March 31st, 2014

Revealed: the recipe for a successful restaurant chain

By Matthew Goodman, The Sunday Times

Why do some dining ventures boom when so many others close? We go in search of the secret ingredients

Revealed: the recipe for a successful restaurant chain

Five days a week the planes from Nova Scotia descend into London carrying several tons of live lobsters.

Some of the crustaceans are dropped into a giant tank in a warehouse close to Heathrow airport. The rest are delivered direct to their final destination - the capital's five branches of the restaurant chain Burger & Lobster, now one of Europe's biggest importers of the shellfish.

Customers regularly wait an hour or more for a table, as the chain does not take bookings. There are only two types of food on the menu (the clue is in the name) and at a fixed price of £20, it is no one's idea of a budget hamburger.

Despite these obvious drawbacks Burger & Lobster, which opened its doors in Mayfair in 2011, is one of a growing number of dining chains that have defied the odds to deliver a recipe for success that not only works but can be reproduced time and time again.

In an industry notorious for its failure rate - 655 restaurants went bust last year, according to the Insolvency Service - coming up with a formula that works is an elusive prospect.

George Bukhov, chief executive of Burger & Lobster, said the set price is one reason for the chain's success. He argues that cost-conscious diners are not fixated as they might otherwise be on noting down who has ordered exactly what. "It relaxes people; they are not thinking about what they are spending."

It helps explain why Bukhov feels confident about expanding the chain outside London. He is scouting for sites in other big cities, including Leeds, Manchester, Edinburgh and Birmingham.

Burger & Lobster's success challenges the received wisdom on what it takes to make it in so-called "casual dining" - that if you want to prosper, best stick to carbohydrates rather than protein.

The preponderance of pizza and pasta outlets across the country may reflect our love of Italian cuisine, but they are also a mark of simple restaurant economics.

"Pizza and pasta are not just quick and easy to prepare, they are very popular and very high margin," said Luke Johnson, who made his first fortune from Pizza Express and has become one of the industry's most successful investors, backing chains such as Giraffe and Patisserie Valerie.

He suggests that some types of cuisine are more likely to have mainstream appeal than others. Johnson tried to turn his London-based mussels and chips chain Belgo into a national operation, but found "it was too niche for the country as a whole".

The likes of Nando's chicken restaurants and Byron burger joints also show that selling protein can produce profits.

Tom Byng, founder and managing director of Byron, said: "A hamburger is such a democratic food. It gives people the kind of kick they get from a steak at a more affordable price."

Burgers are made with cheaper cuts of beef, from the forequarter of the cow, which keeps prices down. But the real secret to success, said Byng, whose chain has grown to 38 outlets with customers famously including George Osborne, is to keep it simple: "Do one thing and do it well."

The straightforward approach has served the Kaye family well for decades. Often cited as the kings of casual restaurants, Phillip Kaye and his late brother Reginald began with Golden Egg cafes in the 1960s before going on to invent brands such as Garfunkel's and Deep Pan Pizza. Phillip's sons Adam and Sam continued the family tradition with the Ask pasta chain.

The family philosophy involved taking an existing formula but trying to give customers a little bit more for the same or less money than the original.

Ask was a prime example. Originally designed to ape Pizza Express, it offered a broader menu and linen tablecloths, a touch designed to appeal to middle England.

This approach of taking something that already works and trying to improve it is behind the success of the latest menu maestros, Andy Bassadone and Chris Benians, who co-founded Strada and Côte. They are now rapidly expanding Bill's, a fresh food store and all-day cafe, and recently launched Jackson+Rye, an American-themed restaurant, in London's West End.

Bassadone has likened developing restaurants to the approach of the car makers Mercedes and BMW. "They both decided to improve something that other people were already doing," he once said.

It seems to work. Bassadone and Benians offloaded Strada to Tragus, the owner of Café Rouge, for £140m, netting a big profit for Richard Caring, the rag-trade tycoon who had backed them. The pair went on to sell Côte, also majority-owned by Caring, to CBPE, a private equity firm, for about £100m.

Although it is a take on a French brasserie, Côte has studiously avoided making itself too Gallic - the menus are in English, for example. And, like other successful chains, it has avoided a cookie-cutter approach to the restaurant's physical environment.

This, says Ian Neill, a seasoned operator who worked at Pizza Express before taking Wagamama noodle bars from one site to more than 60, is another important element that goes towards creating a successful business.

He said: "Customers expect consistency, but they still like to be surprised by the decor. People look for something that stimulates them.

"When I was at Pizza Express, we used to have these paintings on the wall of geometric images. A lot of people hated them, but a lot loved them.

"You want some form of emotional reaction from customers rather than a bland reaction - as long as they didn't hate them so much that they didn't come back."

Johnson concurs, suggesting that "oppressive branding" can be "off-putting".

One big trend in restaurant layout has been ensuring the kitchen is visible to the guests. Andrew Page, chief executive of the Restaurant Group, owner of Frankie & Benny's and the newer Coast to Coast brand, said that although having an open kitchen creates a bit of "theatre", it is "part of the underpinning of trust and confidence of the guest".

One of the biggest challenges in expanding a restaurant operation is to achieve consistency. Charlie Carroll, owner of Flat Iron, a steakhouse in Soho, will open his second venue this summer, and he argues that the short menu - offering one type of steak, one dessert and, specials aside, just 11 items in total - makes this a lot simpler.

He is turning this into a fine art: "We have a pH meter in the kitchen to measure the acidity of our béarnaise sauce so we know it's just how it should be. It means it's the same every time."

Customers like to know what to expect - it's one of the main reasons chains thrive in the first place - but it doesn't hurt to surprise them occasionally.

Tim Bacon, chief executive and co-founder of Living Ventures, an operator that focuses on northwest England with brands such as Gusto, believes that too many restaurants fail to understand what "added value" means.

He said that in the old days, it was easy enough - offering free bread with a meal and setting out linen napkins.

These days, it means really going out of your way to look after your customers, buying them the occasional drink and engaging properly with them.

And if someone does make a complaint, Bacon sees it as an opportunity. "I love the shock and awe of turning a complaining customer into being a real advocate of the brand," he said.

The problem these days, said Paul Campbell, a serial restaurant investor who has backed Hawksmoor steakhouses and Vinoteca wine bars, is that customers are so much more demanding. "They are utterly unforgiving. Why does someone have to give a concept a second chance? There are so many other restaurants to go to."

The next big thing? Juice

Burger fans have never had it so good. The meat craze shows no sign of abating, with a string of operators, including Byron, Honest Burgers, Patty & Bun, Meat Liquor, Tommi's, Gourmet Burger Kitchen, Handmade Burger Co, Burger & Lobster and the American import Five Guys adding branches.

These things come in waves. Mexican food has been big, with chains such as Wahaca, Chipotle, Tortilla, Barburrito and Chilango pursuing the dining-out pound. South American cuisine is fashionable now, thanks to the likes of Ceviche in Soho and chains such as Cabana. Frozen yogurt was a trend, prompting bars with amusing names such as Lick, Snog and Yoomoo.

And at the pricier end of the market we had a wave of steakhouses, with Hawksmoor arguably the best known.

Ted Schama, partner at Shelley Sandzer, a property agent specialising in restaurants, said many of our trends are driven by what is hot in America. But he thinks the traffic could be heading the other way: "Some of our versions of these restaurants could soon be exported back across the Atlantic."

And the next big thing? Experts are tipping healthy pressed juice bars such as London's new Roots & Bulbs.


Tags: The Sunday Times, Tim Bacon
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