2016 predictions part four: the future for funding
In the fourth instalment of our 2016 predictions series, Barclays' industry director for hospitality and leisure Philip Richardson considers the future for funding.
There is no doubt about it, restaurateurs and food entrepreneurs looking to carve out a niche and steal market share from the established brands are enjoying one of the most buoyant periods in recent times.
The glowing triumvirate of low interest rates, low oil price, and low interest rates has driven up discretionary spending and restaurants have welcomed this extra revenue with open doors and lots of covers.
It has provided fertile ground to support the rise of a number of top-notch operators that have built up successful businesses and are enjoying a period of rampant, but controlled, growth.
The likes of JKS (with Gymkhana, Trishna, Lyle's and Hoppers in its strong portfolio), along with Giggling Squid, Big Easy, and Sticks ‘n' Sushi are among the newer successful names on the restaurant scene.
Like many other similar businesses that have reached a certain maturity these companies will have to deliver on consumers' ever greater demand for choice by constantly reinventing their offers in order to remain attractive.
The next stage for these restaurant groups involves making the decision between taking on some leverage through bank debt and selling out to private equity. The choice must be one that is truly fit-for-purpose in terms of the future aspirations of the owners.
Giggling Squid had previously used Barclay's debt and more recently struck a deal with PE firm BGF to fully crank-up its growth aspirations and no doubt others will be following its lead in making equally crucial financial decisions.
At this stage in their development it is also important to ensure that their corporate structures are cleaned up. This ensures a fresh start can be enjoyed under the new financial arrangements and that the founders can feel the full benefits of this next stage in their company's growth.
