Yahoo Finance How the billionaire Issa brothers’ ambitions for fast food chain Leon came unstuck
In the weeks leading up to its takeover by the billionaire Issa brothers, Leon co-founder John Vincent admitted the fast food chain was haemorrhaging as much as £200,000 a week.
Speaking at the height of the third nationwide Covid lockdown, Vincent warned Leon could face collapse within a matter of weeks as he estimated the chain was losing an extra £800,000 a week in sales with £200,000 of cash “going out the bank”.
Just weeks later, Mohsin and Zuber Issa swooped on the company in a takeover worth £100m through their petrol forecourts empire EG Group.
The Issas heralded the deal as a game-changer for Leon, announcing plans to expand it with as many as 20 new sites every year, grow the business outside of city centres and move into the booming drive-thru market.
Almost three years on it appears the chain’s performance may not be living up to the billionaires’ aspirations.
Sales in Leon’s restaurants have lagged behind pre-pandemic levels, reaching £82m in 2022, more than £30m below 2019, while losses widened to £12.6m from £7.5m the prior year.
Instead of expanding, the company has closed restaurants, reducing its estate from 85 in 2022 to 77 across the UK currently.
A planned push into drive-thrus was similarly aborted: a handful that opened have already closed, while one planned site, in Kent, was built but never opened. There are currently no Leon drive-thrus left, according to its website.
The chain has lost two managing directors in short succession since the EG takeover. Nick Ayerst, who joined during the pandemic, stepped down in August 2021 after less than a year, while Glenn Edwards, a 12-year company veteran who took over from him, left in November. Ayerst did not respond to requests for comment, while Edwards said he had a “fantastic” time at Leon when approached.
It comes as the Issas have spent much of the last two years racing to pay billions of pounds of debts accrued as they built their retail empire.
Caught off guard by soaring interest rates, the brothers have been selling assets to reduce borrowings. They sold Leon – along with the rest of EG’s UK assets – to sister company Asda in 2023 in a £2bn deal to ease pressure on EG. However, this loaded Asda with hundreds of millions of pounds of extra debt.
“[Leon] has been caught between a rock and a hard place of trying to be made mainstream and acceptable to an Asda customer and forecourts but at the same time retain its place as a London City lunch concept,” says Simon Stenning, a hospitality industry expert and director of Future Foodservice.
Founded in 2004 by Vincent, Henry Dimbleby, and chef Allegra McEvedy, early sites sold salads and other dishes in cardboard takeaway boxes throughout the day before putting on a dinner service with wine in the evening.
McEvedy left the business in 2009, and, over the years that followed, Dimbleby and Vincent set about growing it into a chain, spotting a gap in the market for a brand offering a healthier alternative to traditional fast food chains such as KFC and McDonald’s.
Dimbleby stepped down in 2014 and was later made the Government’s “food tsar”, but quit in 2023 in protest at alleged inaction over the obesity crisis.
“I think the penny dropped for them in 2012 when they franchised a site at King’s Cross,” says Stenning. “I think they really started to recognise, okay, we’re a fast food brand that is doing healthier, better quality, fast food.”
Leon’s menu grew to include gluten-free alternatives and plant-based options such as its vegan “Love” burger and poached egg breakfast pots.
“We never thought it would be possible to do them and now everybody does,” says Nellie Nichols, a food consultant who worked with Leon at the time. “And we managed to create a really strong breakfast menu. That is something that they definitely put on the map.”
In 2019 it turned over record revenues of £115m. By January 2020, Vincent was telling journalists it could grow by 25pc every year, and was planning a major international expansion.
“It was a pioneer in a business which is in one of the most difficult arenas in the world,” says Julian Metcalfe, the co-founder of Itsu and Pret A Manger. “Affordable food, there is nothing harder.”
Then the pandemic hit and Leon was plunged into a two-year restructuring project and negotiations with landlords.
Yet in the wake of the pandemic, Leon appears to have struggled to adapt to the new normal. Zuber Issa blamed increased working from home for holding back its recovery in 2022.
Meanwhile rising living pressures have caused shoppers to cut back on expensive lunches during the week. A fish finger wrap at Leon now costs £7.49, while an aioli chicken rice box comes in at £7.29. A large portion of baked fries costs £3.99, meaning a meal with a main and a side can easily cost more than £10.
At the same time, Stenning points to the aborted push into drive-thrus as proof that Leon perhaps doesn’t quite resonate outside of major cities.
“When you try and put it into mainstream locations, people don’t quite know what it is,” he says. “They haven’t pushed it in one direction or another. It’s trying to juggle different plates all at the same time.”
Still, being owned by one of the UK’s biggest supermarkets has come with some perks. There are now hundreds of Leon-branded coffee stations in supermarkets across the UK.
Stenning says that as more petrol stations make charging points available for electric vehicles, there may be opportunities for Leon in future. “Subway and Greggs are great for a two-minute stop. But as we move to electric charging points, people will need to stop for longer,” he says.
An EG Group spokesman said: “From when EG Group acquired Leon in April 2021 up until when it was sold to Asda in November 2023, we invested in the brand to set it up for long term success.
“This includes investment in Leon’s digital platforms; investment in technology to improve customer experience; and support given to the business to expand its grocery offering.”
An Asda spokesman added: “The business is focused on leveraging Leon’s heritage as a pioneer and well-established sector brand, investing to grow its offering through continued menu innovation and the ongoing expansion of Leon in the right locations and formats.
“We continue to bring the Leon business into the Asda family, where the brand benefits from additional customer insights and data capabilities to deliver on its mission to make it easier to eat and live well.”
