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The Restaurant Group is finalizing a deal to sell the Frankie and Benny’s and Chiquito’s restaurant chains to the owner of Café Rouge, the latest concession to activist investors pushing for a shakeup at the troubled casual-dining operator.
TRG, which also owns Wagamama, said in a statement late on Saturday it was in “advanced discussions” with The Big Table Group, the company behind Café Rouge, Las Iguanas and Bella Italia, about the “potential divestment of its leisure business”.
The group’s leisure division, which includes Frankie and Benny’s and Chiquito’s, has been TRG’s worst-performing division. It is the only division to face a sales decline this year, with year-on-year sales down 3% in the 34 weeks to August 27.
By selling the leisure unit, TRG management hopes to calm activist investors, including Hong Kong hedge fund Oasis Management and US funds Irenic Capital Management and Coltrane Asset Management, who have criticized the group’s depressed share price and called for a change of direction. . Collectively, activist investors own more than a fifth of the stock.
One TRG investor said the asset disposal was “generally welcomed and a good first step” in making the rest of the group “more attractive” to private equity or other buyers. Another investor said selling the unit “doesn’t help leverage” because the amount likely to be gained is small; management has committed to reducing net debt from more than 5 times earnings to 1.5 times by the end of 2025.
TRG warned that the deal could still fall through. “While discussions are ongoing, there is no certainty that a transaction will result, nor the final terms of any such transaction,” the group said. TRG declined to comment on the size of the deal.
If the deal goes ahead, The Big Table Group, owned by private equity firm Epiris, will add 75 restaurants to its portfolio of more than 160 restaurants, employing about 3,000 people. Epiris declined to comment.
As the only publicly traded casual dining operator, TRG has become emblematic of the struggles of mid-market restaurant chains dealing with soaring input costs and tepid consumer demand.
In a rare bright spot, TRG raised its profit forecast earlier this month amid strong earnings and revenue. But the group still faces continued pressure from activist investors, who increased their stake in the company after Columbia Threadneedle Investments, TRG’s former largest shareholder, cut its stake from 16% to about 10%.
Earlier this month, TRG President Ken Hanna announced that he would be leaving the organization before next year’s annual meeting, citing “personal reasons.” This follows a vote against Hanna’s reappointment to the board at this year’s annual general meeting, while Irenic Capital called for his resignation over corporate governance shortcomings.
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