Fairfax buys controlling stake in Keg Restaurants; management remains
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Fairfax buys controlling stake in Keg Restaurants;
management remains
BY JENNY LEE AND MIKE HAGER, VANCOUVER SUN
NOVEMBER 18, 2013
The Keg restaurant in Windsor, Ont. A Toronto-based insurance company has bought a controlling share in The Keg steakhouse
chain from local entrepreneur David Aisenstat after scrapping its plan to buy struggling BlackBerry outright earlier this month.
Photograph by: Nick Brancaccio, Postmedia News Files
VANCOUVER - Longtime B.C. restaurateur David Aisenstat has sold controlling interest of The Keg
steak house chain to Toronto-based Fairfax Financial Holdings.
Fairfax, which opted to invest in BlackBerry debt rather than buy the troubled firm outright earlier this
month, will take control of 51 per cent of Keg shares in January. Aisenstat will keep the remaining stake
in the business and continue running the 102-restaurant chain.
Financial terms were not disclosed, but the deal is believed to be worth more than $150 million.
David Aisenstat, 57, said he started talking with Fairfax several years ago but their commitment
solidified recently. “They’ve been pretty keen on this industry for a couple of years now.”
He said there are “no real material plans” to change The Keg’s concept.
“It was just the opportunity to partner with a company like Fairfax and the people that run Fairfax,”
Aisenstat said. “It just positions us better in the company to take advantage of opportunities in our
industry.”
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Fairfax buys controlling stake in Keg Restaurants; management remains
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The Keg closed three restaurants in the U.S. and one in New Westminster this year.
“That’s just the pattern of our business,” Aisenstat said. Some leases came up, but other restaurants
are under construction. A new Montreal Keg will be opening in a few weeks, and new restaurants in
Toronto, Guelph and Alberta will open within the next year.
“We’re doing fine,” Aisenstat said. The last quarter was “a little flat but we’re selling more than we ever
have.”
Nevertheless, “expanding into the States — that’s been tough in the last five years,” Aisenstat said.
Expansion is now focused on Canada for the moment, he said.
Fairfax’s next moves are worth watching.
“You’ve got a major investor going very long on casual dining restaurants in Canada,” said Yuri Fulmer,
FDC Capital Partners CEO, who has long-standing experience in the casual dining sector. Fairfax is
moving into the restaurant business in a big way, he noted.
“When you think of the percentage of casual dining meals that Fairfax will now own, it’s got to be close
to a majority. If you go for casual dining, chances are it’s a restaurant owned by Fairfax. The Keg is
their entry into premium casual.”
In a deal announced two weeks ago, Prime Restaurants becomes a wholly owned subsidiary of Cara
Operations with Fairfax holding an undisclosed ownership in Cara, according to the Financial Post.
Cara will add East Side Mario’s, Casey’s and other restaurant chains to its other properties, which
include Swiss Chalet, Milestones Grill & Bar, Harvey’s, Montana’s Cookhouse, and Kelsey’s.
In B.C., The Keg and Cactus Club top the premium casual full-service category with Earls, Milestones
and Moxie’s being in the mid-tier, and Denny’s and Swiss Chalet at the bottom end, Fulmer said. White
Spot is also a major player.
“If there’s a teary moment, it’s that an entrepreneur is no longer in control of a great success story,”
Fulmer said.
The Keg had 80 restaurants when Aisenstat took over the company 16 years ago. “We’re now doing
two and a half times the sales,” Aisenstat said.
“Certainly David’s done a terrific job of growing the Keg brand,” Fulmer said. “It’s really a B.C. success
story.”
The Keg employs 9,500 people and has $500 million in annual sales. Restaurants in metro Toronto,
Vancouver, Montreal, Calgary, Edmonton, Seattle, Dallas, Denver and Phoenix are corporately owned
and operated. Restaurants in outlying areas are franchised. The chain has 15 U.S. restaurants.
Keg Restaurants Ltd. pays a royalty on sales to Keg Royalties Income Fund, which holds trademarks
and intellectual property used by the chain.
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Fairfax buys controlling stake in Keg Restaurants; management remains
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The Keg is one of several successful restaurant chains with head offices in B.C.
Privately held Cactus Club, which two former Earls restaurant waiters opened in North Vancouver 25
years ago, now owns 25 restaurants in B.C. and Alberta and will be opening in Toronto next year. The
Fuller family, which owns Earls restaurants, is a minority silent partner.
Earls, a 30-year-old family-owned chain, has 65 restaurants across Canada and four in the U.S. It will
be opening in Miami next year.
None of The Keg’s competitors appear to be trying in bring in capital, Fulmer said.
Nationally, although sales at table-service restaurants improved in Q3, operators remain cautious
compared to quick service operators, according to a Canadian Restaurant and Foodservices
Association outlook survey.
In B.C., the upscale casual category is up eight per cent in dollar sales from May to September
compared to the same period last year, according to Ian Tostenson, president and CEO of the B.C.
Restaurant and Foodservices Association.
The Keg was arguably Canada’s first national casual dining chain after it was founded in North
Vancouver in 1971 by George Tidball, who had brought McDonald’s north from the U.S. in the ’60s.
Aisenstat, a former Keg director, bought the company in 1997 for a reported $48.5 million from
Whitbread, a U.K.-based brewing conglomerate.
During Tidball’s ownership of the Keg, Aisenstat and his late father, Hy Aisenstat, founder of the
upscale Hy’s Steakhouse chain, had been among its large shareholders.
With a file from The Canadian Press
[email protected]
© Copyright (c) The Vancouver Sun
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13/02/2014
Fairfax buys controlling stake in Keg Restaurants; management remains
Page 4 of 4
The Keg restaurant in Windsor, Ont. A Toronto-based insurance company has bought a controlling share in The Keg
steakhouse chain from local entrepreneur David Aisenstat after scrapping its plan to buy struggling BlackBerry outright earlier
this month.
Photograph by: Nick Brancaccio, Postmedia News Files
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13/02/2014