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Home    'I think GBK has given people a reason to fall back in love with the burger'     Details
 
'I think GBK has given people a reason to fall back in love with the burger'
24/05/2009

Campbell gives Simon Evans a taste of his ambitious plans to expand the Clapham House group at home and abroad

 

Coals to Newcastle is the first thought that springs to mind when Paul Campbell, the chief executive of Clapham House, the company behind the Gourmet Burger Kitchen restaurant group, explains the firm's next likely foray.

"The USA is clearly the big one – it's a massive opportunity but it's also tricky," he says. "We are having a look at taking GBK to the States and deciding how best to proceed. But it's early days."

Campbell was finance director at Pizza Express when it tried and failed to crack America, so he's well aware of the enormity of taking a successful Brit-brand stateside. But he is undeterred. "Our international business is developing and has good potential," he says. "We started in the Middle East – our partners over there opened in Dubai. They are opening this summer in Saudi Arabia and Oman. We also launched in southern Ireland and our partners over there have opened six restaurants in Dublin in one year."

But foreign adventures remain very much a side order at Clapham House for now, with expansion in the UK still the main course.

Clapham House, founded in 2003 after raising £15m on the junior Alternative Investment Market (AIM), has grown rapidly through expansion. The firm, co-founded by Campbell and David Page, former chief executive of Pizza Express before it was gobbled up by private equity, runs 48 GBK outlets, eight Real Greek restaurants, and 22 Tootsies eateries.

Tootsies is currently thought to be the subject of an auction of interested private equity bidders, so it is GBK that dominates Campbell's thinking.

"The mass market for burgers is pretty saturated if we are talking McDonald's, Burger King etc, but in terms of the higher quality product there aren't any chains with anything like our scale in the UK," he says. "The general rule is that if you put a burger on a mixed menu it immediately becomes the best seller. Perhaps there was a demographic that had begun to distrust the burger, but I think GBK has given people a reason to fall back in love with the burger."

But getting people back to burgers has come at a cost. A cursory look at a website such as Moneysavingexpert.com reveals the extent of the discounts offered by the likes of Clapham House to woo the public.

 

Source: The Independent

"There is a hit to margin," concedes Campbell on the heavy discounting on offers such as "two-for-one". "The British consumer wants value. Unless we allow consumers to tick off that nagging doubt in the back of their mind that they are getting value they won't spend at our restaurants. A large part of all this is psychology; it's about giving people deals. It's certainly the game we'll have to play for the foreseeable future."

Like many of its rivals, Clapham House is using the internet to bring in customers via loyalty schemes, such as the GBK Gang. People who sign up to the scheme – some 100,000 so far – get advanced discounts or weekend offers not available to other customers.

"We want to get 250,000 signed up by the summer – we have been surprised by the extent of the uptake," says Campbell. "The industry will come out from this recession a bit cleverer because it will have learnt some lessons regarding the flexibility of promotions and use of the internet. The industry will look very different."

Sadly, getting to the other side of the recession will prove too much for many restaurants. Some predict that, as with pubs, thousands will go under in the coming year.

Although Clapham House hasn't had to instigate redundancies or wholesale restructuring, it has had to trim back, while Campbell and his management team were forced last year to admit that it couldn't turn around the fortunes of its Indian food business, Bombay Bicycle Club, which it sold for £4.4m to the Tiffinbites chain.

Clapham House was also one of the first to call the extent of the likely downturn in the food and leisure sector, issuing a grim warning to shareholders in December 2007 that the brakes were being slammed on its aggressive growth strategy. Shares dived more than 10 per cent on the back of the announcement.

"At the end of 2007 we realised, a bit more than perhaps our rivals did, that the world was changing," says Campbell. "The banking crisis had started. We had to deal with food inflation and the property market was overheating. I remember the board discussing a scheme in Leicester which stopped us in our tracks. The per-square-foot rent was about the same as we pay here, 20 yards from St Paul's Cathedral. Little things like that were telling us that the world was getting a bit barmy."

Shares in Clapham continued to slide last year as market gloom intensified. "If you are a highly rated company then the last thing the City wants to hear is that you are dropping the growth even if it is the right thing to do," says a defiant Campbell. "If you face up to these things early then you typically find yourself in the best spot when things begin to improve at the end of the cycle, which is perhaps where we are now."

For Campbell and Clapham House, the turning cycle is likely to fire the starting gun on the group's ambitious growth plans. Its results last December showed how the firm has benefited from a "trading down phenomenon", as diners search out bargains. Profits increased by 21 per cent in the last six months of 2008. Despite this, Campbell is cautious. "There will be a period where we feel there is enough certainty coming into the outlook where we are confident to put the foot on the accelerator again," says Campbell. "But we will keep that to ourselves because when that happens we will look to develop quite fast. If you look back at 1993, after the recession there was a period of probably 12 to 18 months where confident brands in the restaurant market expanded, taking advantage of weak competition and benign property prices." He adds: "We are looking at some very good deals at the moment. It truly is a buyer's market. In just the same way we tracked GBK, we have our eyes on a few things that are early stage."

The company has no plans to tap its investors for a rights issue, says Campbell. It successfully renegotiated a new debt facility with its bank at the end of last year.

But corporate action doesn't look that far away for Clapham given that it has two powerful shareholders – perhaps ready to pounce in the coming months. Capricorn Ventures, an investment vehicle backed by the Nando's chicken-chain owners, and Wolvercote – a vehicle that reports suggest may be linked to the pizza-turned insurance entrepreneur Hugh Osmond – collectively own more than 30 per cent of Clapham's float. "We know those guys and we speak to them just like any other shareholder," says Campbell. "You can't decide who is on your share register."

Clearly it remains Campbell's intention for now to do the eating rather than be eaten. "It's fun to look for new opportunities. There is one I'm dragging my kids to this weekend," he says. "Opportunities are rare – but they do happen."

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