Little Chef and Travelodge to go their separate ways

Travelodge, the budget hotel group owned by the private equity firm Permira, is to spin off its Little Chef roadside restaurant chain.

Permira spent £712m acquiring the two businesses from catering giant Compass last year and up till now has played down suggestions the businesses may be split.

But Travelodge chief executive, Grant Hearn, who joined earlier this year from the Hilton hotel group, has confirmed he is looking at ways to spin out the business, including a possible management buyout.

"We're working on separation now - we will have them operationally separate by the spring of next year," he said. "It will then be the end of the summer before all the systems are separate." After that, Mr Hearn said the group would decide the best way to spin off the business. Travelodge will continue to be owned by Permira, although Mr Hearn said he hoped to float the hotel chain within the next three to four years.

The group has already set about overhauling Little Chef. Menus have been refocused on basics such as fry-ups and fish and chips, and special offers introduced.

Said Mr Hearn: "It's a fascinating business that has not been well looked after in relative terms. It's like Marks & Spencer a few years ago - a great British institution that is generally loved but people want it to improve so they can start using it more."

At the time of the Compass deal, analysts put a value of around £200m on Little Chef, which has 380 outlets. However, it could fetch more than that when it comes to be sold if market conditions improve and the current management successfully overhauls it. Tim Scoble, former managing director of the UK hotels division at Queen's Moat House, has been brought in to run Little Chef.