Trusthouse Forte PLC

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Trusthouse Forte PLC

166 High Holborn
London WC1V 6TT
United Kingdom
(071) 836-7744
Fax: (071) 240-6860

Public Company
Employees: 93,000
Sales: £2.47 billion (US$3.99 billion)
Stock Exchange: London

Trusthouse Forte (THF) owns and operates a wide range of hotels and eating establishments around the world. Its portfolio includes a number of the most prestigious European hotels as well as more modest franchise operations like TraveLodge and Kentucky Fried Chicken (England). The companys rapid growth has made it one of the worlds hotel leaders: with 75,000 rooms in 800 hotels, THF ranks eighth in the world in number of rooms but first in terms of profitability, a reflection of its crisp management style and great strength in the highly profitable luxury market. Besides approximately 1,000 restaurants, the company also runs the largest contract catering business in the United Kingdom, serving meals to North Sea oil workers, athletes competing in the Commonwealth Games, and Chase Manhattan executives in New York.

Trusthouse Fortes somewhat unusual name refers not to a history in the fields of insurance and weaponry, but to the 1970 merger of two unlikely partners, Trust Houses Group and Fortes Holdings Ltd. The former was the creation of some of Englands most aristocratic and civic-minded families, while the latter represented the lifework of an aggressive and talented immigrant named Carmine Monforte, who after many years and many successful acquisitions became Lord Charles Forte, Knight of the Realm. The merger of these disparate companies is an example of the dramatic changes in 20th-century England.

Trust Houses, the older of the two companies, was formed in 1904 by the fourth Earl Grey in response to two related problems of the English countryside. Because the farming industry had suffered a long recession and because the advent of the railroads had meant the end of Englands extensive coach lines, country inns across rural England were falling to ruin rapidly by the end of the 19th century. Not only were the inns decaying physically, but their owners had tried to recoup lost revenue by encouraging more alcohol consumption, a pastime whose appeal is strong in a time of depression. In an attempt to curb the growth of public drunkenness as well as to save the many splendid country inns from further decline, Earl Grey asked each county in England to form a Public Home Trust Company to pool local funds to buy and rehabilitate the inns and install new managers with strong economic incentives to sell more food and lodging and less alcohol. Most of the original equity was put up by eminent families in each county, and under a special legal agreement this 1% nucleus remained in charge of corporate administration, able to outvote the other 99% of the shareholders. Profits were to be kept low or even donated to charities.

The first Trust House was acquired in Hertfordshire in 1904. It was an immediate success, hailed as nothing less than the rebirth of the traditional English country inn. By the end of World War I, the company operated some 100 hotels around the country well known for their cleanliness, service, and good food. After weathering the postwar recession, the company expanded considerably in the 1920s and 1930s, reaching a peak of 222 hotels just before World War II. Dividends were still kept low so that the company could use its resources to maintain high standards and expand further. Along the way, Trust Houses acquired many of Englands oldest and most famous hotels, including Browns, The Cavendish, the Hyde Park Hotel, and the Grosvenor House. During World War II nearly all Trust Housess holdings were requisitioned for military use, and a certain number of these were never returned. The company nevertheless was operating 181 hotels in 1971, with a total of 10,300 rooms and an enviable reputation for quality and British tradition, several of the inns dating back to the 16th century. Trust Houses also had modified somewhat its profit policy, and had even begun a program of modest diversification that would prove important in the companys later history.

Over the years, Trust Houses had acquired a strong position in the contract catering business through the purchase of Lockhart Catering and its subsidiary, the Merchant Company. In 1966, riding 20 years of the postwar hotel boom, Trust Houses bought and merged with John Gardner Catering, one of Britains largest catering concerns. Gardner had been a successful butcher in Victorian London who expanded into ships chandleryprovisioning outward bound vessels with food. By the 1920s, Gardner was supplying meals to factories and offices, a role which became critically important when the government required wartime factories to feed their workers. With the enormous surge in industrial capacity during the war, Gardner found business increasing proportionately. Thus fortified, the caterer continued growing after World War II, eventually attracting the attention of the newly profit-oriented Trust Houses. When the two companies merged in 1966, its catering arm was called Gardner Merchant, and may well have been the magnet between Trust Houses and an otherwise very different corporate concern, Fortes Holdings Ltd. Five years later, Lord Charles Forte had completed their unlikely alliance and emerged as the most powerful member of the combined board of directors.

Carmine Monforte was born in Monforte, Italy, in 1908. His father was a small landowner who went first to the United States to work and later, in 1911, joined relatives living near Edinburgh. The elder Monfortes great-uncle, Pacifico, had come to Scotland 25 years before and discovered that the Scots knew little about the making of fine ice cream. He set up a business to rectify that failure and was thus in a position to help his grandnephew when he arrived as well as young Carmine, who joined his father shortly thereafter. In the town of Alloa, the Monfortes opened an Italian-style café called the Savoy, which quickly became one of the citys most fashionable watering holes. The original café grew into several, and by the time Carmine Monforte returned from schooling in Italy his father was running a chain of successful cafés and ice cream shops. Carmine Monforte, or Charles Forte as he became known, was dispatched to England to develop and operate a similar chain of ice cream shops in a number of provincial cities. In 1935, Forte moved to the capital and with £2,000 borrowed from his father opened Englands second milk bar, on Regent Street. Fortes Holdings had been launched.

Successful and ambitious, Forte had acquired a total of nine restaurants in London by the onset of World War II. At that point, despite Monfortess obvious anglophilia, he was interned on the Isle of Wight as an Italian national and potential wartime threatan unusual background for a man later knighted. His restaurants continued to thrive, however, and by 1949 he was able to make his first major purchase, the famous Criterion Brasserie in Picadilly Circus. Two years later, Fortes reputation as an able restauranteur won for him a contract to supply the 1951 Festival of Britain. His career in catering received its first real impetus from the 1954 acquisition of the Café Royal restaurant and banqueting rooms, located in the exclusive Mayfair section of London. The Royal had long been famous as a favorite spot of English writers and artists, but Forte was equally interested in its 20 banquet rooms with a seating capacity of 2,500. Thus firmly started in the catering business, Forte went on to claim the first contract for food service at Heathrow Airport in 1955, a year which saw his companys pretax profits reach £21,000. By the end of the 1950s, Forte had expanded his catering interests to include many of the roadside service areas springing up along the countrys new system of freeways. These were christened Little Chef and were patterned closely on the U.S. fast-food concept.

A new era for Forte began in 1958 with his purchase of the Waldorf Hotel in central London. The shift from catering to hotels mirrored that made by Trust Houses from hotels to cateringin each case, an easy sidestep into a closely allied service industryand set the stage for the subsequent merger of the two companies. Forte aggressively expanded in the hotel business, making use of catering profits to broaden his base in both fields. In the mid-1960s, he startled the hotel world by announcing the simultaneous purchase of three of the finest hotels in Paris, the George V, Plaza Athenee, and Hotel de la Tremoille. These five-star hotels were famous for their sumptious decors and attentive service, and when their staffs learned that the new owner was not only a foreigner but also a man who sold hot dogs at Heathrow and hawked burgers along highways, they took the unusual step of protesting publicly the sale to express their concern for the future of the hotels. They misjudged Fortes acumen, and his sense of history; he proceeded with the purchase and then left the hotels essentially unchanged. They remain three of the very select group of European five-star hotels. Indeed, the Paris hotels were only the first in what would become the worlds largest collection of exclusive inns.

At approximately the same time, Forte made his only purchase outside the hotel and catering industries when he acquired Lillywhites Limited, the famed London sporting-goods store and exporter of sporting wear. By 1970, Fortes Holdings had amassed a total of 43 hotels with 12,500 beds, was the largest caterer in Britain, and made a pretax profit of £5.6 million. Forte became Lord Charles Forte of Ripley when Queen Elizabeth II knighted him in that year for contributions to charitable and cultural events. It was also the year in which he merged Fortes Holdings with Trust Houses to form the present company.

Trust Houses over the years had come to resemble a modern diversified corporation more and an aristocratic gift to the nation less, and as a final concession to the contemporary world it agreed that by merging with Forte it would be able to compete in the increasingly complex and international hotel business better. The merger was not without its share of maneuvering and bitterness. Shortly after the combined company was formed, it became the target of a takeover attempt by Allied Breweries Limited, an English brewing conglomerate. Most of the THF board members from the Trust Houses side favored the merger, while Forte and his bloc fought vehemently to maintain the companys independence. Forte eventually won the prolonged battles against both Allied and the opposing board members. The latter promptly resigned en masse, leaving Forte as chief executive of the new hotel and catering giant. With his son, Rocco, Forte set out to expand the base of 26,000 hotel rooms already owned by the company.

Not long before the merger, Trust Houses had acquired a small stake in TraveLodge, the U.S.-based economy hotelier. Forte and son pursued this opening, and by 1973 had upped their share of TraveLodge to 95.5%, since brought to full ownership, adding to THF a substantial share of the vast budget motel market in North America. A TraveLodge motel typically has fewer than 100 rooms and lacks restaurant and conference facilities, instead offering its customers low prices and roadside convenience. Taking a more direct role in the companys management since 1980, THF has revamped many of the motels, while increasing their number to about 400 for a total of 38,000 rooms, including a small number with newly added restaurant and bar accommodations. In addition to TraveLodge, THF also operates 15 three- and four-star Viscount hotels in the United States, as well as 5 in the most luxurious five-star class, including the Palace in Philadelphia and the Plaza of the Americas in Dallas. Because of the pre-ponderence in its U.S. holdings of the low profit-margin TraveLodge motels, overall profitability for THF hotels remains a remarkable fourfold higher in Great Britain than in the United States, a disparity the company hoped to reduce.

In Britain, THF continued its hotel expansion with the 1976 purchase of the Lyons hotel group, a substantial 5,600 bedsassortment of first-rate hotels in London and other cities, and with a more recent acquisition of the 54 Kennedy Brookes and Hanson hotels. THF has largely resisted the temptation to mold its many diverse hotels into one or more brand concepts, preferring to let each of its properties retain the individual flavor that made it popular in the first place. Management, accounting, and training are all standardized, but the company has by and large retained the personality and charm of the hotels themselves. By 1990, however, there were signs that this policy might soon change as THF had introduced the Forte brand of four-star hotels, offering business travelers in the United States, Britain, and elsewhere what it hoped would become a recognized symbol of quality and comfort. By the late 1980s the company was also operating 30 Post House three-star hotels and had introduced the TraveLodge brand in Britain, chiefly along the system of arterial highways where they could be added to existing THF restaurants. In 1990 Trusthouse added the 43-unit Crest chain of hotels to its British portfolio, giving the firm a total of approximately 300 hotels in the United Kingdom and 30 in Europe, as well as the 400 TraveLodge units in the United States. A handful of inns in the Middle East and Caribbean round out the hotel picture.

On the catering side, THF has been invested heavily in the fast-food end of the market. As chief executive since 1983, Rocco Forte has been instrumental in this restaurant expansion, which, unlike THFs hotel business, is clearly oriented toward the branded, lower end of the spectrum. From its initial contract for motorway service areas in 1959, THF has built a stable of 26 such areas under the general name of Welcome Break, each of which typically includes a Little Chef restaurant, a TraveLodge, and retail shops along with the necessary petrol station. The Little Chef brand is THFs largest restaurant chain, with some 315 units. Another 100 Happy Eater restaurants serve much the same market, while the addition of Harvester steak houses gives the company a sizable presence in the mid-price sector as well. Probably the most significant development in the public catering division, however, was the 1987 agreement with Pepsico to operate Pepsis Kentucky Fried Chicken restaurants in the United Kingdom on a 50-50 joint-venture basis. Under this agreement, THF is now part owner or franchiser of about 310 such restaurants, with plans for more.

Trusthouse Forte has built an empire of hotels and food-service establishments to serve every aspect of both industries. From the most luxurious hotels and restaurants to the most economical roadside chains, THF makes its presence felt throughout Europe and North America. This diversity is not, however, reflected in its profit ratios: although the catering division exceeds the hotel sector in sales, the latter accounts for approximately 68% of total profits, with five-sixths derived from the U.K. hotels alone. These generally upper-end hotels thus form the nucleus of the entire THF group, giving the company an imbalance it will try to redress in the 1990s, probably through further proliferation of its fast-food franchises and the continual expansion of TraveLodge in the United States, where the company hopes to raise profit levels. With Charles Forte, in his 80s in 1990, and son Rocco still firmly in charge of the company, the original Monforte ice cream business should continue its history of confident growth.

Principal Subsidiaries

Trusthouse Forte Hotels Ltd.; Kelvin Catering Ltd.; Trusthouse Forte (UK) Ltd.; Puritan Maid Ltd.; Trusthouse Forte Catering Ltd.; Gardner Merchant Ltd.; Trusthouse Forte Inc. (U.S.A.); Airport Catering Services Ltd.; Leased Hotels Ltd. (50%); Forte & Company Ltd.; Forte Holdings Ltd.; Trusthouse Forte Airport Services Ltd.; Trusthouse Forte Bermuda Ltd.; Les Grands Hotels Associes S.A. (France); Lillywhites Ltd.; Little Chef Ltd.; Lockhart Catering Equipment Ltd.; Motorway Services Ltd. (92%); Anchor Hotels Limited; Grosvenor Theatrical Productions Ltd.; Happy Eater Ltd.; Quaglinos PLC (98%); Ring & Brymer Ltd.; The Savoy Hotel Plc (69%); THF International Management Ltd. (Bermuda); THF Oil Ltd.; Trusthouse Forte Ireland Ltd. (Republic of Ireland); Trusthouse Forte International Ltd.; Trusthouse Forte Service Areas Ltd.; Trust-house Forte Hotels Inc. (U.S.A.); Trusthouse Forte Group; Finance NV (Netherlands); Welcome Break Limited; Forte Hotels International Inc.; Gardner Merchant Keyline Travel Ltd.; Hudson & Hill Ltd.; Jermyn Publications Ltd.; Kentucky Fried Chicken (Great Britain) Ltd. (50%); Lillywhites Cantabrian Ltd.; Stangard (Metal Workers) Ltd.; T. Giusti & Sons Ltd.; Trusthouse Forte California Inc. (U.S.A.); Trust-house Forte Food Services Inc. (U.S.A.).

Further Reading

Borer, Mary Cathcart, The British Hotel Through the Ages, London, Lutterworth Press, 1972; MacKay, Colin Neil, How to Be a Knickerbocker Glory Millionaire, Accountancy, August 1977; Seal, Kathy, Trusthouse Forte Began as Humble Catering Business, Hotel & Motel Management, November 3, 1986; THF: A World Power in Hospitality, London, Trusthouse Forte, 1988.

Jonathan Martin