Pizza King

06 September 2005 By db staff writer

“standfirst”>Post-Pizza Express, David Page is building up his next venture, the Clapham House Group, a collection of three branded restaurant chains. Patrick Schmitt hears the one about the Greek, the Indian and the hamburger

There is something pleasingly low-key about David Page, ex-CEO of Pizza Express and current chairman of the Clapham House Group, the business behind The Real Greek, The Gourmet Burger Kitchen and The Bombay Bicycle Club. Wearing a linen jacket, open-neck shirt and slipon shoes, having arrived on a scooter, he’s far removed from your stereotypical City businessman, but has, perhaps, the casual appearance fitting a confident entrepreneur. He speaks softly, as we sip coffee on the pavement tables outside Starbucks on London’s Northcote Road. It’s a venue he’s chosen, not, as he quietly quips, because of the women that seem to regularly waft by, but because it’s the site of the first Gourmet Burger Kitchen (GBK), and a handful of other restaurants he appears to have a share in. It’s also spitting distance from his brother’s house, the inspiration for Page’s company’s rather abstract name.

Page, it quickly emerges, has had an unusual career, almost entirely based within the Pizza Express chain – he was only unshackled from this British institution as recently as September 2003. But he started life, post-expulsion from a Jesuit-run grammar school, as a teacher, and by his own admission, not a particularly good one. “I tried to give the pupils a good time but I’m not sure a lot of learning went on,” he says.

So he jumped at the chance to open and manage a Pizza Express in Kingston when asked by a franchisee, who he’d washed up for as a student at teacher training college. This was back in 1976, and, as Page recalls, “I worked as an employee for two to three years and then saw the franchisee had a box at Covent Garden, an MGB, an MGA and lots of girlfriends, so I thought, ‘Ah, I want to become a franchisee’.”

Bold buy-out

Two years later he was, and throughout the late ‘70s and early ‘80s Page built the largest franchise group within Pizza Express with around 15 restaurants from Bristol to Brighton. “Then 1992 arrived,” he says, pausing for a second, “and the founders of the business decided to sell it – which meant I would have become a franchisee of Coca- Cola, or whoever bought it, which I didn’t really fancy.”

So what happened? “We bought the business ourselves. We didn’t have any money, which was a bit of a handicap,” he says, smiling at the enormity of the understatement, “so we floated, and made my franchise branches chainowned branches.” The upshot was Luke Johnson and Hugh Osmond became new owners and Page the CEO, overseeing a period of rapid Pizza Express expansion – from 25 chainowned branches to 350 only 10 years later, 50 of which were overseas.

“During that time we were sole importers of Peroni,” Page points out. “We made it the Italian beer. Also, Pinot Grigio was the 15th best selling white wine in the UK but when Pizza Express put it on its menu within three years it became the top table white wine seller.” As he concludes, “You can move products quite effectively if you have a 300-strong business.”

So why did Page leave Pizza Express? “The best year was 2001 where we’d made £40m GPT. Then 9/11 occurred and also a financial set-back and our London restaurants started underperforming, and so the next year we were going to do £36m, a drop of 10%, and our shares dropped 60%. We pointed out it was a temporary set-back, but the drop in the share price made us vulnerable to an offer, so the company was bought for £300m by a private equity firm.

“We, as executives, said to the market that they were probably selling at the wrong time at the wrong price, but they didn’t listen, so what has happened now is that trade has recovered and it looks as though the price was a little bit too cheap – but you could only make judgements at the time as a shareholder, and as management. It’s not very easy to predict the future.”

House proud

Nevertheless, this freed Page for his current venture, which he started surprisingly quickly. Within four weeks of the Pizza Express sale the Clapham House Group was formed. Helped by Paul Campbell, exgroup finance director of Pizza Express, Page raised £24m, and within a year the company comprised three small restaurant chains, one Indian, one Greek and one selling hamburgers. In each case Page “chose the business which served the best food, had the best customer reaction, and was available at the right price and we could see rolling out”.

Page selected these three sectors because, as he explains, “There are 10,000 Indian restaurants in the country and so we chose an Indian because it’s a consolidation play; the Gourmet Burger Kitchen (GBK) because people are fed up with MacDonald’s taking the hamburger downmarket; while the Greek/meze, well, that’s a bit more of an education process for the public, but the restaurants we’ve got are very busy – in fact the busiest restaurant we’ve got is The Real Greek by The Globe Theatre which does about £65,000 a week.”

Considering the chains in more detail, it appears there aren’t many similarities, but as Page says, “They are complementary, these are businesses you can put on the same high street. The Indian restaurant is very high quality, people stay for two hours and pay around £25 a head, while the delivery aspect is another market, around £12 a head. The GBK is a one-dish operation and around £8 per head, and the customer base is different; and The Real Greek is more family orientated and about £16 a head. So they fill different financial and demographic spaces.” And by having three chains Page says he is “spreading the risk”, but he “might consider a fourth once we’ve got the three settled”. In the medium term he intends to “expand each brand to 20/25 units and then see if it might benefit from being its own entity, and spin it off into a separate quoted company.”

Already, The Bombay Bicycle Club has grown from one restaurant and five delivery outlets to three restaurants and 10 delivery units, and Page notes that in general “delivery food is the fastest growing part of the restaurant sector”.

He also believes that “profits on a rolling company will grow – we made a loss on our first year, but analysts are forecasting we’ll make a profit this year”.

As for the business with the most potential, Page is cautious to commit. “Time will tell. GBK is six years old with eight units and you could say it’s the most established, but the Indian market is the biggest, with 10,000 restaurants to consolidate; and The Real Greek is storming away because there aren’t really any competitors.”

Holding back expansion, however, is finding suitable property at a suitable price. Page describes this as “a skill that needs to be worked at”, and warns against rapid expansion because people end up “overpaying for sites”.

“With Pizza Express, after it floated, we opened seven the first year, 14 the second, 21 the third, 28 the fourth, 35 the fifth. We built it up slowly and that’s what we plan to do here. In October last year we started with 15 in total, now we have 25, so we will probably open 10 to 15 by the end of our first year, next year 20 to 25, and the year after that 30 to 35, to get to about 100 in three years’ time. Slow but sure, or gradually accelerating business, is best.”

Middle-class monopoly

But what about changes in the restaurant trade during Page’s career – have there been any significant shifts? “Yes,” he says, “the quality of food and drink has soared. The middleclass market in the UK was Pizza Express until 1989 when Roger Myers opened the first Café Rouge. So think of the brands on the high street now, and compare it with 1989, when there was nothing there apart from Pizza Express, and then the first Café Rouge in Richmond. No branded pub operations, no gastropubs, there wasn’t anything. Pizza Express had the middle-class dining market to itself from ‘65 to ‘89; that’s 24 years.”

As for those branded restaurants that are struggling, Page blames this on the fact that “enormous amounts of capital were thrown at the customer base and, although the customer base has probably increased eating out 20% a year since 1989, the amount of capital has probably increased by 50% a year. And quality will always out, and changes of ownership don’t help.”

Looking ahead, Page suggests that something might emerge to rival Wagamama in the Asian sector “with a slightly different offering and environment”, while someone might “do a small chain of gastropubs, perhaps 20; but you tend to find people like gastropubs because they are one-offs”.

Overall, the only part of the high street market that has been consolidated is the pizza and pasta sector, according to Page. “But there will be some consolidation of other national cuisines and we intend to be there.”

At which stage it seems suitable to ask Page’s advice for those considering opening their own chain in the restaurant sector. “Don’t start up with too little money,” he instantly warns, “because the customers will notice if you skimp when the bank manager puts pressure on you. The old maxim is if you’re going to borrow, borrow big,” he says chuckling slightly.

 “Work very hard,” he continues. “I think I worked very hard for about 15 years – very, very hard. And then, occasionally, when the business requires it you have to work very hard again, and then relax. It’s not a normal 9 to 5 job; you do 100 hours a week for a year and then you can take two months off. Then something happens in the business and it’s 100 hours a week for another couple of years and then you can take a year off. You have to be flexible to the demands of the business.”

VITAL STATISTICS

David Page washed dishes at the fourth Pizza Express as a student and then began a career as a teacher. After a brief spell at a Brixton middle school he went back to Pizza Express to help open the seventh in the chain. By the late ‘70s he was running his own franchises which he expanded until he was the major Pizza Express franchisee. Then in 1993 the chain was floated on the stock exchange, Page’s franchises became absorbed into the newly acquired Pizza Express company and Page was appointed CEO. He oversaw the group’s rapid expansion until it was bought in September 2003, at which point he formed the Clapham House Group with the aim of acquiring and expanding emerging restaurant chains.

The Real Greek Food

Company Purchased December 2003 Cost initially £363,000 rising to £9m (bought as an earn-out, so paid according to money the business makes over a two year period)

 The Bombay Bicycle Club

Purchased January 2004 Cost £2.42m

Gourmet Burger Kitchen

Purchased November 2004 Cost £2.6m rising to £7.4m (also bought as an earn-out)

Business he admires?

Wagamama “Great operation, so successful. I made CEO Ian Neil an offer but he said I’m not that cheap.”

Personality he admires?

Peter Boizel, Pizza Express founder “Over-generous madman whose passion for quality still lasts – for 40 years.”