Whitbread is considering selling some of its restaurant chains. The restaurants are currently failing to hit Whitbread’s 5% growth target, so risk joining its pubs and brewing business in being sold off. However, some chains are doing substantially better than others. While Bella Pasta and Cafe Rouge could well be on the way out when the group finishes its review in autumn, the rest of the unit may be spared the ax.
The next few months are going to be decisive ones for the restaurant brands nestled in Whitbread’s portfolio. The leisure group is understood to be considering the sale of some of its restaurant chains as part of a strategic review that will be completed this autumn.
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Whitbread currently owns 930 restaurants, some of which are performing significantly better than others. In the quarter to June 2, like-for-like sales at the group’s high street chains rose by just 2%. This increase was helped by good growth at Pizza Hut and Costa Coffee, both of which are expected to be safe from the cull. The necessary growth rate is expected to be at around 5%, below which Whitbread will be considering a sale. Cafe Rouge and Bella Pasta have both been underperforming and are expected to be put on the block.
Whitbread first announced the review of its restaurant business last October, and decided to sell 140 sites, or around 10% of its restaurants, as a starter. The pub estate and brewing business also went last year, as the company chose to focus instead on its hotel and leisure divisions, including Marriott hotels and David Lloyd Leisure health clubs. Whitbread also expressed plans to increase the number of Pizza Huts and Costa Coffee shops to around 500 each.
While the sale of Cafe Rouge and Bella Pasta seem likely, the future of some of the other businesses is not so sure. The Beefeater chain saw solid sales growth of 4.7% while Brewers Fayre had sales growth of 3%. While this is less than the expected target, the two restaurants provided a big chunk of last year’s GBP123 million restaurant division profit. The two chains, as well as the Costa and Pizza Hut outlets, would be positive assets for Whitbread to keep if it decides not to abandon the restaurant business altogether.
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