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Morning Briefing for pub, restaurant and food wervice operators

Sun 25th Aug 2013 - Breaking News - Risk Capital takes Red Hot majority stake
Risk Capital takes majority stake in Red Hot World Buffet: Risk Capital, the private equity firm headed by Luke Johnson, has acquired a majority stake in Red Hot World Buffet, the restaurant company headed by Paramjit and Helen Dhaliwal. The deal has taken three years to reach fruition and as recently as a fortnight ago there were market rumours that the deal would not happen as the Dhaliwals investigated alternative funding routes. The new funding will pay for restaurant upgrades and pay for an eighth venue. The company was founded by the Dhaliwals in 2004 and its latest opening at Nottingham Cornerhouse is serving 8,000 customers a week. It wants to expand to 25 sites within the next three years. Red Hot World Buffet serves a fixed price buffet featuring cuisines from around the world, including China, Mexico, India, Italy and the US. Red Hot World Buffet operates seven restaurants, four under a company called Helen’s Cuisines and three are operated by a sister company, Passepartouts. Passepartouts reported turnover up 117% to £14,073,957 in the year ended 31 January 2012 and pre-tax profit of £926,557 (2011: £388,856) due to the opening of a new restaurant in Manchester and the full-year effect of a Leeds restaurant which opened in October 2010. Helen’s Cuisines saw turnover rise 10% to £6,484,171 in the year ending 31 January 2012. There was an exceptional item of £742,488 related to the closure of its original Nottingham site, which had traded well but had ended up “off-pitch” as Nottingham city centre developed and was producing small operational losses. The company reported a loss before tax of £1,119,670. In 2011, Helen’s Cuisines reported a pre-tax profit of £435,307 on turnover of £5,871,654. Of the most recent £2.7m opening in Nottingham Cornerhouse, which has 500 covers, Paramjit said: “Everything we’ve learnt at previous venues is going into Nottingham. We want to give chefs the space to perform.” Red Hot World Buffet has evolved over the years – its first restaurant in Nottingham had 160 covers, while the second Red Hot World Buffet, opened in Northampton in 2006, could accommodate 250. Outlets in Milton Keynes, Liverpool and Leeds followed, adding covers each time. Manchester, opened in 2011, has a capacity of 375 and last year added a second floor dedicated to corporate dining and private parties, and serves more than 10,000 people a week. The Cardiff Red Hot World Buffet, also opened in 2011, serves around 8,000 customers a week. The number of dishes on offer is now 300, including more than 40 different desserts, all part of the fixed price offer. Paramjit added: “What we’ve done is take the best aspects of a la carte, and the best aspects of buffet, and create our own version of it. A la carte is high quality food, freshly cooked with a wide choice, and with buffet you have speed and variety. Added to that, people know that irrespective of how much they have, it’s one price. Consumers enjoy the variety, and the chance to make up their own plate of food. The other thing that appeals is the speed.” In an interview in The Sunday Times today, Luke Johnson said: “My sort of investing tends to be at the higher-risk, higher-reward end. I like businesses where, under my ownership, I can see a doubling or trebling of the size.” Referring to Patisserie Valerie, he added: “In 2006 we bought it for £6m. This year, we should make operating profits of £12m. You don’t see that sort of success or growth by playing it safe. Risk involves the possibility of failure. Being able to hold your head up high and carry on, and not retreat and not give up is a part of business and part of life.”

Propel Opinion by Paul Charity: There were very strong rumours in just the past fortnight of the Dhaliwals agonising over whether to sell such a sizeable stake in their business. In the event, the couple has opted to bring Luke Johnson’s experience in growing restaurant businesses on board. There’s no doubting the potential of Red Hot World Buffet. In March, I wondered whether Tesco was being ambitious enough in buying Giraffe when a brand like Red Hot World Buffet can offer consumers a much more varied, exciting experience. Who would bet against a Sainsbury’s or Asda eventually buying Red Hot World Buffet to plug into their edge of town superstores? For now, though, there is a fair amount of bringing the estate up to scratch to be done. The concept has evolved to a powerful iteration at Nottingham’s Cornerhouse but I made a recent visit to the Leeds site and found a sweltering basement site in need of investment. No doubt, Risk Capital’s money will bring the estate to a more uniform standard and allow the opening of an eighth site in Leicester – the next steps before a roll-out in earnest can begin.

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