The Restaurant Group (TRG) has laid out the reasons behind the poor performance of its biggest brand, Frankie and Benny's, as it reported an uptick in revenue but a dip in profit in the first half of 2016
Revenue grew to £358.7m in the 27 weeks to 3 July, up 3.4 per cent from £346.9m in the same period last year. However, like-for-like sales were down 3.9 per cent, which the company said reflected a challenging performance in its leisure brands - although this was somewhat offset by a good performance in its pubs and concessions business.
Operating profit dropped 4.4 per cent to £37.5m from £39.2m, while pre-tax profit was down 3.7 per cent at £36.6m.
The company revealed earnings per share declined by three per cent, falling to 14.26p from 14.71p.
The company's share price was up 2.35 per cent in early trading.
Why it's interesting
It's a busy time for the FTSE 250- listed group, which recently appointed ex-Paddy Power boss Andy McCue as chief executive. TRG has also acknowledged that there's further room for improvement - and in its results said it was focusing on the Frankie & Benny's restaurant chain, its largest brand.
The group admitted that, while competition has been growing in the market, its review of the business "indicates that this has not been the major factor behind the brand's weak performance".
There are three main problems, TRG said: the brand has lost "value-conscious customers" because of "significant price increases" and the removal of popular value offers; menus were changed without sufficient testing, meaning several popular dishes were no longer available; and finally, a lack of leadership for the brand over the last two years "resulted in weaker operating discipline and therefore an inconsistent and unsatisfactory service experience for many of our customers".
Following the Frankie & Benny's review, TRG is taking "decisive action", with a number of restaurants set for closure, and a new leader for the chain in place since June.
The company is now switching the focus of its review and looking into its other brands: Chiquito, Coast to Coast, Joe's Kitchen and Garfunkel's.
However, the group isn't totally preoccupied with problems - it plans to open up to 28 new sites in 2016 as a whole, with 30 more in the pipeline for next year, and said trading has been improving in recent weeks.
What TRG said:
"This has been a challenging trading period for our leisure brands, albeit with a good performance from our pubs and concessions businesses," said group chair Debbie Hewitt.
"The board has moved quickly to undertake a review of the operating strategy and we now have clarity on the issues facing our leisure brands, particularly Frankie & Benny's. The brand remains relevant and popular and we are confident that improved performance will be achieved by being more customer-focussed and data-driven, and through better operational execution.
"A new executive team is in place to lead the implementation of this first phase of the review and to apply the learnings to our other brands."
TRG has a lot on its plate if it wants to clean up the mess at Frankie & Benny's - but the company has reason to be cheerful.