Little Chef must find a new recipe

London Briefing:The race to rescue Little Chef, one of Britain's oldest and best-known roadside restaurant chains, sparked a wave of nostalgia amongst motorists who have thrown caution and cholesterol levels to the wind and tucked into one of its £6.99 "Olympic breakfasts".

Famed for its "Fat Charlie" logo, the fry-up specialist had been locked in increasingly desperate takeover talks since before Christmas. It finally won a reprieve last week in a rescue deal that saved almost 200 of its 235 sites, although not before it had been put into administration.

In the end, the little-known private equity firm, RCapital, is thought to have paid just £10 million (€14.9 million) to buy 196 Little Chef outlets from the administrators, in a deal that will save the bulk of the chain's 4,000-plus jobs.

The rescue was part funded by Azarim Investment, the Israeli group which bought 65 of the group's freehold sites last year in a £60.3 million sale and leaseback deal backed by Anglo Irish Bank.

Little Chef first fell into private equity hands in 2002, when Permira bought Travelodge and Little Chef for £712 million. After a number of sites were closed, it changed hands again in 2005, bought up by restaurant entrepreneur Lawrence Wosskow for £52 million.

But a sale and leaseback deal used to repay debts saw the rental bill soar and, after suffering a heart attack last year, Mr Wosskow put the business up for sale.

Modelled on an American diner, and with just 11 seats, the first Little Chef opened in Reading in 1958, the same year Britain's first motorway came into use.

The format did well in the 1960s and 1970s as car ownership grew and in the 1980s it opened a chain of Little Chef Lodges, which later became Travelodge.

Despite the introduction of ciabatta burgers and salads to the menu, the Little Chef format became stuck in a 1970s time-warp, with a reputation for slow service and unappealing restaurants. It suffered fierce competition from burgeoning fast food chains such as McDonald's, KFC and Burger King and, more recently, coffee chains such as Starbucks and Marks & Spencer's Simply Food outlets.

Efforts to update the business were hampered by a vociferous lobby of customers, 15,000 of whom petitioned the company when it attempted to slim down the Fat Charlie logo and introduce healthier ranges a few years ago.

It still sells 13 million sausages, 15 million eggs and 10 million cups of tea to its dwindling band of loyal diners each year, but is thought to be losing as much as £3 million a year. Chief executive Simon Heath is staying on to run the business under its new owners and says he is confident it can be revitalised.

He talked last week of the brand's iconic status, despite its chequered past. But while Little Chef may well have a special place in the hearts of Britain's drivers, a business cannot live by nostalgia alone.

One of the first things Mr Heath should do is turn Fat Charlie into Slim Jim in double quick time. By all means serve up as many Olympic fry-ups as customers can stand. But if Little Chef is to compete with larger rivals such as McDonald's, Starbucks and M&S, it must get either quicker or healthier - or both - without delay.

Weather blame game

Retailers are notorious for blaming the weather for poor trading - it's always either too hot, too cold or too wet or too windy. How different things might have been, they say, if only the weather had been more predictable.

Having already hit the market with two profits warnings over the past year, struggling Blacks Leisure clearly decided it needed a big excuse when it delivered its third profits warning last week. And they don't come much bigger than global warming.

While other retailers simply noted that the mild weather in November and December hit sales of seasonal ranges, Blacks chief executive Russell Hardy put the blame for dire trading firmly on global warming.

Underlying sales in the crucial five weeks to December 30th tumbled by 6 per cent, and Blacks warned second half profits would fall substantially below expectations.

Analysts, who had been hoping for full year profits of around £11 million, slashed their forecasts to just £1.5 million.

Parkas, fleeces, gloves and woolly hats stayed on the shelves as temperatures refused to drop. Now Mr Hardy says Blacks is re-engineering its ranges to cope with climate change, introducing more layered and lightweight clothing.

It certainly needs to do something - the £1.5 million profit predicted for the current year represents a 90 per cent shortfall on last year's numbers. And if that were not pressure enough, Mr Hardy has secretive sports billionaire Mike Ashley breathing down his back. Mr Ashley, who owns the Sportsworld chain, snapped up a near 30 per cent stake in Blacks shortly after it reported disappointing first half figures in October.

The sportswear entrepreneur has a history of taking stakes in retailers but has never taken such a large stake in a quoted company before, sparking speculation that he could be planning a bid. If trading doesn't improve soon, Mr Hardy may find the time for excuses, no matter how big, is over.

Fiona Walsh writes for the Guardian newspaper in London