A French Chef's Stock In Every Pot?

Bernard Loiseau's IPO will be the first, but probably not the last

Chef Bernard Loiseau is cooking up a new recipe. The owner of Burgundy's La Cote d'Or, one of only 21 restaurants in France to earn three stars in the prestigious Michelin Guide, plans to go public this September in Paris. He hopes to raise $5 million to $8 million to expand his restaurant, hotel, and boutique, open a Paris bistro, and begin selling branded gourmet foods and wines throughout France by mail order. "I compare myself to Christian Dior," Loiseau says. "If fashion designers design haute couture in order to sell pret-a-porter, so can chefs."

Loiseau's listing will be the first for a big-name French chef--but probably not the last. As economic growth picks up in France, customers are again flocking to temples of haute cuisine. According to Paris-based statistics agency INSEE, spending at French restaurants will increase by 2% this year, after falling 2% to 4% annually since 1990. Now, elite restaurateurs who struggled during the recession want to leverage their growing fame by opening chains of less expensive bistros and selling branded foods in supermarkets. And Loiseau may start a trend of turning these mostly family-run businesses into public corporations.

downscale risk. It's a difficult transition in any business, and a niche such as gourmet cooking comes with special risks. Luxury-goods makers, from Louis Vuitton to Gucci, have avoided going downscale to broaden their markets, fearful of diluting the cachet of their brand names. Similarly, top chefs could wind up tarnishing their reputations. "Some chefs have even tried putting their names on pet food," complains Alexandre Lazareff, director of the National Council for the Culinary Arts.

Nevertheless, more and more French chefs are branching out from small, exclusive eateries into bistros or chains. Some are even striking deals with big nonfood companies. Unlike their German and British counterparts, who often work for hotels, most top French chefs have become their own bosses. Now, the French are finding that hiring out their talents to deep-pocketed companies can be more lucrative and reduce their risks.

For instance, Alain Ducasse runs a three-star Michelin restaurant in Monaco for the principality's chief casino operator and a three-star Paris restaurant for the luxury-hotel division of Vivendi, the former Compagnie Generale des Eaux, which operates everything from municipal waterworks to telephone networks. Ducasse's privately held consulting company employs 30 people and generates some $3.5 million in annual fees.

But the big money in French restaurants these days is in lower-budget chains, such as Belgium-inspired mussels-and-fries specialist Leon de Bruxelles and the Hippopotamus steakhouses owned by Groupe Flo. Leon de Bruxelles generated almost $50 million in sales last year at its 24 restaurants, and Groupe Flo produced $200 million from its 100 outlets. Both chains are growing at a double-digit pace. Since its listing on Paris' Second Marche two years ago, Leon's stock has nearly quadrupled in price, to $103 a share, while Flo's, launched this May at about $30 a share, has soared to more than $60. "Just as we've seen the tremendous development of hotel chains in France, tremendous room for expansion exists for standardized, middle-priced restaurants," says Michel Leblanc, a Credit Lyonnais restaurant analyst.

GLOBAL REACH. Such stellar performances are what encouraged Loiseau to go public this year. "Groupe Flo and Leon de Bruxelles show that investors like restaurant stocks," says Pascale Jendrot, a corporate-finance specialist at audit-and-consulting firm BDO Jendrot, which is advising Loiseau on the initial public offering. "We believe they'll find a top chef's stock even more appetizing." La Cote d'Or's sales will reach $10 million this year, with profits of about $1 million--in the upper range of profitability for a three-star restaurant.

For the next course, French restaurants may go international. Chefs such as Loiseau, Ducasse, and Paul Bocuse enjoy global fame, yet until now, their activities outside France have been limited. Only Bocuse has a restaurant in the U.S., in Florida's Disney World.

"My products should be in the U.S.," says Loiseau. If investors find his stock offering appetizing, American consumers may be the next beneficiaries of his gastronomic talent.

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