Cooking up a storm
Article Date: Dec 20 2006He says: ‘Corporate governance becomes more onerous and independent non-execs were appointed who may not have had a full understanding of the business.
‘In addition, all the options that had been put in place had been exercised and cashed in. We wanted to re-energise everybody in the company, but we found it difficult to create incentives to grow as fast as we had over the last ten years. The whole point of working began to lose its attraction.’
Then, after the bust of 2001, Page told his shareholders that profits were coming down from £53 million to £50 million, although the business was well situated to recover strongly in two years. He advised them to hang on to their holdings. They sold and the share price fell from £9 to £2.
Within a year, Pizza Express had been bought by TDR Capital, which made five times its money in 18 months. Six weeks after the sale of Pizza Express in October 2003, Page had left and set up Clapham House, raising £22 million to invest in buying small restaurant groups and turn them into UK chains.
‘The only national cuisine at £10-£15 per head that has been consolidated so far is
pizza,’ he says. ‘Other cuisines, like Japanese, Turkish, Greek, Indian and Chinese, are all fragmented in the UK. Even though you see a lot of chains, more than 80 per cent of restaurants in the UK are still independent. We are looking at that figure to go down to
60 per cent in the next 10-15 years and want to share in that consolidation.
‘We like to see a simple operation with queues out of the door and good financial characteristics. You can easily have a popular restaurant and not make any money.’
Page quickly snapped up the Gourmet Burger Kitchen, The Real Greek and The Bombay Bicycle Club. Earlier this year, he bought Tootsies, a chain of 30 units which
had fallen on hard times.
‘Burgers are the star turn at the moment, but Indian cuisine is coming up on the outside. Because The Bombay Bicycle Club is a delivery kitchen, it makes no money in the first year, a bit in year two, lots in year three and tons in year four. You have to wait for a return on capital, so you can’t open too many,’ he says.
In total, Clapham House now has 67 restaurants in its portfolio and Page is looking to expand beyond London along the same lines as Pizza Express ten years ago.
All the restaurants are on leasehold. ‘When you open a restaurant, your return on capital can be 30 per cent. So buying the freehold is a poor use of money,’ he says.
The Gourmet Burger Kitchen is leading the way at the moment with openings in Brighton, Bristol, Guildford, Cambridge, Manchester and Birmingham. Page is deliberately opening near competitors like Nando’s, confident that he can take £5,000 or £6,000 off them straight away.
In the longer term, the advantage of having four brands is that he can expand across the best areas, as he has already done in Putney, giving Clapham House the chance to maximise its share of the local market.
Page does not envisage himself buying any further brands as yet: ‘We still think there is
value in what we have bought, so we are going to grow them.’
Even though it is following a similar model to Pizza Express, Page has deliberately chosen not to expand through franchising: ‘There is no point in franchising if you know what you are doing and have access to capital. You operate units yourself and give your managers an incentive to perform.‘
