From stuffed crust to stuffed shirt?

Last week saw Whitbread announce that CEO Alison Brittain would be replaced in January by Dominic Paul, who was most-recently CEO of Domino’s Pizza Group, but has previously been on the Whitbread executive committee and was managing director of Costa Coffee for three years.

It was a bad day out for Domino’s, where shares fell by 6% on the news, but it was welcomed by the hotel sector, where Richard Clarke, analyst at Bernstein, told Reuters: “Dominic is the an obvious choice as he is a veteran in this industry.

“What is interesting is that Dominic came from Domino’s, which operates as a franchise model, and we know Whitbread has not been successful as a franchisee except in the Middle East.”

And Clarke is correct, the interesting thing is that Dominic comes from Dominos (and that must have been just magic for everyone working on the group’s switchboard) and that brings to mind a whole other era of the hotel sector, which was riddled with executives who had limited to no previous experience in the sector (Dominos’ Dominic has, at least, done time at Royal Caribbean Cruise Line, easyJet, British Midland and British Airways) but plenty of experience with brands. 

Those with long memories will recall that the then Starwood Hotels & Resorts brought in Frits van Paaschen, a former Nike executive with no previous experience in lodging. IHG appointed its CEO – Andy Cosslett – from Cadbury Schweppes. Accor tapped up Denis Hennequin from McDonald’s.

It was, for a while, all about the brand and not about the hotel. Now, we have significantly more brands, but fewer brand experts. Can this be because the sector doesn’t actually care about brands? An accusation punted at several of these CEOs when they were handed their cardboard box with a plant in was that they weren’t expanding the companies quickly enough.

Will this fate also befall Dominos’ Dominic? Whitbread is currently doing what it does best: enjoying some cautious growth with a side dish of caution and then would you like a twist of extra caution with that? While sitting on a load of cash. What it is looking at in the UK is for the Quarter of Reckoning to deliver some independents who’ve had enough, already, and it’s not a bad pitch to play on. 

Will, as Clarke suggests, the company start to look more to franchising? Much of Whitbread’s strength/value is in its property and in the value of its covenants, but this has also made it hard to sell off, should one be so minded. If it could be much larger, without adding that extra heft with each hotel, it might help to peak interest from buyers who wouldn’t balk when looking at a market cap of close to £5bn.

All this means that Dominos’ Dominic might not trip over expansion issues faced by previous brand champions, but he will have to sell Whitbread The Brand. As one of the most well-known brands in the UK, that’s also taken care of. But can the company give up control and let owners and third-party operators hoist the sign without central control? 

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