The terrorist attacks of 2001 in New York could have spelt disaster for James Horler’s La Tasca acquisition. But two years on the group has flourished. By Noella Pio Kivlehan
September 11 2001 was to be a memorable day in James Horler’s business career. He was signing on the dotted line to buy a chain of restaurants, and was set to inject millions into it.
Later that day, Horler – the former chief executive of the City Centre Restaurant chain Frankie & Benny’s – pondered the ramifications of the deal.
The terrorist events at the World Trade Center in New York had overshadowed his purchase of the 16-strong Spanish restaurant group La Tasca. With prophecies of Armageddon, eating in restaurants had been wiped off the public’s agenda.
Horler, the newly appointed chief executive of the Restaurant People Group, which was formed to buy La Tasca from founder Neil Gatt, immediately felt the economic impact. Two of La Tasca’s most profitable branches – Covent Garden and Canary Wharf – saw sales drop dramatically, and for a month business was bad.
Understandably, Horler was worried. Along with the £14.5m supplied by Penta Capital, he had tied up his own personal assets into the purchase, having left CCR to take the opportunity to be his own boss. Industry commentators also pointed out that at £28m, RPG paid too much for La Tasca. Horler himself admits RPG paid nine times over operating profit.
Eighteen months on and Horler is sitting relaxed in La Tasca, Canary Wharf, London, with Jonathan Havenhand, the group’s property director. Things are clearly going well. The group’s 30th unit opened in Chelmsford this month, and Horler is talking about expanding La Tasca in the UK, his plans to acquire another chain of casual dining eateries, and possibly branching out into Europe.
Enjoying the bounce
What a difference a year and a half can make. “Post-11 September, I had a few hairy moments,” admits Horler.
With a smile, he is pleased to report that both the Canary Wharf and Covent Garden restaurants bounced back well after the New York terrorist attacks, with the former trading up 16% year on year. And he is enjoying the industry compliments that he has done a “good job rolling out the La Tasca brand”.
However, the industry has not always been so complimentary. The perception that Horler’s scary moment started, not with the terrorist attacks, but with the price paid for La Tasca, is ever present. “His timing wasn’t great. It was a foolish price by 2001 standards, but by 2002 it looked somewhat better,” says one leisure agent.
Horler remains solid in his argument that it was a good deal. “That nine times EBITDA will be down to five and a half times this year, and next year it will be down to four and a half.”
Horler believed then and believes now that he was buying “something that was unique and has great roll-out potential”.
“We targeted the chain because of what it offers. It is unique. My gut feeling was that it would work.”
Good instinct
His instinct was correct. Unlike the oversaturated pizza and pasta market, which has seen the likes of PizzaExpress suffer falling profits and plunged into the takeover pool, Horler’s La Tasca is one of a kind. “Our competition comes from independent Spanish restaurants. Each city has their own, but we are the only ones on such a big stage.”
La Tasca is set to become an even bigger player. Horler, who left CCR specifically to take on La Tasca has his sights set on 50 units. The original business plan was for 43, but good business has allowed him to be more ambitious. Havenhand says they plan to open another 10 this year.
“We have one under contract for Cardiff’s Old Brewery Quarter, and we are negotiating on another four which are in solicitors’ hands.”
With a sense of pride, Horler and Havenhand point out that it took eight years to build the chain to 16 restaurants, but only 15 months to almost double this number.
“We could create 100 restaurants without much problem and without having to cannibalise or compromise other restaurants,” says Havenhand. When asked why they could increase the chain so rapidly and Gatt could not, Havenhand diplomatically says that it is hard to find good sites.
But their bullishness about growth in a market downturn leaves some observers warning that they could be building the chain too quickly. “Most of the first phase was good, but the later ones I’m not so sure about,” says one leisure source.
Horler and Havenhand are bemused at the criticism. “That’s a misinformed agent,” says Havenhand, who states quite categorically that they are still very choosy about sites, and that they will not settle for an unprofitable site.
Horler concedes that unlike the sites built under Gatt, some of the new units are not in prime cities, but that does not make them any less successful. “If you look at Bluewater, it will exceed 100% of its first full year of trading. Reading is also trading phenomenally,” he adds.
In fact, City analysts say that seeking secure secondary pitches is a safe way for a chain to expand in the current economic climate.
Being the UK’s only major Spanish chain clearly seems to be a factor in La Tasca’s success, but there are other elements as well: its appeal to women customers, individuality, and an unorthodox management style.
Women customers, says Horler, are driving the casual dining market and they make up 70% of La Tasca’s customers. He says women feel comfortable in his restaurants because of the diverse choice: a drink, some tapas, a coffee, or a full meal.
The décor is also appealing. Horler deliberately avoided what he calls the minimalist style sported by the likes of Est Est Est. Spanish staff add to the atmosphere: around 60% of the staff are Spanish – partly recruited through La Tasca’s Spanish website.
Horler is proud of the subtle individualism which stretches to management of the separate restaurants, which vary in size and decoration.
A degree of independence is given to the managers – who are part of RPG’s Management Partner Scheme. “We supply them with the menu and set up the supply chain. The managers then decide on the rest – such as which local produce to use and the style of housekeeping,” says Horler.
Focus on management
Havenhand says: “You won’t get memos, you get management.”
Horler’s style of management is famous within the restaurant industry, with agents calling it “unusual” and “radical”. The company has no headquarters – all meetings are done in individual restaurants, which keeps costs low.
“If people consider my style radical, it’s because I have worked my way up in the industry, and I can relate to all the things that go on,” says Horler, who adds that the secret to running good restaurants is the hands-on culture of the local restaurant.
“I don’t want to hide anything. I have always hated hierarchy.”
When asked about the possibility of a stock market flotation, Horler replies: “I don’t think we will float. Why do you want to run a plc? Management is at the core of what is wrong with plcs.”
Horler intends to carry his professional beliefs to another chain and to another level. “We have a strong team running 30 restaurants, and we can use that team to build upon our good reputation.”
With his team he is on the acquisition trail. “We want to acquire other chains that have potential. Somewhere in the £8-£15 per head arena in the same areas as La Tasca.”
His horizon could be broadened, as he says they are looking towards Europe. Is this a case of bringing Spanish food to the Spaniards? Horler laughs, and says they are “researching the Continent”, but that they “have no definite plans”.
Horler is sensitive to the conflict with Iraq, and he does expect his businesses to suffer to some degree.
“During the time of any war there will be an impact and we will have to ride out the inevitable initial downturn,” says Horler. “But I don’t think it will be prolonged, and if it is prolonged, the British public will bounce back quickly.”
2001: Chief executive, Restaurant People Group
1996: Managing director of Frankie & Benny’s, City Centre Restaurants
1993: Regional manager, west of England, Granada Hospitality
1990: Regional manager Midlands & South Wales, Little Chef & Travel Lodge
1985: General manager, Devon, Little Chef & Travel Lodge
1981: Management trainee, Trust House Forte Hotels
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Spanish cuisine The steady rise of La Tasca |
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Pub operator and in-flight caterer Neil Gatt turned to Spanish cuisine when he opened the first La Tasca in October 1993. |
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Gatt was quoted in Caterer & Hotelkeeper in 1995 as saying: “I noticed a hole in the market in Manchester. There wasn’t a Spanish restaurant in the city centre, only nondescript Italian bars.” |
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In La Tasca’s first year, Gatt expected to take £750,000, but actually achieved £1.5m. |
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He slowly built up the chain using a central production system that turned out good quality food. By 2001 and 16 restaurants later, Gatt had taken the chain as far as he could. |
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“The entrepreneur can usually only stretch to 10-15 sites. After that they begin to creak at the seams and can no longer stamp their personal signature on them. Neil Gatt was struggling to find sites, and if he had continued to develop prime sites, they would have got too big for him,” says a City analyst. |
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Gatt’s tactic of slowly building up the chain proved to be a great foundation, believes the City analyst. “Gatt’s roll-out took four years to get to five restaurants, whereas in the big company arenas growth is expected to be much faster.” |
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In 2001, Penta Capital formed the Restaurant People Group to buy La Tasca, and committed £14.5m to the purchase, while Bank of Scotland supported the deal with debt and a development programme. John Barnes, a partner in the Penta Network Fund and former chairman of Harry Ramsden’s, became non-executive chairman of RPG. James Horler was appointed chief executive. |
