Tesco buys Giraffe restaurant chain for £48m under plans to transform stores into family-friendly destinations

Tesco will open Giraffe eateries in some stores (Getty Images)

Supermarket giant Tesco has bought restaurant chain Giraffe for £48.6 million under plans to transform its stores into family-friendly retail destinations.

The group plans to open Giraffe restaurants alongside larger stores, with the first due near London before the end of the year, as part of aims for customers to “meet, eat and drink, as well as shop” when they visit its supermarkets.

The deal will net a hefty windfall for Giraffe founders Juliette and Russel Joffe and Andrew Jacobs, who with other management and long-standing investors have sold their combined stake of around 54%.

Tesco is hoping the acquisition of the 48-strong business and its plans to open restaurants alongside supermarkets will help make the weekly shop more appealing to families, while it is also taking steps to reinvigorate its UK arm, which has been battling to shore up flagging sales.

The grocery group recently bought a 49% stake in Harris + Hoole coffee shops with aims to open branches in its shops, while it has also backed Euphorium Bakery.

Kevin Grace, group commercial director at Tesco, said: “We have the opportunity to develop some of the space in our larger stores to create retail destinations that offer customers even more choice.

“Giraffe is hugely popular with a wide range of ages and particularly families - we think our customers will love it.”

The deal comes after Tesco suffered a difficult 2012 when it reported its first drop in profits for two decades.

Sales improved over Christmas, growing by 1.8% in the six weeks to January 5, but the horse meat scandal is expected to have taken its toll on trading in recent months.

Shore Capital analyst Clive Black is predicting 0.5% growth at best in the group's fourth quarter.

Giraffe was launched in 1998, when its co-founders opened their first outlet in Hampstead, north London.

It since secured backing from 3i, which bought a stake in 2006, and former PizzaExpress chairman Luke Johnson through his Risk Capital Partners venture.

While Tesco has bought 100% of Giraffe, the co-founders will be retained by Tesco following the deal, with Mr Joffe continuing as managing director.

Mr Joffe said: “This move will allow us to introduce Giraffe to a wider audience, presents great opportunities for growth and for the team to be involved in an exciting stage in our brand's development.”

Philip Dorgan, analyst at Panmure Gordon, said: “Tesco - along with the other food retailers - has been very bad at in-store catering for a very long time and this appears a logical move, especially in combination with its acquisition of a 49% stake in Harris + Hoole.”

He added that with online shopping increasing in popularity, the group needs to “invest in areas that its shoppers will want to spend time doing when they spend a lot less time shopping - eating out is clearly one”.

PA