Charity: Laurel's fast-casual dining future

Tycoon Robert Tchenguiz was on the receiving end of more press coverage than usual in the past fortnight.

Much of the focus was on his financial position in the wake of the derailment of the Sainbury's and Mitchells & Butlers deals, both of which count as very substantial setbacks for the Iranian investor.

But there was also coverage of his Laurel Pub Company, where a flotation of the restaurant division could be on the cards for the back end of 2008.

It's at Laurel that a coherent and compelling investment strategy, primarily based on fast-casual dining, has emerged this year.

It's worth recalling, though, how unusual a route Tchenguiz has taken to get to this position. The company, founded in December 2004, represents an investment by Tchenguiz of about £557m in acquiring assets; Laurel, the high-street remnants of Whitbread, cost £151m, Yates cost £202m, 98 sites out of SFI cost £80m, and La Tasca was acquired for £124m.

From each acquisition has come something that's helping pave a future for Laurel, together with, in most cases, a fair smattering of "issues".

From "original" Laurel, the contribution is cash-generative high-street sites and many a well-sited retail box ideal for conversion to one of the drive brands.

The Yates deal has provided the company's drive wet-led brand, Yates itself, and Ha Ha Bar & Canteen/Grill, which has a solid future in the fast-casual dining side of the business with 27 or so sites.

The SFI deal provided the Slug & Lettuce brand, due to hit 90 sites this side of Christmas. And the La Tasca buy-up provided one more highly-attractive option for leasehold sites in need of a different market position.

The aforementioned "issues" warrant acknowledgement. Laurel's still trying to sell a number of dud wet-led leasehold sites and, in the view of some, may have bought too much of SFI, especially at an average of £816,000 per leasehold site. Its wet-led segment will also, no doubt, be feeling the pinch in the smoke-ban era.

Ian Payne​

The arrival of Ian Payne as chairman and Paul Symonds as chief executive in 2006, though, allowed the crystallisation of the current coherent strategy. (One rumour is that such was the confusion at Laurel in early 2006 that consultants' advice doubting the future of Slug & Lettuce was being listened to).

Clearly, Tchenguiz has been prepared to stump up considerable capex funding to allow Laurel's transformation.

"We've had fantastic investment support from shareholders,"​ says Symonds. This calendar year will have seen up to 60 major refurbishment schemes, with some smaller ones and estate-wide smoke ban preparations.

Buoyant mood​

The mood at Laurel is now pretty buoyant. Food sales at Slug & Lettuce have shown 40% growth by volume this year, boosted by new openings and much-improved menus. Slug & Lettuce could well hit the 125-site mark from site cannibalisation alone.

A recent issue of Property Week included a Laurel advert for Slug & Lettuce sites that named 75 locations, of which one third were in London.

Symonds talks of there being "masses of growth opportunity"​ for the brand.

Likewise, Property Week had an advert for La Tasca sites that included 40 target locations.

Loch Fyne​

Laurel's fast-casual dining segment will hit 200 sites by February 2008, with 280 sites possible from internal conversions, according to some estimates. Confidence is such that Laurel had a look at Loch Fyne before it was sold to Greene King.

"At the right price, I'd have loved to have gone for it,"​ Symonds has stated. (Greene King's keenness to buy Loch Fyne, where takings average £28,000 a week per site, to create a new option for its vast property portfolio is reminiscent of the logic behind Laurel's La Tasca deal).

Talk of a flotation for Laurel's restaurant business next year is, of course, premature.

Nobody can be certain of the state of the public markets next week, much less next year.

But with underlying house earnings across the business already at an estimated £60m and a locker full of options for under-utilised sites, Laurel's opportunities outnumber its problems.