Pizza Express and Clapham House Group: David Page

He explains how he opened 350 restaurants for the groups and what he's doing now


Four words. That’s all it takes David Page to explain why investors backed his new venture Clapham House Group to the tune of £15m when it floated as a cash shell in October 2003.

“We’d done it before,” he says, shrugging with obvious satisfaction. Page, and co-founder Paul Campbell, formed the company weeks after agreeing exits from Pizza Express. They floated on AIM one month later. The idea was simple: buy three profitable emerging restaurant chains at the three to five-site stage and expand them. The sell was even simpler: Page’s experience. If there’s one thing investors value it’s market knowledge and a proven track record. When it comes to expanding restaurants, Page has both in abundance.

Earning a crust

‘Knowing a business from top to bottom’ is a claim CEOs like to make but few can justify. Page is one of those few. Well, almost. He actually got to know the restaurant trade from bottom to top – and a little by chance. Expelled from grammar school for spending the summer term lounging by a friend’s swimming pool and then sacked from his first job as a cartographer for refusing to wear a tie, Page’s early rebellion led him to the kitchens of Pizza Express as a dish cleaner.

The three years spent there part-time while training as a teacher taught him one thing: he didn’t want to be a teacher. Fortunately, Page’s employer had noticed where his true talents lay – even if he, by then, hadn’t. He offered Page the opportunity to run one of his restaurants for him. “It was better than teaching and paid more money,” recalls Page. “He gave me 15% of the profits, a good salary and taught me the rudiments of being a small businessman.”

The partnership proved a success, but after five years helping grow someone else’s business he wanted to do it for himself. A second mortgage and a loan of £6,000 secured him a Pizza Express franchise in Chiswick. Over the next decade, Page established a portfolio of restaurants, which included, after buying-out his former employer, 14 Pizza Express franchises, under the company name of G&F Holdings. By the end of the 1980s, he’d built a turnover of around £5m and cash profits of £1m.

“I had a knack for running restaurants, making customers happy and choosing sites,” says Page. “All my restaurants were successful and had 20% profit margins.” But he had his eyes on bigger things. When the original founders of Pizza Express decided to sell in 1992, his opportunity to join the big league appeared. As the major Pizza Express franchisee, Page’s G&F Holdings was absorbed into the newly aquired Pizza Express company and floated on the stock market in February 1993.

Page was appointed CEO of the group by new owners Luke Johnson and Hugh Osmond and oversaw a period of spectacular growth, with the issue share price of 40p rocketing to a high of £9.50. “It’s not often that the shares go up more than 20-times so it was quite an exciting ride,” admits Page.

Exciting, but not, Page insists, as personally profitable as most would imagine. “I put every single penny into the business and there was no room for error. When we floated it I was technically a millionaire but I had negative equity in my house. I didn’t own anything other than a lot of paper that said I was a millionaire.”

Despite a decade of almost sustained success, it was perhaps this which fuelled Page’s enthusiasm to reinvest some of the profits he made from the eventual sale of Pizza Express, which, by that time had seen its share price drop to a less-frenzied figure. At around £3 a share, Page insists the buyers got a “very good purchase” – not that he stopped to dwell on it. As he had been 20 years earlier, Page was more interested in putting the experience gained to good use in a new venture.

Cash shells

Page used his knowledge of the stock market to launch Clapham House Group as a cash shell. At the time a method little practised in the UK and viewed by many with more than an air of scepticism, Page insists it was the logical way to start a business where the strategy was to grow by acquisition. “If you have the cash in the bank you can buy the businesses more efficiently,” he says. “If the business you want knows it’s essential for you floating, the price will go up – that’s only natural.”

Page admits some investors were a little tentative, fearing the company would simply take their money and put it in the bank. But its pledge to make all three acquisitions within the first two years of trading pacified most of the doubters. “Schroders have got 17%, Framlington have 5%, Shell Pension Fund 7%,” says Page. “They’re all people that have already made money out of Paul and I, therefore I suppose you could say they were throwing more good money after good.”

Spoilt for choice

The acquisitions took less time than expected. The third, Gourmet Burger Kitchen (GBK), was completed on November 30 last year, a little over a year after initial funds were raised. An upmarket burger offering, GBK joined The Real Greek Food Company and The Bombay Bicycle Club, an Indian restaurant chain, as Clapham House Group’s first three brands.

All three were established, popular and profitable companies serving quality food with proven business models that demonstrated potential for growth – criteria far more important to Page than the type of food they specialised in. Indeed, Page insists the group will never buy a start-up and isn’t interested in turnarounds as it “only wants to be associated with success because anything else is too risky”

They held initial talks with more than 40 different Greek, Tapas, Noodle, Indian and Burger restaurateurs and deliverers. However, it wasn’t simply a case of picking the restaurants that made the most profit – and that’s where Page’s experience of ‘what makes a good restaurant’ came in.

“First we chose the ones where we liked the food best,” says Page. “Then where the customers seemed to value the restaurant, and finally, the deciding factor, where the management were good. We have to think like a private equity house and there’s no point us buying businesses unless we’re confident about the management.”

This meant weighing up and mostly ruling out the potential of several chains that may have appeared successful to the untrained eye. “There are some businesses around that the public think are marvellous where queues are out the door, but don’t actually make any money,” explains Page. “They take a lot but don’t make a lot – and we’re not interested in that.”

Page believes that in each case, the company that interested them was capable of adding something new to an existing market. “We were looking for businesses with clever propositions, clever management and clever employees that had got to the four or five-unit level and were ready to grow to the 25-unit stage if we gave them the money and support,” assesses Page.

Striking a deal

The problem with buying exciting growing businesses on the crest of exploiting their potential is persuading the owners that they should sell instead of doing it themselves. As someone who realised in his 20s he “didn’t want to be an employee”, it’s an issue Page acknowledges but one he insists isn’t an obstacle.

“It is a terrible decision for these people to make. They’ve got a successful business, so why the hell should they sell to us?” he empathises. “But they need to do something. If they want to expand from three or four units, it’s quite a big leap. They’ll need help from people who have done it before, in terms of property and site finding, and the extra revenue from sites five, six and seven will only pay for the management structure they need. You can’t do it with cashflow so you have to borrow money and there’s a lot of risk involved,” he adds.

That’s where, according to Page, selling to Clapham House Group suddenly becomes an attractive option. The company structures its deals with big earn-outs for the seller based on the future profits Clapham House will fund them to reach. Unlike venture capital, debt finance or private investment, the owners get some money straight away as well as the chance to work towards a far bigger pay day.

“We give them big incentives to perform over two or three years in terms of earn-out,” says Page. “They sell us the shares for say 20% of what they’re worth on day one and then in two or three years’ time if they make profits we reward them by buying them out for a formula. For instance, if the original owners of Real Greek manage to make about £1.8m PBT (profits before tax) in 2007 we’ll give them £8.7m.”

The owners also gain Page’s expertise and experience in the field that investors have trusted so readily. “It’s quite easy if you’re rolling out a retail business to choose the wrong properties in terms of location and rent and it holds you back,” says Page. “We know most of the high streets below Inverness; we know where to open and where not to open.” However, Page claims it’s the 100% conclusion of discussions entering ‘heads of agreement’ they’ve achieved which proves that selling to Clapham House is a good deal for the owner too.

Pinning down an ethos

As a company which started as a cash shell and relies on other people’s ideas and qualities to buy into and expand, it’s hard to know what Clapham House’s ethos is – or if it even has one. Page isn’t sure if it does or not, but is perfectly comfortable with not knowing – another trait which can be traced back to his Pizza Express background. He laughs when asked about Pizza Express founder Peter Boizot’s much pulicised claim that the company’s restaurants were “a necklace of little gems”. It’s a description which prompts Page to demand, “pass the sick bucket”, but nonetheless one that he can’t help agreeing with.

“It is the same for Clapham House,” he admits more seriously. “It’s how you should operate a business. What happens if you impose a chain culture is that staff wander round like robots and customers become bored.”

Unsurprisingly then, there definitely isn’t a mission statement. “Mission statements are bollocks,” retorts Page in disgust at the mere suggestion before reconsidering. “If there is anything like that, it’s that owners come third. If the customers and staff are happy you make lots of money and so should be happy. Too many places are built around the fact that owners want to be seen owning it and lording it.”

The customer experience is central to Page’s thinking and is something he thinks the larger restaurant chains have lost sight of. The company’s purchase of Gourmet Burger Kitchen was partly borne out of a belief that the UK’s current offering is “appalling”. In GBK, Page believes Clapham House has invested in a market where there’s a high demand for better quality fast food served in pleasant surroundings that’s currently under-served. However, he doesn’t necessarily see the existing market as GBK’s competition.

Asked about McDonalds, Page refuses the opportunity to gloat at the conglomerate’s declining sales although he’s clearly not displeased by the trend. Instead his obsession with how the restaurant sector works leaves him musing over how McDonalds’ turn in fortunes is as much down to being poorly managed as any shift in the public’s demand for the type of food it wants.

“It’s forgotten what its market is,” assesses Page. “It’s ‘food for fuel driven by price’. All their customers want is somewhere warm to sit for half an hour and eat and drink something really cheap. Because their management presumably went to university they have aspirations but their customers are not aspirational.”

Future plans

A second share issue raising £5m in May last year has left Clapham House Group with £14m still in the bank. But Page insists there won’t be any more acquisitions in the near future. The next few years are about demonstrating what they’re supposed to be good at: expanding the brands.

“In the next 12 months we’ll be looking to double the size of the businesses we brought,” says Page. The plan is take each brand to 25 sites over the next three to four years. However, he admits, it’s becoming an increasingly difficult challenge due to the lack of suitable plots for new branches.

“All the high streets are tightly held,” he says. “What happens is that you start negotiating on 30 sites and will probably open in six of those sites within 12 months, the following 12 months you’ll negotiate for another 30 sites. You’re now in talks on 54 sites and will open in 12… and so on and so forth. It’s a rolling process that you need to be on top of and can be very frustrating.”

At the moment Page is keeping the businesses within the M25. It’s a practical decision based on logistics and minimising costs – but national rollout remains a long-term consideration. “We’re only going to 25 sites because we think that’s all the M25 can cope with but we’ve bought businesses because we think they can go to 100.” Given Page’s history of aspiring to the next level in the food chain, it wouldn’t be a surprise if he were trying to make that ambition a reality sooner rather than later.

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