Fairfax Financial Holdings Ltd (TSE:FFH) is eying Cara Operations to pave the way for a possible merger with its Prime Restaurant Group.

Fairfax Financial Holdings

Citing known sources, Hollie Shaw of Financial Post notes there have been ongoing discussions between Fairfax Financial Holdings Ltd (TSE:FFH) and Cara’s board.

Largest Full-Service Dining Restaurants In Canada

According to Hollie Shaw, with pressure from trendy upstarts, the two largest full-service dining restaurant companies in Canada could be brought into Fairfax’s fold.

Hollie Shaw further notes full-service and family-style restaurants have been struggling in recent years, losing market shares to fast food joints and trendier full-service options. Hollie feels a deal to combine the biggest slingers of jalapeno poppers, quarter chicken dinners and potato skins, could streamline the businesses and increase their purchasing clout.

According to market research firm NPD, dollar sales at quick-serve chains have shot up to 52.5 percent of the $48 billion in restaurant sales in Canada, from 49.5 percent five years ago. However, full-service spending slumped to 47.5 percent from 50.2 percent during the same period. Besides, a number of gourmet burger, sushi and taco restaurants have been springing up to compete for sit-down diners.

Fairfax Bought Prime, Beating Cara

Interestingly, two years ago, Fairfax Financial Holdings Ltd (TSE:FFH) bought Prime, beating a counter-bid from Cara. With 700 restaurants, Cara has been without a permanent leader since May, when Robinson retired.

While Prime runs restaurant chains East Side Mario’s, Casey’s, Prime Pubs and Bier Market, Cara owns Swiss Chalet, Harvey’s and Kelsey’s restaurant chains.

Citing an unnamed source, Hollie Shaw observes talks between Fairfax Financial Holdings Ltd (TSE:FFH) and Cara’s board. These talks have been going on since Robinson’s departure. However, citing another source, Hollie also feels turnaround specialist Bill Gregson could be a potential CEO of the merged entity of Prime and Cara.

Hollie Shaw points out that Bill Gregson revitalized the Brick furniture chain, which is also a Fairfax investment. The furniture chain was later sold to rival Leon’s last year.

Fairfax Financial Holdings Ltd (TSE:FFH) has been diversifying its assets portfolio encompassing investments in retail and restaurants.

Citing real estate opportunity, Ken Wong, marketing professor at Queen’s University School of Business points out real estate is another opportunity where one can come up with concepts facilitating diners with multiple brands under one roof.

According to Foodservice and Hospitality’s annual top 100 ranking, Cara had combined sales of about $2.3 billion in 2012, while Prime’s biggest banners had combined sales of $335.1 million.