Restaurant Stocks on the Menu Again

Investors are rediscovering their appetite for restaurant stocks, after a shake-up of the sector left many investors disillusioned. The departure of PizzaExpress and Ask Central has left a void that is being filled by new entrants, such as Urban Dining, and existing players like The Restaurant Group. This shift in the market comes at a time when the UK trend to eat out is on the rise, with like-for-like sales increases being reported by companies in the sector.

Key Takeaways:

• The Restaurant Group, formerly City Centre, is one of the few sizeable listed companies concentrating on traditional restaurants, with brands such as Garfunkels, Frankie & Benny's, and Caffe Uno.
• Urban Dining has agreed to invest £500,000 to support the company's flotation on Aim, despite not owning a single restaurant, indicating a latent demand for more stocks in the sector.
• The company is backed by two former PizzaExpress directors, Glen Tomlinson and John Metcalf, and plans to acquire small chains of 15-20 restaurants to roll out nationally.
• Urban's business model differs from that of Clapham House Group, which focuses on acquiring concepts at an early stage of development, as seen in its acquisition of the Real Greek and the Bombay Bicycle Club.
• The two companies offer different routes into the restaurant sector, with Urban focusing on acquiring established brands and Clapham House focusing on developing new concepts.

Statistics:

• Urban Dining plans to invest £500,000 to support its flotation on Aim.
• The Restaurant Group's like-for-like sales rose 3% in the first quarter, compared to 2% in the 11 weeks to March 14.
• Whitbread's high street restaurants, including Pizza Hut, recorded a like-for-like sales rise of 4.7% in the first seven weeks of its financial year, compared to 3.1% in the year to March 4.

Sources:

• "Investors find the menu very restricted" by DAVID BLACKWELL, published in the Financial Times.