Helen Melvin, Finance Director of Brasserie Bar co, the restaurant and pub group run in partnership with Raymond Blanc, explains why the board decided to expand the business and the path to find the capital to invest in a growth strategy.
Financing business growth always has its challenges, but none more so than in the leisure sector, which is so reactive to economic change and uncertainty.
I have been Finance Director of Brasserie Bar Co (Brasserie Blanc and The White Brasserie Co. pubs) for six years and prior to that, Loch Fyne Restaurants for nine years, and have experienced a road that has been interesting, inspiring but never without the occasional bump and diversion to keep you on your toes.
Brasserie Blanc started life twenty one years ago in Oxford, the home town of Raymond Blanc and within a short drive of his Michelin-star Le Manoir aux Quat’ Saisons in Great Milton.
The idea was to take the same underlying principles of Le Manoir, the use of freshly prepared ingredients and authentic French flavours guided by the seasons, and apply it to a broader, more accessible everyday concept. Today there are twenty Brasserie Blancs trading across city centres, regional venues and hotels all over England.
The evolution of the brand has not been without its challenges. We acquired six of the London Chez Gerard sites in 2011, to boost our presence in the capital. However, the subsequent remodelling into Brasserie Blanc required significant investment.
Meanwhile, growth within the estate was stalling, it was grappling with creating a clear identity and its appeal was heavily biased towards an ageing population. The management team were convinced that the solution lay in a far-reaching rethink of the brand.
We believed the fundamentals were sound. The skill and dedication of our chefs in producing food from scratch in every brasserie, paired with a strong service-led culture through every level in the business, gave us the confidence that the brand was worth investing in. However, to do the exercise properly would be costly and the return on investment would take time to show through in our trading results.
At the same time, the management team, having had some experience of running pubs, was working on an idea of putting the same French food concept into an English pub environment. There was a clear gap in the market for pubs with a good food offering and, against the backdrop of an ever more competitive High Street, this seemed a logical next step to deliver growth.
Initially, we trialled the pub concept with the leases of two tied pubs, one of which was directly opposite our head office. We were keen to keep a close eye on progress and who doesn’t want the perfect pub with the best French food on their doorstep?
The pubs traded well and proved our early instinct to be on target: this was a format that was unique and well received by drinkers and diners of all ages and life stages.
We saw a lot of potential in both brands, but they were going to require significant capital investment. The big question was how to fund it.
Private equity was not an option and the banks, whilst keen to support the roll out of the pubs, were nervous. For them, the pub concept did not have enough trading history for them to back in any meaningful way. When it came to Brasserie Blanc, we were going to need a fair degree of latitude in both funding and covenants to allow us to do the job properly, not something that sits particularly well with more conventional banking.
After a great deal of debate around the Board Room table, we opted for expensive mezzanine debt. The coupon was eye-watering, but it was all Payment In Kind (PIK) and would give us the latitude to execute our plan unfettered by covenants.
We recognised that the cost would set the plan back but, had we not taken this action, we believe the business would not be in the strong position it enjoys today.
By June 2016, we had completely rebranded the Blanc estate. Gone were the table cloths and stiff uniforms, replaced with an all-together less stuffy offering, designed to appeal to a broader and younger demographic. Brasserie Blanc was now enjoying double digit like-for-like sales growth and the pub estate had grown to 11 sites, all of which were trading strongly.
We were now ready to re-enter more conventional banking arrangements. However, timing is everything, and just as the time was right for the business to refinance, the UK voted to leave the EU.
The post-Brexit landscape brought with it a weakened pound, increased food costs and uncertainty around the future working rights of those of our employees who are EU nationals.
On the domestic front, we have encountered unprecedented recent cost increases through business rates, minimum wages, auto-enrolment and apprenticeship levies.
There were those that questioned our decision to go back into a banking environment. However, we were confident that growth at a steady pace, with a clear focus on the pubs and developing a new innovative property strategy for the Blancs was the way forward – and this was going to require capital investment.
We met with a few banks and after meeting OakNorth, we were left with a strong sense that they occupy a unique place in the market. Mark Derry (our CEO) and I attended the credit committee meeting where aspects of performance and the business plan were discussed in an open forum. Following the meeting, OakNorth made their decision to lend within days.
Clearly, the future holds a great deal of uncertainty and many challenges, we are optimistic about fulfilling our business plan aspirations within a solid, trusted partnership.