Restaurant Group PLC on Monday confirmed it has agreed to sell its ‘challenged’ Frankie & Benny’s and Chiquito chains to the owner of Bella Italia, Las Iguanas and Banana Tree, saying this will reduce its debt and improve its profit margin.

The buyer, Big Table Group Ltd, will pay a nominal £1 for Restaurant Group’s loss-making Leisure business and will receive a ‘contribution’ from Restaurant Group of £7.5 million.

Restaurant Group said the disposal of its Leisure business, which consists primarily of 75 Frankie & Benny’s and Chiquito restaurants, is expected to complete at the start of the fourth quarter of this year. It already had been in the process of closing loss-making sites in the division, and any sites already closed will remain the responsibility of Restaurant Group.

Big Table is backed by private equity firm Epiris LLP, which in the past has invested in Hotter Shoes and Hollywood Bowl Group PLC. Big Table operates 160 sites under the Bella Italia, Las Iguanas and Banana Tree brands.

‘Creating, developing and acquiring brands that complement our existing portfolio whilst offering widespread consumer appeal is a fundamental part of our growth strategy,’ said Big Table Chief Executive Officer Alan Morgan.

Restaurant Group will consist of three divisions after the sale: Wagamama, Pubs and Concessions.

It said the disposal will ‘significantly accelerate’ its goals of improving margin and deleveraging. The deal will results in a ‘minor’ working capital outflow in 2023. After that, adjusted earnings before interest, tax, depreciation and amortisation margin is expected to improve by one full percentage point in the first full year after the sale, while lease liabilities are expected to be reduced by about £50 million.

The board is continuing to actively explore its strategic options to further accelerate margin accretion and deleveraging, Restaurant Group said.

The deal announced on Monday continues the changes at Restaurant Group. On Friday, it said Chair Ken Hanna will step down at the annual general meeting in 2024, having been in post only since the start of 2022.

Restaurant Group shares were up 5.0% to 49.85 pence early Monday in London.

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