In particular, the information on this website does not constitute any form of advice or recommendation and is not intended to be relied upon by users for investment decision-making purposes. The net result was that the group reported a modest loss after tax for fiscal 2018 of £150,000 versus a profit of £1.2m in 2017. While top line growth has been impressive at Fulham Shore the bottom line picture has been “messy.” Not dissimilar to a Greek restaurant after a period of plate smashing or an Italian restaurant at the end of an evening. Great food at reasonable prices in good locations. The bottom line, though, is that if I had to bet on one listed restaurant group in the UK it would probably be Fulham Shore. However, I am a bit wary of that approach. Mr Mascoli moved from Naples, the home of pizza, to Brixton and took over a restaurant called Franco’s. Franco Manca owner The Fulham Shore has said it is eyeing expansion opportunities across the UK as the coronavirus crisis pulls rents lower and forces rivals to vacate sites. This is because they are capital intensive and don’t have very high margins. Tripadvisor reviews of Franco Manca are generally positive with the Tottenham Court Road branch scoring 5 out of 5. The company may have the potential for long-term growth if the two restaurant brands can maintain their edge. And your restaurants…). We and our partners will store and/or access information on your device through the use of cookies and similar technologies, to display personalised ads and content, for ad and content measurement, audience insights and product development. Find out more about how we use your information in our Privacy Policy and Cookie Policy. The UK restaurant space in the 1980’s was very different. The restaurant footprint is relatively small and the prices are relatively affordable. This is a huge amount of extra capacity. Fulham Shore generated £55m revenue in the last fiscal year and the group’s enterprise value is £72m. I agree that it is a tough sector, not least given no barriers to entry. But given the current state of the casual dining market I’d rather keep my powder dry and invest once the financials improve – albeit I run the risk of missing out. He should know. Be that as it may, if I had to bet on one company doing well it would probably be Fulham Shore. Clapham House is a salient reminder that just backing an established restaurateur isn’t sufficient. The pace of growth in the short to medium-term is therefore set to be modest than in the last three years. The company’s experienced management team own the majority of the company and clearly want to make a go of it. He started out as a Pizza Express dishwasher and eventually became the company’s CEO. Given the uncertainty in the UK the group is planning to fund new restaurants through internal cash flow. Nine new Franco Manca pizzerias and 3 The Real Greek restaurants were opened in the year to March 2018. The result has been significant restaurant over capacity in the UK. To use an analogy, the fruit and veg in my supermarket is a lot worse than it is in the small fruit and veg market stalls. Franco Manca also has a relatively affordable price point with the cheapest pizza – tomato, garlic & oregano – only £5. The group has also signalled that with more properties coming onto the market it should be able to strike good deals. In the article I could of tried to do a profit estimate extracting a lot of costs related to growth. Turning to the balance sheet and much of the expansion to date has been debt financed. My colleague Michael wrote a review of the restaurant sector in which he covers Fulham Shore link. The main potential route for a high ROCE is to be delivery focused and/or franchise focused. But it added that its Real Greek restaurants elsewhere in the country have performed more strongly, with some regional locations “twice as busy as they were last year”. I saw an interview with Mr Page in which he said the internet had created tough conditions for restaurants. Reasonable trading update from Fulham Shore. For as little as £5.99 a month you can access all of our content, including Premium articles. This was because landlords have turned to restaurants to fill the gaps left by clothes stores etc. There were only a few supermarkets near me when I moved to where I live. The pizza sector is a lot more competitive than it was in the 1980’s and 1990’s. N.b. All rights reserved. I happened to see Fulham Shore CEO, David Page, present at Mello Autumn and hence the writeup. The secret apparently is dealing with suppliers directly in order to lower costs and maintain the quality. Restaurant chains (excluding delivery outlets) are an increasingly difficult sector to make money from. Revenue has increased from £30m in 2016 to £40.4m in 2017 and most recently £55m in the financial year to March 2018. On one occasion this included helping a small producer in Italy to finance his business. The Real Greek food centre serves dishes of Greece and the Eastern Mediterranean. Fulham Shore also has the potential to take its brands overseas if it can attract suitable franchisees. © 2020 Cube Dot Investments Limited. The one reassurance I have with Fulham Shore is that management seem very smart and own a lot of the shares. If there are no barriers to entry you want to be in the leading player. The Fulham Shore plc, 1st Floor, 50-51 Berwick Street, London W1F 8SJ The ebullient Page was expelled from school and sacked from most of his initial jobs. Then we saw Pizza Express open, also ASK, also Strada then also Jamie’s Italian. I’ve looked at Fulham Shore a couple of times and have eaten in their Real Greek restaurants. This website is provided “as is” without any representations or warranties, express or implied. I.e. Andrew Latto, CFA, is an independent financial analyst. The investor Peter Lynch (Fidelity) used to talk about how roll-out concepts are great to invest in. If anyone can make a pizza restaurant work from a financial perspective it should be David Page (as long as he doesn’t get fired….again). However, if I had to back a UK-listed restaurant group and its management I would probably choose Fulham Shore and David Page. The restaurant business in the UK is, however, an increasingly challenging place to make money in. Intuitively it feels like it could be a goer. The increased revenue has been generated predominantly from a slightly greater number of transactions in both of our businesses and is driven by menu innovation, the quality of food, the value of our propositions and dedication of our team.”. The group is currently expected to generate £71m in revenue in the current fiscal year. The group also reported a “one off” impairment charge on property, plant and equipment of £867k in fiscal 2018. Or at least there are so many of these kinds of outlets that we are spoiled for choice. With relatively few The Real Greek outlets the assumption might be that this brand is less successful. Page also founded restaurant group Clapham House whose main brand was Gourmet Burger Kitchen. People can often get great vouchers to use at Pizza Express. (You are not a clueless cretin Michael…..despite what your bio says….you clearly know your onions!!!! I have since seen four or five new small to medium-size supermarkets open. It is not a sector that it is possible to be extremely profitable in as a restaurant group. There does, however, appear to be a profitable business buried beneath the sourdough. This is a formula that should win the hearts and minds, or stomachs and wallets, of Franco Manca’s customers. This is not least because the management of Fulham Shore own around half of the company. However, trading in a sector like this is relatively fickle and with Brexit just around the corner…. Franco Manca also won an award from Yelp in 2016 as the best Italian restaurant in the UK. First let me sell you on the prospect of a pizza at Franco Manca. He was recently in charge of UK research for Fat Prophets. Just looking near me and previously there were a few high quality local pizzerias. Franco Manca was started by Giuseppe Mascoli in the 1990’s and the brand does feel authentic. Sales lifted after reopening as the Eat Out To Help Out scheme helped to boost takings in August, the company said. With regard to recent trading the group stated in August that: “There have been encouraging revenue increases in both Franco Manca and The Real Greek in the first 21 weeks of the financial year. What do we know about the Christmas bubble rules? With the pace of expansion slowing down we should see a reasonable bottom line result in the current fiscal year. If you did can we have a staff meal there?). If a restaurant concept can work in a competitive city like London it should work elsewhere, or at least you would hope so. Fulham Shore reported pre-opening restaurant expenses of £1.2m in fiscal 2018 and £1.9m in fiscal 2017. The group had 42 Franco Manca restaurants in the UK as of August 2018 and the majority are in London. Cube Podcast #1: Interview with Duke Royalty (DUKE), Anglo African Oil & Gas (AAOG) – Multi-horizon well with big speculative upside, Cube Report (30 Oct) – FTSE ends October on a scary note. Sourdough is slow rising and is made every day on site. Fulham Shore’s two restaurant brands appear to be popular with Joe Public and they both have scope to expand. Fulham Shore had 58 UK restaurants in August with this made up of 42 Franco Manca outlets and 16 The Real Greek outlets.

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