A growing number of gym operators and restaurant chains are moving to tap investors, as a sharp rebound in demand offers a leisure sector decimated by the coronavirus pandemic a rare window to raise money.
PureGym, the UK cut-price gym chain, has enjoyed a surge in demand, with visits now outstripping those of December 2019, shortly before the pandemic erupted, and membership volumes recovering.
As a result, the group, which is owned by private equity group Leonard Green & Partners, said last week that it was “considering its strategic options, potentially including an IPO”.
In the US, the Mark Wahlberg-backed fitness group F45 Training listed on Wall Street last week with a $1.4bn valuation. At the same time, SmartFit, the largest Latin American gym brand, raised about $450m in Brazil’s fifth-largest stock market listing this year.
Investors’ enthusiasm for a hospitality sector hit hard by lockdowns across the world comes despite the spread of the Delta coronavirus in the UK, in parts of the US and Europe and elsewhere.
In the UK, restaurant chains are seeking to take advantage of the easing of restrictions, which has led to a jump in demand for face-to-face meetings. The government lifted almost all remaining restrictions on Monday.
Tortilla, the UK casual dining chain backed by private equity group Quilvest, said it planned to list later this year to capitalise on “opportunities for new openings and further expansion in the new hospitality landscape”.
Epicurean Endeavours, a leisure-focused buyout firm backed by the former Sainsbury’s boss Justin King, is looking to raise between £12m and £15m in September. Meanwhile, Nightcap, a fund founded by Tonkotsu chair and former PizzaExpress manager Sarah Willingham that first floated in January, raised another £10m in May as it aims to snap up late-night bars.
“It’s the world’s simplest business plan,” said Andrew Fishwick, Epicurean Endeavours’ founder. “We don’t believe the desire for hospitality has gone anywhere apart from up and the market has never been in a worse situation. The opportunities are more incredible than they have ever been.”
Britain’s hospitality sector has lost about £80bn in sales during the pandemic, according to trade body UKHospitality, with 10,000 businesses closing.
The industry is now grappling with higher food costs due to tight supply chains and rising wages. Pub and restaurant operators also face severe staffing shortages after thousands of employees sought out other careers during the lockdowns.
Fishwick insisted that investors were not deterred by fears that a fourth wave of infections in the autumn could see restrictions reimposed. “If anything we are seeing people becoming more bullish. I think people are becoming pretty sure that while we will have waves and variants we are going to have to live with this thing.”
However, Hugh Osmond, the leisure entrepreneur and founder of Punch Taverns, warned that investors should be careful which businesses they back.
“Investors seem to be not selective and that is going to turn out to be a mistake . . . What you don’t want to back is a business whose brands and venues were a bit tired going in [to the pandemic] but have been temporarily boosted by the post-Covid surge”.