Whitbread has decided to sell its Pelican restaurants unit, including Bella Pasta and Cafe Rouge. The Pelican division has consistently failed to meet Whitbread’s expectations. Instead, the high street has become crowded with rival restaurants, leaving little room for growth. Despite a larger number of restaurants, Whitbread may have trouble convincing buyers to pay as much as it did for the group in 1996.
Whitbread has decided to pack in its attempts to boost sales at the restaurants in its flagging Pelican unit. The consistently low margins and slow growth in restaurant chains such as Bella Pasta and Cafe Rouge have finally worn through the management’s resolve. They just take up too much time for too little benefit.
Whitbread has been on a streamlining mission for a year and a half now. It’s already sold its breweries, pubs and Threshers wine shops, as well as a tenth of its restaurants. The company announced last October that it would focus its attention on the faster growing parts of the business and sell off whatever didn’t meet its targets of 5% like-for like sales and 10% profits growth. The Pelican restaurants failed.
But Whitbread isn’t turning its back on all of its restaurant holdings. The company still has faith in Pizza Hut and Costa Coffee, both of which are up for expansion, and the pub-restaurants Beefeater and Brewer’s Fayre, which provided 80% of last year’s GBP123 million restaurant division profits, will be kept. TGI Friday’s is also expected to stay.
The Pelican group has changed a lot since it was bought in 1996. The division has gone from 103 Cafe Rouge and Dome restaurants to 200 outlets including some smaller brands such as Abbaye and Mamma Amalfi.
Despite this, it’s unlikely even to pull in the GBP133 million Whitbread paid for it. Competition is fierce, many of the restaurant sites are leaseholds and the chains have proved unable to live up to expectations. Even Whitbread described the 2.3% margins they command as “unacceptable”.
GBP100 million of the 1996 price was goodwill and there’s just not that much of it around now. Despite its investment in the group, Whitbread hasn’t produced a particularly tempting dish.
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