Famous French restaurants fight crisis with cut-price steaks

Alice Cannet and Noëlle Mennella | Reuters | Fri Mar 16 2012

Paris, March 15, 2012

Restaurant chain Groupe Flo, which owns some of the most famous restaurants in France, will try to lure cash-strapped consumers with low prices and loyalty offers to counter the effects of the economic crisis, its chief executive said.

The owner of prestigious Parisian brasseries such as La Coupole and Le Vaudeville was badly hit by the 2007-2008 subprime crisis, with its stock price tanking from more than 13 euros a share to less than 2 euros early in 2009.

Its market value now stands at 174 million euros ($227 million).

A gradual recovery in 2009-2010 was hit by the euro zone crisis, with sales going downhill again from August 2011.

Sales have picked up again from this month, the CEO said, as the worst of the European crisis seems to be over.

"We want to have an aggressive commercial strategy because there is a real purchasing power problem today, particularly because of rising fuel prices," Dominique Giraudier told Reuters in an interview.

Giraudier now expects consolidated sales in the first quarter to fall 1-2 per cent, compared with a 5-10 per cent drop observed in the overall French restaurant market. Groupe Flo operates 310 restaurants in France.

"We are in a logic where we want to gain market share in 2012," he added. The firm hopes to conquer a 5 per cent share of the French market in four to five years, up from around 2 per cent last year.

Groupe Flo's Hippopotamus brand, which represents half of its sales, overtook privately owned Courtepaille last year to become France's second-biggest steakhouse chain after Buffalo Grill.

Hippopotamus has introduced 10.90 euro lunch menus and launched a loyalty card scheme. The group's other restaurant brands include Taverne de Maitre Kanter and Brasserie Flo, which is a major attraction for foreign tourists in Paris.

Groupe Flo, which opened its first brasserie in 1968, now has franchise agreements in 20 countries.

The company is focusing on its most profitable businesses and is turning its Italian-themed Bistro Romain restaurants into Hippopotamus outlets, a move that hit sales last year as seven restaurants were temporarily closed for renovation.

Giraudier hopes that doubling revenue at the newly opened Hippopotamus outlets will offset the cost of conversions and closures. The group lost 3 million euros in sales last year.

Total group sales including franchisees reached 587 million euros in 2011, up 3 per cent from 2010, while consolidated sales totaled 382 million.

This transformation should improve Groupe Flo's EBITDA(earnings before interest, tax, depreciation and amortisation)margin this year slightly from 12.6 per cent in 2011, Giraudier said, adding that his target remained an EBITDA margin of 15 per cent before 2015.

The group's net debt-to-EBITDA ratio should also be stable at 1.6 in 2012, he added.

In the UK, Restaurant Group, owner of the Frankie & Benny's chains, last month reported a 2 per cent fall in sales since the start of the year, similarly affected by lower spending.

Meanwhile, the increasing number of Britons choosing to eat at home rather than go out for meals boosted 2011 profits at the country's biggest pizza delivery firm, Domino's Pizza.