Exclusive – Azzurri Group enters Mexican fast-casual market with Boojum acquisition:
Azzurri Group, the ASK Italian, Zizzi and Coco Di Mama operator, is to broaden its portfolio and enter the Mexican-themed fast-casual restaurant market, with the acquisition of the Belfast-based burrito chain Boojum, Propel has learned. The Steve Holmes-led Azzurri has acquired a controlling interest in the 14-strong Boojum from Renatus Capital Partners, for an undisclosed sum, and will now look to help the David Maxwell-led business grow both in Ireland and in Great Britain, where it hopes to make its debut before the end of this year. Boojum first opened in Belfast in 2007. In 2015, Renatus Capital Partners and the Maxwell brothers – David and Andrew – partnered to acquire Boojum. Today Boojum employs more than 300 staff across its 14 sites. Managing director David Maxwell, who remains a shareholder, and the management team will continue to run Boojum, and oversee its expansion, which includes three new sites in its openings pipeline in Ireland. Propel revealed last spring that Boojum had appointed advisors at PwC for an equity raise in support of its expansion plans, as it looked to become the leading burrito brand in the UK and Ireland. It is thought Boojum has received interest from financial and strategic parties over the past 18 months. It is thought the brand’s initial focus for its launch in Great Britain will be in the north of England and that Azzurri believes there is scope to open five or six Boojum sites a year in a market that is “very much under-served”. Holmes said: “Boojum is a really strong business, with devoted customers and an exceptionally talented team. By leaning into Azzurri’s financial strength and platform, Boojum can seize the massive opportunity in the Mexican fast-casual segment. Boojum is a really good fit for Azzurri as the business will add a new dimension to our portfolio given it offers a different cuisine, a different occasion and serves a younger demographic. We know the Great British market well and are looking forward to working with David and the team to deliver their growth plan.” David Maxwell added: “We are excited by the opportunity to join the Azzurri family and are looking forward to the next chapter in our history. I would like to thank our team for their hard work and commitment. Since Boojum was founded in Belfast in 2007, we have become Ireland’s most loved Mexican restaurant chain. We look forward to working with Azzurri to successfully establish Boojum across the Irish Sea.” For the 52 weeks to 26 June 2022, Azzurri reported total revenue of £235.9m (2021: £116.9m). The growth in sales helped the business post Ebitda for the year of £25m (2021: £5.4m) and a pre-tax profit of £2.7m (2021: loss of £42.3m). Operating profit stood at £5.7m (2021: operating loss of £28.7m), while net cash inflow from operations was £27.4m. Azzurri Group features in the Propel Turnover & Profits Blue Book. Its turnover of £235.9m is the 36th highest in the database. The Blue Book ranks companies by turnover, profit and profit conversion, listing directors’ earnings for the past five years. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email firstname.lastname@example.org to upgrade your subscription.
Comment by Propel group editor Mark Wingett, including interviews with Azzurri chief executive Steve Holmes and Boojum co-founder David Maxwell:
“We’d still like to open more ASKs and Zizzis in the next 12 months, but the current market dictates you need to apply some caution. I think we’ll see how we trade in the first part of 2023. We’re still looking for sites, but we need to see how we get on during that period first. We are opening a Zizzi in Belfast next March/April, in the new Odyssey scheme. That’s the only restaurant we’ve currently got opening in the first half of 2023 at the moment.” Never one for grand sweeping expansion statements, when speaking to me last November, Azzurri chief executive Steve Holmes was taking his usual pragmatic approach to where he saw his company’s and the UK’s casual dining market being in the first half of this year. His caution has been born out to be correct. That site in Belfast has opened and the business hopes to open its first new ASK in four years by the end of 2023, while a couple more Zizzi openings are also being evaluated, but Holmes was aware the circa 215-strong business needed to continue to evolve, to find another growth brand, alongside its Coco Di Mama concept. One away from the currently under pressure casual dining sector that gave it the ability to provide a point of difference and appeal to a new demographic. Enter, the Belfast-based Boojum.
Holmes says: “Well first of all it is an exceptional business, with great site economics and a talented operator. We spent some time over in Ireland with David and what impressed us about the Boojum businesses is that we think it’s got the best quality burritos in the market. Really great value for money. The stores are incredibly busy and they've got a really committed and loyal customer base. It's almost revered in Ireland by its customers. So, we were very, very impressed by the business itself and how it performed and David is keen to try to bring the brand to Britain and we know one or two things about operating restaurants here, so it felt like a really nice fit for us. It’s got a big delivery business and Coco does quite a lot of delivery as well so we are familiar with that. And there's obviously synergies involved when you acquire a business around something like that. It also has a loyalty app and we have just launched our Zizzi Zillionaires programme and it's all proprietary. We build our own technology and Zillionaires app is our proprietary app. So, we saw a real opportunity to work with David to develop his digital loyalty programme and effectively take that in-house as well and to grow that as well. Culturally we're very aligned. We think we can add value to its business in more ways than just sort of financial if you like because of our expertise in digital procurement, property in the UK, etc. So, we think we can add quite a lot of value to Boojum as it grows and I think that's what David hopefully sees as well. Boojum is the market leader in Ireland by a long way and we think it has got good potential to be able to do that over here.”
When TowerBrook Capital Partners invested in Azzurri in summer 2020, it was always with an eye on look for additional complimentary businesses, but this is the first one outside the Italian category for Azzurri – discounting its acquisition of salad chain Pod, which on the whole was used as a way to boost the Coco pipeline in central London. Holmes says: “That’s another thing we liked about it. Azzurri is a platform and we operate ASK, Zizzi and Coco independently and add value from our Azzurri central services. We have been looking to make acquisitions, and we like the Boojum business because it's a different cuisine type – we've never been wedded to Italian, it's just a coincidence that we have three Italian businesses. So, I like the fact it's a different cuisine. I think we like the fact it attracts a younger demographic. It's a different occasion. So, it's another fast-casual business similar to Coco but a younger demographic, predominantly students, young professionals, and that's a different demographic to the ASK and Zizzi businesses. So, it ticked a lot of boxes from a portfolio perspective. Then obviously we thought we could add value to support its growth in Britain as well, which is obviously quite a key part of the strategy.”
Maxwell believes the combination of the Boojum brand and proposition of Azzurri’s platform makes for a “great opportunity”. He says: “Obviously the Azzurri platform is perfect for us in terms of helping us in areas where we expect to see some challenges, when we are rolling out in Britain. We've been talking about this for a while, but we're also quite very pragmatic and I think timing is important. The Boojum brand today is as strong as it's ever been. We're performing at a level that most Mexican fast-casual operators are not and we see immense opportunity in the British market, across many levels, with property being one, with access to good units. We're just excited to introduce what we do in that space, and can see how the brand can thrive.”
In terms of the Irish growth story for Boojum, it is a brand that has been adopted by students. Maxwell says: “It was a brand they fell in love with and as they matured and went on about their professional careers, they've stuck with us. Over the last number of years, we've been able to attract a younger demographic, but our strategy will be to target those student-driven locations and effectively replicate the journey that we had in Ireland but obviously now armed with a huge amount of data, due diligence, the support of the Azzurri platform, and a really ambitious team of people around the table who want to do something really meaningful with the brand over the next number of years. Ideally, we will run hard at this and try and get some momentum into the plan early but again, we’re all experienced operators now and we will be making the right decisions and it will be about quality sites not necessarily quantity.”
I understand the company’s average store sales have been north of £40,000, with its top performing sites, with the VAT adjustment, often achieving sales in the “high £50,000s”. The brand’s digital sales are a significant part of the group’s sales mix and the company sees this as a part of the market it excels in, and it expects that to be the case in Britain as well. Maxwell says: “So when we talk about Boojum we think about versions – version one being the founder story, and version two the growth phase in Ireland. Version three is being the kind of optimised version of Boojum, with the British roll out. We've been working on those foundations and clearly we have had an extended window of planning around that optimisation journey but we feel that the knowledge that we have today, the way the business is performing, and the efficiencies that we’ve been able to find over the last number of months and years, and the knowledge we've been able to gather, about where we want to go, will absolutely position us to succeed. Again, marry that up with the specific knowledge that Azzurri has, the services and support it can provide, and I think that's a really good match. We think we’ve found a partner who shares a lot of our values and operates at a level we like to operate at. We're really excited about the opportunity but also excited about the team of people that we've been able to fit around that opportunity as well.”
Azzurri isn’t the first among its peers to look at diversifying its brand portfolio. Big Table Group – the Café Rouge, Bella Italia and Las Iguanas operator – acquired Banana Tree, whilst last summer The Restaurant Group (TRG) made it move into the Mexican food-to-go market with the £7m acquisition of Barburrito. On Azzurri’s deal with Boojum, TRG’s chief executive Andy Hornby’s point from its own acquisition still holds true – with fast-casual/food-to-go, a sector that is more recession proof, with a lower price point. On Boojum, Holmes says: “It's more affordable, it's more accessible and it's more every day. It's not quite quick service restaurant but it's more in that direction than full service. I think that makes it more robust and more sustainable, certainly more recession proof. It’s been trading very well over the last 12 months and more. It also adds another little bit of diversity to our group as well.”
As mentioned previously, Boojum does very well in student locations, with young professionals in Belfast, likewise in the regional towns in southern Ireland. On expansion in Great Britain, Holmes says: “I think it’ll try and replicate that strategy. It's worked for it in Ireland, so I think we'll try and replicate that over here, with potentially northern cities to start, with students, young professionals and some workers as well. So, Leeds, Manchester and Sheffield feel like the right locations to start with.” And what about the overall size of the prize, with the brand set to come up against the likes of the aforementioned Barburrito and current market leader Tortilla? Holmes says: “This is a market entry in many ways, and we want to make good site selection decisions. We will certainly look to open one before Christmas, two if we can. I see this as comfortably being able to do five or six sites a year, and we have the opportunity to do more in Ireland. We think this sector is under-served. It's a delicious cuisine and it’s very good value for money. The Boojum product is particularly special in that it marinates its own meat, makes its own sauces and I think that quality comes through in its product. It's very good value for money and it travels very well and is very healthy and sustainable. People can customise as well and all those trends remain popular at the moment.”
Tortilla remains the category leader in the Mexican food-to-go sector and hopes to translate that success across into Europe over the next few years. However, it will be aware that with the economies of scale and investment that TRG and now Azzurri can bring to the table, it will now have serious competition when it comes to being the go-to brand for landlords looking to provide a point of difference in their fast-casual/grab-and-go estate mix. I am sure it will relish the challenge, with plenty more white space for all three brands to go after, whether that is here or internationally. Is it a further sign that M&A is returning to the sector? Trade buyers certainly remain the main players currently – if the right strategic opportunity stacks up. So, will Azzurri stop at Boojum? Holmes says: “We keep our ear out and we are keen to meet people. We set Azzurri up to be like an investment platform. So, technically, yes. The more businesses you can add to that platform, potentially the better.” Holmes will also be aware there is only so much more runway for his two core brands – ASK and Zizzi – in the current market, and with the debate on how big casual dining brands should be ongoing, although both continue to perform robustly, and the latter’s new local concept continuing to gain traction. The business currently operates circa 135 Zizzi sites, with a spend per head of around £19; circa 65 ASK restaurants, with a spend per head of around £20; and 16 Coco di Mama stores and 130 delivery kitchens, with a spend per head of around £5. Further openings for the latter brand are in the offering, including a second regional site. With Coco and now Boojum, the business is moving to future proof its wider estate both in the short and long-term.