Unitas takes a bite out of Babela’s

Having scores of different items clearly makes little commercial sense over hundreds of stores, and menu simplification is crucial for reducing on preparation time in the kitchen. "Right now there's a lot of items that aren't even being consumed that much, so Unitas is cutting down, focusing on the best-selling items and those that can be best replicated and standardized in the back of the house," a source close to the deal tells AVCJ.

Pizza and chicken wings will be the Shanghai-based brand's "hero products," and will feature heavily on the set menus being introduced by Unitas.

Babela's Group, which runs Italian, Cantonese and Taiwan-inspired restaurant chains, was until recently part-owned by The Carlyle Group and two high-net-worth individuals. They sold their stakes to Unitas as part of its investment, while Xingwei Chen, the company's founder, retains an interest in the business. Unitas was attracted to the deal by the strong growth potential of the food service sector in China. In 2011, the industry was estimated to be worth $377 billion, having grown by 12% per annum over the last five years.

Driving the changes at Babela's are Unitas partners Eugene Suh and Jay Lee. The latter is a former senior executive at Yum! Brands, owner of KFC, the biggest brand in the fast-food space in China. Jim Tsao, who used to be CEO of food company Lam Soon Hong Kong Group will be the private equity firm's third representative on the Babela's board.

A new operating system is already being introduced that allows management to measure performance at each store. This includes a standardized reporting process that enables daily comparisons of sales figures and gross margins for individual products. A central kitchen will also be introduced to save time on food preparation.

"The mom and pop kind of approach can work when you have 30-50 stores but when you get beyond that level, you really need a systematic way to run the business," says AVCJ's source.

Another area ripe for improvement is Babela's supply chain. Plans are in place to increase the company's focus on a core group of suppliers for each product, rather than having stores order individually from a host of different vendors, thereby delivering greater efficiency.

Unitas won't be the only one monitoring how these changes are implemented, as new CEO has just been hired who will take up office in the coming months.

Unitas reserves the right to hire additional senior managers "as needed" to the Babela's workforce of 3,000 people.

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• Topics
• Greater China
• Buyouts
• Consumer
• China
• Unitas Capital
• buyout