Clapham House: Paul Campbell
The joke we make about ourselves is that we aren’t clever enough to invent anything,” says Paul Campbell, co-founder of Clapham House, the AIM-listed holding company behind the likes of Gourmet Burger Kitchen (GBK), Tootsies and The Real Greek. Indeed, he and business partner David Page, who made their names through Pizza Express, haven’t invented any of the aforementioned brands. Formed in 2003, Clapham House is a growth and acquisition vehicle where proven brands are bought into the group and then given the resources to expand. Its focus is food and restaurants, and its aim is to take advantage of a growing yet fragmented market.
Campbell is himself a trained accountant, a skill set that he values greatly, but ultimately didn’t want to pursue: “I did accountancy as a business qualification at PricewaterhouseCoopers, but then left a week after I qualified,” he says.
He moved into corporate finance and soon found an area he was attracted to. “One of the people I worked with was in the leisure industry, and it just looked so much more fun running a business instead of advising one,” he says.
The express route
Business is in Campbell’s blood. His father worked as a market trader and, as a youngster, he even ran his own stall, selling Rubik’s Cubes. He feels this gave him an early insight into what business was all about: “I learnt how hard it is to run a business. You have to get up on a Sunday morning, pack your van, set up the store and you haven’t even begun to sell anything. You might come back without having covered your costs.”
The struggles and ardour of those days have made an impression on him and created a drive to pursue bigger ambitions. “It was a good lesson in how hard business can be,” he says. “It was quite successful. We had a good time with it, but it probably taught me more than anything that it’s better to be involved in a business of scale.”
Campbell met David Page through his brother Richard, whom he met while studying history at university. In March 2002, Page brought Campbell into Pizza Express as the group’s finance director prior to exit. Previously, Campbell had been chief executive of Relaxion, a gym and leisure business which opened over 100 centres across the UK. There are parallels between running chains of restaurants and gyms, but whereas health and fitness became the big thing to do, eating out is here to stay, according to Campbell.
“David and I were planning the next stage and thought that restaurants were still a good place to be active. We believed it would be a growth market for probably the next 10-15 years,” he says. “I really liked working in restaurants as they were less faddy than health and fitness clubs – and it’s something people will always need.”
Doing up the house
Clapham House, first conceived in a house in Clapham – yes, really – began life as a cash shell formed to make acquisitions in the food sector. It’s never an easy job convincing investors to back your business when there is no business, but Campbell and Page had taken Pizza Express to new heights, and from an investor’s viewpoint mid-market dining was a good place to put cash.
“When we looked at the restaurant market in the UK, it was clear there was great growth, but little consolidation,” says Campbell. “Except for pizza and pasta, and fast-food outlets like KFC and McDonalds, there aren’t many big players. And compared to what’s happening in the pub sector it’s a benign market.”
Campbell was looking for proven businesses with simple, scalable concepts. Nothing too chef-orientated and where crucial economies of scale can come into play, so as the company grows, costs fall in proportion.
“To prove a concept I think it has to be up and running in two or three locations. One could be a fluke or location-centred,” he says. “But by the time you have three, you have proved the concept makes money, and the creator has probably ironed out the problems and got consistency across the outlets. At that stage, we become interested.”
Following flotation in 2003, Clapham House began its search for businesses to buy. In fact, it had several in mind well in advance, and Gourmet Burger Kitchen had been top of its list while Page and Campbell were still at Pizza Express. They had visited its Battersea restaurant several times, witnessed the demand and rated the concept.
The company’s New Zealand founders weren’t immediately interested in selling, but eventually, in October 2004, they took Clapham House’s offer and sold for a total consideration of £10m. It has since grown from six to 45 outlets in the UK with eight more internationally. It was a strong brand, highly scalable, had a good price point and served a universally loved food. “GBK ticked all the boxes,” says Campbell of his most successful acquisition.
The Real Greek was the first buy for Clapham House, for £700,000 in December 2003 and had just two restaurants. It has since grown to six outlets, all in London, and has won awards and acclaim for its food. In the following April, the Bombay Bicycle Club, a home delivery curry service, was acquired for £2m. However, it is the company’s least successful move, and last July it was disposed of to reduce debt and to focus on the restaurant business.
“I was a little bit sorry to see it go but we had to take a strategic view,” Campbell says.
The group’s biggest acquisition, Tootsies for £25m, added 30 restaurants to the group, although this meant a fair amount of work. The 35-year-old business’ restaurants needed refurbishment and its menus updating. Some of the least profitable parts have been closed down, while certain sites, such as the one in Canary Wharf, have been converted to GBKs.
There are now 23 Tootsies, although more are planned at airports and shopping centres, where high footfall and mixed demographics fit in well with the family-focused restaurants.
Style and substance
With three big brands, 2,000 plus staff and 82 locations, Campbell and Page are busy men. But quite understandably Campbell embraces the art of delegation. “I think people are surprised how hands-off I am, but I think they really thrive when you give them independence,” he says. “But you need to do that in quite a measured way and you have to be able to get stuck into the detail at the right time.”
Each of the brands has a managing director and each restaurant has its own managers. However, Campbell spends a lot of time in his restaurants and tends to hold meetings at them when possible. The information is all computerised and centrally managed, so he monitors activity daily. As an accountant and former finance director, he also has the knowledge to be able to analyse it, which isn’t always fun for his finance team. “Having an accountancy qualification is quite useful. I feel for my FD having someone like me to answer to.”
Last December the company issued a profits warning while at the same time announced that it was scaling back on expansion plans. The economy was still reeling from Northern Rock and predictions of a recession were everywhere. Campbell opted for a cautious approach, but the City didn’t respond well and the share price dived.
“The market was surprised that we had slowed down so much, but I think we called it early and called it correctly,” argues Campbell. “The wrong thing to do when you’re a quoted company is to bury your head in the sand. We tried to do the right thing and decided on the best rate of expansion for this year, and I’m happy we did that.”
It was also a wake-up call to how much attention the former Pizza Express men were getting. The business media were hungry for examples of failing confidence and Clapham House was a tasty target.
“I found it hard to believe the amount of coverage it got,” says Campbell. “I suppose it was quite a compliment that people thought we were some kind of a barometer of what was going on. Consumer brands get more coverage, which is great when things are going very well, but when things aren’t so good there’s a flipside.”
Food for thought
Eating out is more popular now than ever, and the mid-market space is growing. But we are also developing ever more discerning palettes, and the restaurant industry needs to keep up. Campbell believes that we are demanding more quality when we eat out, and that people also want more value.
“You can still eat out in London and pay a lot of money for what’s a very average meal,” he asserts. “We are looking to offer a great meal at a great price, and I think that GBK is the best example we have of that.”
The GBK menu epitomises what he believes is happening to British food tastes. All the beef comes from grass-reared Aberdeen Angus cows, and the salads and the sour dough are fresh. Of course, burgers, fries and milkshakes aren’t health food, but it’s a far cry from McDonalds.
“UK customers are becoming more and more quality-aware. They want to know more about their food and its providence,” says Campbell. “There’s a health issue, too, but I don’t think it’s at the top of the tree.”
Food is a passion for Clapham House. Campbell thinks too many retailers have become less interested in food and got lost in themes and concepts. “I’m not interested in things that are concept or theme led,” he says.
As the financial world reels and wobbles, being an AIM-listed firm is not as good as it was a few years ago. But Clapham House is still growing in terms of turnover and locations, and has strong brands attached to it.
Pizza Express can be found in the majority of UK towns and cities, and GBK could yet emulate that success. How long the current downturn will last is anyone’s guess, but this will only slow the company’s growth, not stop it all together. And, as Campbell knows, when it does end, we will all still beeating burgers and GBK wll almost certainly be there to serve them.