Restaurant group has a hunger to expand

Sep 19 2007 By Iain Laing, The Journal

RESTAURANT operator Shire Group has revealed plans to quadruple in size after taking over a chain of London bar and grills.

The Corbridge-based company, which last year doubled in size, has just paid around £6.5m for the Smollensky’s group of nine eateries in central and greater London.

And last night, Shire’s managing director Paul Lilley, who already owns nine bistros across the North of England and employs 450 staff, said he planned to open around 20 new restaurants in the next three to four years.

Mr Lilley, former group finance director of the Noble Organisation, has already raised £8.5m for the expansion and is confident of raising more as it is needed.

He believes the purchase of £9m turnover Smollensky’s is the stepping stone to the much larger expansion as he rolls out its well-established brands of Smollensky’s and Burger Shack.

“The acquisition of the Smollensky’s group of restaurants is an important milestone in our buy and build strategy. The deal gives us more southern outlets, with nine London restaurants, to add to those we have in the Midlands and North-West, and adds a very respected brand to our portfolio. It is great news for our North-East base of operations,” he said.

“The brand is associated with a high quality bar and grill experience. Strong management and the excellent service and discipline we have brought to our other restaurant businesses will make the established name thrive in a new era of ever increasing competition.”

The Shire Group will see its turnover treble to around £14m following the purchase of the chain of two large Smollensky’s bar and grills, in the Strand and Canary Wharf, four smaller Smollensky’s in Greater London, and three Burger Shacks.

He plans to open 12 more Burger Shacks and three more large bar and grills in the City of London, Canary Wharf and the West End.

Mr Lilley set up the company in 2005 to buy the Pastiche Bistro in the Midlands and it currently has six branches of that chain and five of the Le Frog Bistro restaurants in the west of the country, which it bought last year. He wants to increase the 11-strong bistro chain to around 20 branches, principally expanding in the North-West.

He said that despite tough competition in the bar and restaurant sector he is finding business is going well.

“I am not seeing any large degradation of the bottom line. There is over-provision in the market nationally and there are a lot of companies who are getting driven out. That is because their strategy is driven by corporate requirements rather than the requirements of the market.”

Mr Lilley, who is about to become a father for the second time, said he would like to open some restaurants near his Corbridge home but has not yet found the sites.

Newcastle commercial law firm Muckle LLP advised on the Smollensky’s deal, with McInnes Corporate Finance and Richardson Hall Kennedy, which was backed by Octopus Private Equity and Alliance & Leicester Commercial Bank’s North-East Business Centre.

Matt Collen of Muckle said: “The deal offers a new direction for a business established more than 20 years ago and has a great reputation and heritage in the capital. For The Shire Group to be taking the reins is a fantastic coup for the group and we were delighted to be able to provide commercial and property support to Paul.”

Shawn Bone of McInnes Corporate Finance added: “The Smollensky’s acquisition represents a great opportunity for The Shire Group to expand into the London market and develop its footprint nationally. The group’s management team has a real passion for the business and I am sure they will bring that enthusiasm to Smollensky’s.”

David Hall, Richardson Hall Kennedy’s managing partner, said: “This is the fifth major deal that Paul has completed in two years and each one has been bigger than the last.”