Little Chef – past its sell-by date?

Struggling roadside restaurant chain Little Chef was rescued last week just a day after calling in the administrators, but its latest white knight, turnaround specialist RCapital, will surely be its last. After years of turmoil, this looks like the final throw of the dice for one of Britain’s most iconic brands.

RCapital is thought to have paid about £10m for 196 of the group’s 235 restaurants, saving more than 3,500 jobs. Former owner and chief executive Simon Heath, who bought Little Chef for £52m in October 2005 with Lawrence Wosskow, will continue to run the business.

Heath says: “We have been through some incredibly tough times in recent years, but one thing we do know is that Little Chef is a much-loved brand. I have no doubt that we now have a huge task ahead, but this is a British icon which has, despite its chequered past, maintained a level of brand integrity. Albeit out of date, the roots of its offer remain relevant and it clearly has a future in today’s market.” Set up in 1958 and based on roadside diners in the US, Little Chef was well established by the 1980s on roads across the country. In 2002, then owner Compass put 400 of the restaurants up for sale but private equity company Permira bought only 370. Compass closed the remainder and sold them off, and Permira pursued a similar sell-off programme, reducing the number of restaurants to 300 by 2004.

It seems that the Little Chef brand is both its biggest strength and biggest weakness. There is clearly a lot of affection for its “Fat Charlie” logo and the company was forced to abandon plans to slim him down in 2004 after more than 15,000 people signed a petition against the move.

But it is also a brand that appears to have lost its relevance in recent years and has been hit hard by competition from revamped service stations offering healthier, takeaway food. Attempts were made to refresh the Little Chef brand and it began introducing its own healthy options such as salads and jacket potatoes, and installed wireless internet access in its restaurants.

Losing money
However, the problems continued, and Heath and Wosskow were forced to negotiate a controversial sale and leaseback deal on 65 freehold sites in February last year, which raised £60m to pay off acquisition debt and other investments. But the deal saddled Little Chef with huge rent commitments and the business is understood to have lost £3m last year.

Futurebrand marketing and new business director Tim Hill says: “There is a glimmer of hope. The service is not particularly quick and the environment is not that special, but it is what it is and people know that. The problem is that it’s trying to be something it’s not by jumping on the healthy bandwagon. If people want to eat healthily there are places for them to do that, but for drivers who want to take a break and refuel I think Little Chef still has a role.”

Self-parody
Hill thinks the job of the marketing team is more important now than ever before. He suggests decorating the restaurants with pictures of Britain and using someone like comedian Matt Lucas as a spokesman for the brand. “Little Chef sits in that Little Britain world,” says Hill. “The programme is a parody of the British way of life and I would play on that. That’s why people have so much affection for the brand. It isn’t a lost cause but the new owners have to be realistic and admit that Little Chef is not relevant any more.”