Are Investors Missing a Trick in Hospitality?

Amidst the doom and gloom, a quiet wave of smart money is moving in - looking past the headlines and betting on brands with staying power.

© Mowgli Street Food

We’ve all heard it: the restaurant sector is under pressure. Operators are (rightly) calling for more government support, citing inflation, energy costs, wage and NI hikes, and rent. Media headlines regularly sound the alarm on closures, and consumer confidence has been lacklustre for a while. Against this backdrop, it’s no wonder many institutional investors have cooled their appetite for the sector.

But while parts of the industry are genuinely hurting, others are quietly thriving. And we need to be careful not to talk ourselves out of the investment our sector needs to grow. Yes, it’s hard but that doesn’t mean it’s not investable. In fact, the best investors know that challenging times often present the clearest value opportunities.

Many of the private equity firms dominating the hospitality space back when I started consulting, have either exited or dramatically scaled back. Many were burnt by overextension pre-Covid, or the fallout from the pandemic itself, and have since pivoted to sectors like tech, healthcare, professional services, education, and infrastructure. But are these players missing a trick? History isn’t likely to repeat itself for a generation or two because we have all learnt some tough lessons around overleveraged debt burdens, unsustainable discounting wars, and short-sighted growth strategies. The operators succeeding now are leaner, more disciplined and more customer-obsessed than ever before. Multiples have reset to a realistic level and the path to returns is tangible and well-trodden.

Where some have stepped back, a new generation of capital is stepping in to reap the rewards. TriSpan’s Rising Stars fund is one such example, backing challenger brands in high-growth segments - including Pho, Rosa’s Thai, and Mowgli. They’ve recently formed Arcturus Group, to support these brand’s expansion and explore synergies across finance, supply chain, tech, property, and talent whilst - crucially - maintaining independent company leadership.

They’re not alone. Funds like McWin, Active Partners, Edition Capital, Capdesia, and White Rabbit are also actively deploying capital into carefully selected brands with strong growth potential, innovative concepts, and scalable formats. Whilst each fund follows a distinct investment strategy, their recent acquisitions collectively reflect long-term consumer trends and cultural shifts in hospitality. McWin’s backing of Big Mamma Group underscores the power of immersive, theatrical dining experiences and the power of social media in driving footfall. White Rabbit’s investments in Kricket and much of TriSpan’s Rising Stars Fund is backing the growth of Asian-continent cuisines, with Kricket’s focus on Keralan flavours also taps into the trend of micro-regional cuisines and authenticity. Meanwhile, Capdesia & Bain Capital’s investment in Gail’s speaks to the rise of the artisan bakery café, fuelled by a shift toward neighbourhood dining and increased working from home post-pandemic.

One thing we are also seeing more of is operator-investors, where seasoned hospitality leaders not only sit on boards but lead the deal generation and strategy. These are people who understand that hospitality is about people and product, not just the numbers. They know that short-term IRR targets and aggressive cost-cutting rarely lead to long-term brand equity or operational health. Instead, we’re seeing a more collaborative, long-term approach that values steady scaling, protects brand integrity, and empowers management teams.

That said, tensions between investors and operators will always exist - and often, that friction is healthy. But the difference between creative tension and toxicity often comes down to the deal itself. From our observations, the best outcomes are when the business plan isn’t excessively ambitious, and the multiple isn’t overinflated so the management team aren’t left with impossible targets and pressure. Crucially, incentives should be ring-fenced - to reward performance and motivate teams, protecting what matters most: the people and culture that drive the business.

Alongside PE, trade buyers continue to make strategic moves - especially where they see potential for synergies or market share. Big Table Group has been particularly active, acquiring Banana Tree, TRG’s Leisure Division (Frankie & Benny’s, Chiquito etc.), and Amber Taverns. Like-wise Azzurri Group (known for Zizzi and ASK) has been pushing into high-growth QSR categories, acquiring Boojum, a fast-casual Mexican brand in Ireland, and signing a deal to roll out Dave’s Hot Chicken across the UK. These deals show there’s still real belief in the sector - especially where brands have clear positioning, loyal following, clear white space for growth.

At a smaller scale, crowdfunding has become a more common route to raising growth funds. Brands like Honest Burgers have run successful campaigns on Crowdcube, bringing in over £2.8 million, backed by customers. But we should be cautious about viewing crowdfunding as a long-term solution. When it’s cash-for-equity - rather than rewards-based - many of the valuations we see are highly optimistic. A correction could come if retail investors feel they’ve been taken advantage of. Plus, crowdfunding is often only viable at a very small scale - which won’t solve the wider capital gap in the sector.

Some of the best-performing restaurant businesses today are flying under the radar - profitable, resilient, and building loyal customer bases in underserved regional markets or through fast-growing niche segments. But because they haven’t raised significant capital or lack a London footprint (where many PE firms are concentrated) they’re often overlooked, despite offering strong fundamentals and attractive unit-level economics.

There are fantastic deals out there - but they might not look like the ones we remember from the 2010s. They may be smaller, more regional, more experimental. But they’re real, resilient, and ripe for backing. The real risk isn’t backing hospitality – like any sector, it will have its winners and losers. The risk is missing the window while others snap up the best deals first.