It isn’t often that the opening of a roadside diner in Devon attracts EG’s attention. But the 1970s and 1980s-inspired Brightside, opposite Exeter Racecourse on the A38, isn’t any old diner. It is the latest venture from Alex Reilley, the chair and driving force behind the Loungers chain of cafés.
The Haldon Hill Brightside, which opened its doors last month, is the first of three that will be opening this spring. The next, also on the A38 near Saltash, opens shortly and the third, on the A303 east of Honiton, opens at the end of June.
Further opportunities are already being looked at in the Midlands, the east of England and Wales, as Reilley and his team seek to take advantage of the increasing roadside dwell times as larger numbers of drivers ditch the combustion engine for electric cars that need charging breaks.
But it is not just the income potential that has spawned the latest brand to join the Loungers family, there’s a touch of nostalgia for Reilley too. The chance to finally realise a dream to reignite a childhood fondness for the likes of Little Chef.
“For me, Little Chef was part of something,” says Reilley. “It was my first-ever interaction with hospitality.”
Reilley talks of how he used to travel from his home in Leicester to visit his great-grandmother in Suffolk every three weeks as a child.
“The highlight of that was stopping at Little Chef on Friday for tea,” he says. “And then stopping at the Little Chef bang opposite on the other side of the road for tea on Sunday.”
Little Chef was an institution in the 1970s and 1980s but a rapid expansion in the early 2000s ultimately led to its decline.
“I remember when the fag ends of Little Chef were being sold off in around 2015,” says Reilley. “There were about 70 restaurants left and I thought, ‘Hmmm…’”
He immediately called up Loungers’ then private equity partner Piper Private Equity and proposed an acquisition. Despite his seriousness, he was greeted with laughter. And alas, his dream would not come true. Not then, at least.
The birth of Loungers
Reilley founded Loungers in 2002, with long-standing friends David Reid and Jake Bishop. Their key driver was simple: create somewhere they would want to drink themselves. The first Lounge was opened in the Bristol suburb of Southville, with early growth confined to their Bristol stomping grounds. Expansion outside of the city did not occur until 2007 with new outlets in Bath and Cardiff.
“Cardiff was the real acid test,” recalls Reilley. “We had seen so many businesses from Bristol attempt to open in Cardiff and vice versa, and despite enormous success on home turf, they had failed.”
That did not happen for Loungers, luckily, which now has more than 200 outlets across the UK, with ambitions to expand to more than 500.
The global financial crisis was one of the greatest facilitators of the growth of the company, says Reilley.
“Prior to the recession we were pushing against a lot of closed doors, particularly if there was any sort of covenant competition,” he says. Once everyone else stepped back from growth, landlords began approaching the firm. And openings followed in Reading, Caversham, Southampton, Birmingham, Bournemouth and Plymouth.
“Plymouth was a bit of a game-changer,” says Reilley. “Because that was the first time we had opened in a scheme.” Loungers was one of the first tenants to take one of the commercial units in Urban Splash’s Royal William Yard. Because so few other businesses were expanding, Urban Splash was willing to do a deal.
The move not only paid off, it transformed the business, says Reilley.
“It took a level of sales we had never seen in any other Lounge and opened our eyes to the potential of new schemes. We now have really good partnerships with some developers,” he says.
Outside investment
As the Lounge concept expanded, Reilley saw an opportunity for a slightly different offer and launched the first Cosy Club, a more grown-up, semi-formal restaurant chain, in a former art school in Taunton in 2010.
The business continued to grow across the two brands. Piper came in buying a minority stake for £16m in 2012, with friend and co-founder Reid leaving the business. Over the course of Piper’s four-year involvement, Loungers grew from 22 sites to more than 90. By 2016, it was time for Piper to realise its investment, however. Lion Capital stepped in, acquiring a majority stake in Loungers for £137m.
Still, the company expanded but, like many businesses, was hit with soaring costs, the fallout from Brexit and increasing competition.
By 2019, the group proposed a float on the AIM in a bid to raise equity to help pay down its circa £160m debt and fund its ambition to reach 500 outlets. It was admitted to AIM on 29 April 2019 with a market capitalisation of £185m – not quite the £250m it was hoping for.
Looking for expansion
The IPO was a rare bum note for Loungers. It was supposed to give Lion Capital its exit.
“We didn’t get the valuation we thought we deserved,” Reilley recalls. “But we decided, having done all the spadework, that it was still worth doing.”
Just as well. If the business had not IPOed then, it would have had to wait a year to try again. And that would have landed it right in the middle of the Covid-19 lockdowns.
And while the stock market may have its daily fluctuations, the IPO has enabled the firm to accelerate its openings and get close to that ambition of 500 locations. Its latest results reveal an increase in revenue for the six months ended October 2022 to £122.3m – up from £102m for the same period a year earlier – and an increase of 15 sites to its portfolio, putting it on track to end its financial year with 225 locations.
That growth will inevitably come from the new Brightside concept but also from expansion into new locations.
“I saw five or six great opportunities in the North East recently,” chief executive Nick Collins tells EG, “and we see an awful lot of opportunity for us in Scotland.”
He adds: “If we start to establish a presence in the North East over the course of the next 12 to 18 months, then the natural next step for the business will be to start looking at Scotland. The suburbs of Glasgow or Edinburgh would be amazing. I think we would trade really well there.”
Wales is also proving successful for the business, with Reilley seeing opportunity for “far more” than its current 18 sites. It recently opened a site in Cwmbran and another just opened in Neath. Llandudno and Chepstow are in the pipeline.
The growth of Loungers so far is why everyone, says Reilley, is excited about the new Brightside venture.
“This is new territory for us,” says Reilley. “It will be a baptism of fire.”
He adds: “While the Lounge and, to some extent, Cosy Club need to be very discreet about brand, this needs to scream brand. It has to pass the backseat test. We need the kids to say ‘can we go to Brightside?’”
What Reilley really wants to create with Brightside is something “magical but absolutely repeatable”.
So far, the response has been reasonably positive, if not a little divided. For every couple of five-star reviews raving about the Exeter site there is at least one damning one-star review. For each customer charmed by the decor and the throwback to the 1980s, there is another outraged by the prices – “£16 for a big breakfast”, writes one, “and it isn’t even that big”.
But from an operational perspective, Reilley is “really confident” that he can make it work. He sees huge potential at large-scale EV charging stations.
“Convenience is the wrong fit for those sorts of sites,” he says. “You need dwell time. You need people to want to stay for as long as it takes to charge their car. We think we might be the perfect fit.”
The first one sits next to a Costa and McDonald’s. That will be the test.
“People have to leave happy, they have to leave with a smile,” Reilley says. “If everybody walks past us to buy a burger, we’ve got this wrong.”
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