For the last 18 months, the key word in hospitality and leisure has been “survival”.  But as we start to get back to some degree of normality, the sentiment has shifted to “opportunity”.  We are seeing more and more activity in the sector, with operators now ready to take advantage of the possibilities the pandemic has created.


To realise those opportunities, however, many operators are seeking funding.  Yet with so many options available, choosing the right one is no easy task, and it is certainly a case of no one size fits all.  So what are the options for an aspiring operator?  



An initial public offering, or stock market listing, is always one for debate for business owners – in one regard, if you have an attractive business it can be a way of raising money through the public markets, just as Various Eateries and Nightcap plc did in 2020.  It does, however, mean you are now sharing a lot more information about your business in the public domain – undressing in public on a regular basis.  So if you have a period of bad trading, or there is one mistake in numbers presented to the public, it could have a significantly detrimental impact on your business (just ask Conviviality plc). 


In recent weeks, Hawksmoor has announced a possible interest in an IPO to continue their expansion and Soho House has become Membership Collective Group as part of a listing in the US (although their share price has decreased c10% since their listing).


An IPO tends to lend itself better to a business with sufficient scale, with excellent governance and nothing to hide.  For F&B operators with sub 8-10 sites, it may not be the best option though.


Private Equity (PE) / Venture Capital (VC)

The demand for private equity or venture capital funds to invest in F&B operators in the last 18 months has reduced significantly – largely because of the uncertainty that exists in the market. Leisure rollouts were all the talk of PE investors ten years ago, but in the last few years (and even before Covid) this was declining, largely due to the failure of many mid-market chains that had received PE investment.  The key here was that many of these chains were generic, without a unique concept, and were poorly managed. 


In recent times, generalist investors (without a sector focus) have moved away from traditional F&B, and sector specific investors have moved into more niche areas (e-gaming / experiential concepts).  An example of this is Cain International putting further capital into the parent company of experiential leisure brand, Swingers, earlier this year. 


Having said this, we are starting to see more interest as investors realise the pandemic has created opportunities for significantly more cost effective rollouts.  Now operators have started trading again (and trading well), along with more (and better) site availability, and more favourable landlord deals, the F&B rollout is coming back for those businesses with a unique concept and a quick payback and return on investment.  Imbiba’s investment into Pizza Pilgrims is a prime example of this.


We are having more and more interesting conversations with PE and VC investors regarding leisure assets, and we truly believe that the purse strings are likely to open further in the coming 6-12 months. 



Crowdfunding can be a fantastic way to increase brand image and a great marketing tool, as Brewdog found out.  It is more popular with smaller brands or independents as a way to raise their profile, and raise capital while doing so.  It is, however, very expensive.  You need at least 40-50% of the funds required before you even start to have any chance of a successful raise, which puts off a lot of operators. 


In the last week, Market Halls has announced it is launching a £1m crowdfunding campaign, offering shares to all investors with scaled incentives.  As is typical with crowdfunding, these include discounts in the venues, VIP hire of event spaces, and access to events.  A great initiative to raise brand awareness (and some capital), but it certainly will not come cheap.


Private investors

If none of the above work for you, private investors are another option worth some thought; either friends and family, angel investors or family offices.  In fact, this is where I would start if I were an operator looking for capital, because if you know people, it can be the quickest and cheapest way to raise funding – and the level of due diligence required will likely be a lot lower, as the level of trust will be a lot higher.  The issue is that many private investors have also been put off the sector in recent times, and unless you have a good network, it can be difficult to find the right investors for you. 



There are plenty of debt solutions out on the market, and arguably if you are not giving away equity in the business, this is a cheaper option – although remember you have to pay the debt back.  You will often be required to give a personal guarantee, something that many business owners are reluctant to do.  Debt products can be expensive in terms of interest/cash flow too, and traditional lending has become incredibly difficult to come by in recent years with high street banks doing very little in the sector.  Merchant cash advance (lending against future credit card income) is becoming more popular, but again, it is expensive. 



Many business operators do not realise that there are lots of options out there for raising capital.  Yet recent stories, such as Hawksmoor, Soho House, Pizza Pilgrims and Market Halls, highlight many of these are still available, despite the worst crisis to hit our sector probably ever.


The market is opening up again so make sure you are well equipped from a finance and cash flow perspective to take advantage of the hospitality and leisure revival.



Shelley Sandzer Corporate Finance is the leading mid market advisor in the leisure space. The organisation combines Shelley Sandzer’s expertise in property with Gerald Edelman’s expertise in corporate finance to provide F&B operators with a full spectrum of services to help maximise their growth, including raising private equity, debt finance, family office finance and other funding routes to suit their needs. Please get in touch with one of the team if you would like to find out how we can help you on your fundraising journey, or if you are considering a sale of your business in the next five years.