­fice, a foot­print and ac­cess to re­sources from the word go,” says Hed­der­wick. Driv­ing the point home, he asks: “Would you rather take the stairs or go up in the lift?”

At the stroke of a pen seal­ing a £3m (R42,7m) deal, FBR has se­cured a size­able pres­ence in the land of fish ’n chips and döner ke­babs. Wimpy UK com­prises 194 Wimpy out­lets in Eng­land, Scot­land and Wales, and the com­pany runs an­other 20 restau­rants un­der a mas­ter-li­cence ar­range­ment in Ire­land. The busi­ness owns the Wimpy trade­mark in 15 Euro­pean coun­tries, al­though FBR will ini­tially con­cen­trate on the UK busi­ness.

While Wimpy SA has con­tin­ued sell­ing burg­ers and break­fasts un­der its red-and­white ban­ner with much suc­cess, the Wimpy brand in the UK has failed to keep up and now looks tired.

Wimpy restau­rants opened in Lon­don in 1954 (with the name orig­i­nat­ing from J Welling­ton Wimpy, the burger-lov­ing char­ac­ter from the Pop­eye car­toon, ac­cord­ing to Wimpy UK’s web­site).

Grand Metropoli­tan (the one-time par­ent of Pills­bury and Haa­gen-Dazs) bought Wimpy UK in 1989 and be­gan con­vert­ing the Wimpy out­lets into Burger King restau­rants. Grand Met then merged with Guin­ness to form Di­a­geo and in 1990 the re­main­ing 220 ta­ble-ser­vice restau­rants were bought out by man­age­ment, ac­cord­ing to The In­de­pen­dent. This was fol­lowed by a sec­ond man­age­ment buy­out in 2002.

“It’s sad that the Wimpy brand glob­ally has be­come frag­mented over the years,” says Hed­der­wick. “When man­age­ment un­der­took the buy­out in the UK, our view of that sce­nario was that the fi­nanc­ing wasn’t right, with the re­sult that it spent time ser­vic­ing debt rather than grow­ing the busi­ness.”

An­glo­Vaal In­dus­tries (now AVI) brought the brand to SA. In 1996, man­age­ment (led by Christo Calitz) and Ethos Private Eq­uity Fund bought Wimpy from An­glo­vaal In­dus­tries’ Plea­sure Foods, whose other well­known fran­chises, Juicy Lucy and Milky Lane, were sold to Unilever SA’s Ola Ice-cream unit in 1993.

FBR en­tered the pic­ture in De­cem­ber 2003, when it bought Wimpy from Plea­sure Foods. Un­der the guid­ance of Wimpy SA MD Dar­ren Hele (now the head of fran­chis­ing at FBR), the com­pany has grown into a busi­ness with over 450 restau­rants and has de­vel­oped a cof­fee of­fer­ing. Hele will take over from Wimpy UK CEO John Dav­i­son, who is re­tir­ing.

A fur­ther £2m (R28,5m) will be in­vested in re­viv­ing the brand, with the to­tal in­vest­ment funded from FBR’s cash re­serves and debt fi­nance. FBR owns three-quar­ters of the busi­ness, with Hal­i­fax Bank of Scot­land hold­ing the re­main­der.

At the time the deal was an­nounced, FBR is­sued a fur­ther state­ment say­ing it had set­tled its debt with In­vestec for the ac­qui­si­tion of Wimpy SA in 2003. The terms in­cluded a fi­nal resid­ual pay­ment of R9m, to be paid by 30 Novem­ber 2008. In­vestec chose to re­ceive the pay­ment in the form of 5,8m FBR shares at R1,55/share, the rul­ing price in De­cem­ber 2003. With a cur­rent price of around R15/ share, In­vestec is smil­ing from ear to ear.

Hed­der­wick says the next step will be to work out which parts of Wimpy SA’s in­tel­lec­tual prop­erty and strate­gies will be taken over. “We’re not about to re-in­vent the wheel, but we will ex­port prod­ucts such as sauces, uni­forms, crock­ery – any­thing we can se­cure at a bet­ter price in South Africa.”

When it comes to food dis­tri­bu­tion, Wimpy UK is well ser­viced by Bid­vest sub­sidiary 3663 First for Food­ser­vice. “It’s a very so­phis­ti­cated and well-de­vel­oped op­er­a­tion.”

The ma­jor boon from this deal is that FBR has the nec­es­sary in­fra­struc­ture to take other brands to the UK and pos­si­bly the global mar­ket.

We could ei­ther take the stair­case or the lift. Kevin Hed­der­wick

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