Carluccio’s: Simon Kossoff
Kossoff discusses his journey from restaurant hell to crafting a measured expansion plan
For someone who should have a lot on his mind, Simon Kossoff is a very patient man. Carluccio’s managing director has agreed to meet me at the restaurant chain’s Richmond branch, located over the road from Growing Business’ offices. From his expression, he wasn’t bargaining for the heavily directed photo shoot that follows our conversation. Early morning diners glance over their coffees, making Kossoff, now posing horizontally, feel a little uncomfortable. He gamely goes through the motions, but he’s obviously relieved when it’s over.
Carluccio’s has grown steadily to 38 branches – 37 in the UK and one franchise in Ireland – since launching in 1999, with plans for expansion in the Middle East. The AIM-listed firm’s £64m turnover and profits of £5.6m for 2007 – up 66% on 2006 – are no mean feat in the hugely competitive casual dining space, where there’s a general perception that more branches equates to less quality. “There’s a risk for restaurant businesses that if they grow too quickly, the wheels come off and standards and delivery start to fall away,” he says.
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Accident and design
Carluccio’s brand is founded on quality and affordability, fitting seamlessly into a boom in middlebrow dining that has seen a host of chains, from Wagamama to Pizza Express, rise to dominance on the High Street. Kossoff modestly acknowledges that the serendipitous timing of his growth plans for the restaurant owed more to accident than design. “I can’t say that anticipating the growth of casual dining had been on our minds at the time. I’d love to say it was a carefully conceived plan that understood the market trends and the demographics but it wasn’t like that,” he says.
His career path to date also has something of the happy accident about it. After studying economics at York, Kossoff ducked out of the traditional graduate milk round, opting for a prosaic sounding postgraduate course in hospitality management at Manchester Polytechnic. Historically, catering had been about experience, with even its finest exponents leaving school at 16 and going directly into the trade. “This was the first course of its kind,” he recalls. “As a consequence, academically it was crap.”
He spent the year cruising through his studies and, with no grant to support him, working in a diverse range of roles and venues, from a well-established dining restaurant to a new bistro and a nightclub bar.
Kossoff and his colleagues were told that they would emerge from their studies as the “cream of the industry”. However, he returned home in 1982 jobless. Five months later, he finally landed a role as assistant manager of The Pub of Pubs, a tourist trap in the basement of a hotel on London’s Gloucester Road. “It was pretty awful,” he recalls. “I was utterly appalled by the hierarchy of management in the hotel and the way it sapped any initiative.” He lasted nine months, before a telling move in 1983 saw him join a fledgling Pizza Express, where he got a taste for casual dining and big restaurants. Three years later, he moved on to restaurant group My Kinda Town, which ran huge American-style eateries, such as The Chicago Rib Shack and Chicago Pizza Pie Factory.
Kossoff spent a decade consolidating his management experience under the unrelenting eye of founder Bob Payton. When recession hit the trade in the early 1990s, he found himself taking on the multiple roles of numerous casualties of the downturn. Promotion followed, and as managing director UK and Ireland, he was involved in the flotation and eventual sale of the business in 1996 to Capital Radio.
My KindaTown had provided invaluable experience, but when this period of his career came to a close, the inexorable rise of the theme restaurant was becoming faintly absurd. Looking for a new opportunity, he encountered concepts that included both Star Trek and Abbey Road. “It seemed ridiculous and completely out of control,” he says.
Kossoff met Priscilla Carluccio in 1997. Her idea for an eatery that would combine a quality Italian deli with a casual all-day restaurant under the Carluccio’s brand name (her husband Antonio was a proto-celebrity chef) provided the eureka moment he’d been searching for.
“I thought it was exactly what the market was looking for,” he says. “It seemed so fresh in contrast to those ridiculous themed restaurants.”
Kossoff wanted to get the new business started with a bang, so rather than investing £500,000 on one restaurant that would prove the model for a second round of investment, he decided to go for £2m, enough to finance three. But despite a senior team that included the Carluccios and two other My Kinda Town executives, the venture capitalists simply weren’t interested.
“We were building the business on the back of Priscilla and Antonio’s operation, which had a great reputation, but was not commercially successful,” he explains.
Worse still, Kossoff was on the investment trail in the middle of the dotcom boom. “I remember several meetings with people where they asked what our online strategy was,” he recalls. “I think it would have been easier to raise £200m for an online food business than it was to raise £2m for a bricks and mortar restaurant. We gradually worked our way down from the best VCs, to the less good ones, to VCTs. And then we started to see individual people.”
The turning point came when Kossoff met Seattle Coffee founder Scott Svenson, who had recently sold the chain to Starbucks. While he had joined the board of the coffee giant, he was also on the lookout for angel investment opportunities. “Scott and his wife loved the idea. He put in a chunk of money and other people who knew him followed.” The process had taken 18 months, but once Kossoff had met Svenson, the deal was done in six weeks.
Reinventing the meal
The first Carluccio’s outlet, situated off Oxford Street, opened in November 1999. It began life as a daytime-only café and deli. Despite critical acclaim and brisk lunchtime business, Kossoff felt that the uneven trading would see the business fail unless he changed the model. He spent the Christmas holiday reinventing the concept.
“By the end of January, we had a completely new menu, different trading hours and changed economics,” he says. “What you know as Carluccio’s really came about in February 2000. Our first evening opening came on Valentine’s Day and it was full.” Despite packing them in, it took a little longer to make the costs work.
A second site, a concession store in Fenwick of Bond Street, opened a year later. “It wasn’t part of our strategy, but they were investing the capital, so it protected our very valuable cash and was a great way of getting the brand out there,” Kossoff explains.
The firm’s milestone third store – located in St Christopher’s Place in West London, a desirable specialist retail area – required another departure from the strategy. While patience has informed the Carluccio’s story, it’s also punctuated by leaps of faith. “It just didn’t conform to the model that we’d planned,” says Kossoff. “It was twice the size and the costs were double. But we saw it as a flagship site, so spent the last of our original investment on it.”
It was a roaring success from day one. “At that point, we had a stable business and were suddenly generating cash instead of using it up,” he recalls.
The company has carefully added around five outlets each year, aided by a flotation on AIM in 2006, ensuring that overexpansion doesn’t put the integrity of the brand or the company’s balance sheet at risk. “One of the reasons that Carluccio’s has been successful is that we’ve been very cautious about site selection,” reveals Kossoff. “Although we do have sites that perform less well than others, our success rate is much higher than everyone else’s. That has necessitated going a bit slower. We now feel we have a size, infrastructure and the funding to go a bit quicker, but we’re still only talking about adding maybe seven or eight outlets – it’s the property equation versus the risk.”
These are tough times for anyone on the High Street, but Carluccio’s has proved resilient to the downturn. Its deli, which accounts for around 20% of turnover, means it can trade in quiet periods, and a multifaceted offering sees it stealing market share from a range of eateries. That’s not to say that the firm isn’t feeling the pinch. “Eating out is discretionary,” says Kossoff. “That issue is out there for everyone in customer-facing businesses. I can’t get my head around what’s going on with the economy. What I do know is that our customers think something horrible is happening. The next 18 months will have its difficulties, but there’s lots of growth left in casual dining. But no one should underestimate the times that we’re facing.”
Rising food prices have seen Kossoff personally taking on responsibility for purchasing, and, remarkably, Carluccio’s has slightly improved its cost base, avoiding the worst of the food price inflation by altering its menu. “Compared with other casual dining operations, our offering is broad. We’re not solely pizza, hamburgers, steak or pasta,” Kossoff explains.
When beef prices rose sharply recently, Carluccio’s revised one meal and took two off the menu, neutralising the effect.
So what’s stopping challengers simply ripping off the Carluccio’s model? “We’re the experts and have some level of first mover advantage,” Kossoff replies. “We’re running two businesses in one, with two skill sets. We’re managing huge numbers of product lines in the shop. These are all things other people will find difficult to do. And we had a great brand when we started. That’s not true of most openings. But we’re not geniuses – we just understood a good idea when we saw it and we’ve worked bloody hard to make it work.”