Risk Capital declined to disclose the size of the transaction but media reports have pegged the deal at around £30 million. Red Hot operates all-you-can-eat restaurants serving a variety of cuisines including English, Indian, Chinese, Italian, Tex-Mex and Japanese. The group employs around 600 people and generates annual sales of around £22 million.
The investment from Risk Capital will be used to upgrade the business’ existing restaurants as well as finance further expansion. Red Hot’s founders, Parmjit and Helen Dhaliwal, have plans to open up to 25 new sites by 2015, according to media reports. Red Hot’s existing management team will remain in place, with the addition of James Horler, who formerly headed restaurant businesses including Frankie & Benny’s and La Tasca.
Risk Capital, which is investing its £75 million Fund II, is not new to the restaurant industry. In addition to Red Hot, the firm controls a number of hospitality businesses including Patisserie Holdings – the group behind Patisserie Valerie and Baker & Spice – and Bread Holdings, owner of Gails eateries. It is also a former investor in UK restaurant chains Giraffe, Signature Restaurants and Strada.
Risk Capital co-founder Luke Johnson owns stakes in a number of other UK restaurant businesses, including Japanese chain Feng Sushi, casual dining venues Rocket Restaurants and pub group The Draft House. He also headed Pizza Express between 1993 and 1999, a period during which the Italian chain grew from 12 to 250 restaurants, and was chairman of British broadcaster Channel 4 between 2004 and 2010.
Johnson’s latest investment comes amid strong private equity appetite for UK restaurant businesses in need of capital to help fund expansion. Recent deals in the sector include LDC’s acquisition of D&D Restaurants and Bowmark Capital’s investment in Drake & Morgan.