Snack time: Canadian restaurant chains seek deals to upsize

Tue Jun 16, 2015 2:57pm EDT
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By Amrutha Gayathri, Sneha Banerjee and Euan Rocha

(Reuters) - Cara Operations Ltd CAO.TO, owner of the Swiss Chalet casual dining chain and Harvey's burger outlets familiar across Canada, is gearing up to lead a consolidation in the country's fragmented restaurant industry.

Canada's largest operator of full-service restaurants, controlled by dealmaker Prem Watsa's Fairfax Financial Holdings Ltd (FFH.TO: Quote), made a strong stock market debut in April and has made no secret that it's looking to expand through acquisitions.

"Acquisitions are definitely on the radar for Cara and there will be some announcements soon," said a source familiar with Cara's plans. "There's deals in the hopper."

Analysts said while Cara could look to buy more full-service brands such as Jack Astor's or St-Hubert, the company could also be interested in fast-casual cafes that offer options perceived to be healthier and are increasingly popular in the country.

Acquisitions are just about the only way to grow for Canada's few big restaurant groups, analysts said.

"If you're a large Canadian restaurant there is opportunity to grow, but it's really a steal-share game," said Robert Carter, executive director at market research firm NPD Group.

Canadian restaurant traffic has been stagnant at about 6.5 billion annually for five years, according to NPD, and no growth is expected anytime soon as the economy grows only modestly.

But individual deals are likely to be small, given the nature of the country's restaurant industry.   Continued...