You put the house back on the market at twice the price you paid for it barely six months earlier. Out of the blue, a rich Italian family turns up and wants the house. You can barely believe your luck! Not only have you dodged a bullet, you are going to make a packet from the sale, too.
You sit down across the table from your Italian buyers with a big smile on your face. But just as they are about to put pen to paper you stop, look them in the eye, and say: 'Of course, the whole deal is off if you don't agree to keep calling the house Dunroamin.'
It sounds like lunacy, but it is exactly the position iconic British brand Little Chef is in. Founded in 1958 as an 11-seater snack bar in Reading, Little Chef now has 195 outlets, 3500 staff and, in recent years, more owners than hot dinners. Everyone from Granada to private-equity firm Permira has had a bite.
It was bought in 2005 by its chief executive Simon Heath and catering magnate Lawrence Wosskow for 拢52m from Travelodge. Despite bold revitalisation plans, the business floundered, with rent outstripping revenue by millions. Little Chef went into liquidation in January and was snapped up by turnaround specialist R Capital for 拢10m.
It's here that the story takes a couple of bizarre twists. First, the super-rich Benetton family emerge as interested buyers. Sadly, not because of an ambitious plan to co-brand its fashion stores with roadside eateries but because the family also owns the Autogrill European service station brand. Apparently the Benettons are prepared to pay the asking fee of 拢20m to acquire Little Chef and rename the properties under the Autogrill masterbrand.
In what the papers are calling an 'eccentric move', R Capital has made the retention of the brand name and its 'Fat Charlie' identity a non-negotiable part of the deal. 'You can buy it, but you cannot change it' is the message. A source in The Daily Telegraph was quoted as saying that R Capital 'wants to sell to a buyer who cares as much for the heritage of Little Chef as it does'. The source added that 'the firm is still at the table with Autogrill seeking assurances that it won't change the name of these restaurants and rid the country of a British institution'.
Little Chef marketing manager Cathy Stevenson took heart from this development. 'Little Chef is an iconic British brand and a lot of our staff have invested a great deal of time and effort to revitalise the logo over the years,' she said. 'It would be a shame to do away with it and I can imagine that it would engender opposition.'
Alas Cathy, that is not what is going on here. R Capital might cite brand equity and patriotism as their motivations but, in reality, I suspect this is all about the brutal business of divestment. For starters, there is no legal precedent for selling a brand on the condition that its identity remain protected in perpetuity. Once an owner takes possession of a brand they can, quite legitimately, do whatever they wish to the logo or name.
I suspect the real story here is a savvy company drumming up publicity about its desire to sell, the fact that it has a potential buyer in place, and that the asking price is 拢20m. Marketing doesn't just work on everyday punters. It can be just as effective on the people who buy businesses too. R Capital wants a bidding war, not a polite Italian deal. It might just get it.
30 SECONDS ON ... LITTLE CHEF'S OWNERSHIP CHANGES
- Caravan manufacturer Sam Alper opened the first Little Chef in 1958. By the late-60s, it had become part of Gardner Merchant, which merged with Charles Forte's empire to become Trusthouse Forte.
- In 1996, Granada mounted a hostile takeover for Forte and converted its Happy Eaters to the Little Chef brand.
- Following a merger and demerger, Little Chef ended up as part of Compass Group in 2001. Permira then bought the chain as well as Travelodge in 2002, before selling it to the Wosskow-fronted The People's Restaurant in 2005.
- Changes introduced by the group included the opening of 'grab 'n' go' Coffee Tempo! shops within bigger branches and the introduction of a takeaway menu to appeal to customers who didn't want to hang around. It also slashed prices.
- R Capital paid just under 拢10m for the chain on 3 January 2007.