Taking on the local chippy
Wimpy’s recipe for success heads back to UK
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