Wagamama: a story of international scope

The British restaurant scene is no stranger to overseas investment, mainly in the form of global private equity houses. Lion Capital, Wagamama’s current backer, works out of New York as well as London.  But why shouldn’t a strong UK-based operator with an established international presence be of interest to one of the big, particularly American, casual dining groups?

UK concepts have been proving they can cut it on the international stage, even if British-based investors have been generally negative about overseas opportunities. Whitbread’s coffee brand Costa, in particular, has led the way. But Caffe Nero, Gourmet Burger Kitchen, Yo! Sushi, Ping Pong and, of course, Wagamama are among others to grab footholds. The international potential of British-born brands should be taken more seriously.

The current deal activity in the UK market will have encouraged many seeking to exit their casual dining investments. Last week, we had Carlson, the US brand owner, showing its confidence in the British market by buying the 60% share in TGI Fridays UK business that it didn’t already own. See Carlson to invest US$100m in TGI Fridays UK business

Then we had renewed rumours that Nando’s parent Capricorn was the party behind an approach for Clapham House, owner of Gourmet Burger Kitchen (GBK), in which it already has a stake. See Nando’s parent circles Clapham House. Finally, we had the Wagamama revelation, see Wagamama up for sale. Although, the domestic audience will the one most buoyed by these news stories, don’t ignore the wider significance.

Nando’s, for example, has made no secret of its growth ambitions. Insiders speak of the potential for 700 sites in the UK and 2,000 in the USA. Buying GBK would not be just about Britain either.

The British media regularly gets excited about the prospect of US chains coming to the UK, but the success rate for anything other than fast food brands is poor - TGI Fridays excepted. The chances that Chipotle, the fast casual burrito business, will win over here are actually good, but it could have been no surprise when the plan for Applebees to open in London fell through. It, along with many of the old-time restaurant groups, has its own significant problems back in the States. Romano Macaroni Grill, for example, has just put a stop on foreign franchise growth.

Those US companies are more in need of fresh ideas and concepts, even if imported, than we are of another American dining chain.

The businesses that look destined to work best, either domestically or on a broader stage, are those that fit on the fast casual end of casual dining. The simpler the operational model the better. The less the complexity, the more likely a concept is to be scaleable and ultimately saleable.

The likes of Wagamama, Nando’s, GBK and Costa all fit the bill – and who knows the backing they will attract to achieve their full potential?