Business Profile: Canteen

“We’re not restaurateurs,” declares Canteen co-founder Dominic Lake. “We founded the business because we saw a gap in the market for great British food at reasonable prices, but we’re really just designers.” Modishly dressed and occasionally distracted by an impressive collection of Apple gadgetry, the founders certainly look the part. On our utilitarian yet beautifully designed table are a selection of sample tiles and a couple of light fittings. We come to an agreement that, with a fifth site in the works, they can probably now be considered genuine restaurant operators. 

Launched in 2005 by Lake, Cass Titcombe and Patrick Clayton-Malone, Canteen was intended as an antidote to the corporate chains with an egalitarian pricing structure that gives the likes of Pizza Express and Café Rouge a run for their money. 

With the strapline ‘Great British Food’, the business was the first branded chain to champion local sourcing and sought to revive traditional British dishes. Pie and mash and roast beef sandwiches might be all the rage now, but seven years ago it was a breath of fresh air in a restaurant market fixated by the exotic. 

This nationalistic philosophy extended beyond the ingredients sourced and dishes created – the attractive but functional restaurant spaces champion British design, not least Clayton-Malone's own firm Very Good & Proper. 

British branded chain​

Canteen is also notable as one of the first branded chains really to nail all-day dining: the restaurants are consistently busy for breakfast, brunch and afternoon tea. The inaugural site opened in Spitalfields followed by branches in Baker Street, Royal Festival Hall (on South Bank) and Canary Wharf, all in London. 

The Canteen within Royal Festival Hall is the biggest of the bunch, at 6,000sq ft, but the all day-format requires larger sites, most are in the region of 120 covers. Spend per heads are somewhere between casual dining and premium casual; £7.50 at breakfast, £14.50 for lunch and £21.50 at dinner. Turnover was £7.2m last year, good going for a four-strong group. 

Canteen is high-profile and influential, but it’s a small independent brand in a crowded and rapidly changing landscape. The larger chain have upped their game and lowered their prices, the rise of the food pub means traditional British grub is everywhere and sourcing exclusively British produce is a novelty no longer. Direct competition has also emerged, most significantly in the Bumpkin format, the three-strong British-centric chain operated by Ignite Group. And although not direct competition, Jamie Oliver’s fast-expanding Union Jacks British pizza concept is trading off a similar premise. 

People​

Last year there would have been an extra person sitting around our table at the group’s Baker Street site. Titcombe – the only member of the founding team with a chef background – left the business amicably in early 2011 and is soon to open a bistro in west London, working title Roost. 

This rather sizeable skills gap has been filled by two chefs – former Gordon Ramsay Holdings man Mark Sargeant (now overseeing his Rocksalt restaurant in Folkestone, Kent) and Richard Edney, most recently at The Swan Collection, where Sargeant also briefly worked. 

Sargeant – employed as a consultant with a particular remit for quality control – is a high-profile name, but from a strategic standpoint the lesser-known Edney is the most noteworthy addition to the team. Having headed up product development at hugely successful sandwich chain Pret A Manger, he has effectively taken over from Titcombe as executive head chef and is employed on a full-time basis. 

A1 sites​

Mid-last year, Canteen announced its interest in cheaper and more readily available A1 retail sites. Normally, eat-in operators can trade only from A3 restaurant or A4 pub and bar units, but there is a loophole that Pret deftly exploited in the early 1990s soon after the Property Use Classes Legislation was introduced. As long as no primary cooking (typically methods that require ventilation such as frying, roasting and grilling) occurs on site, restaurateurs can potentially trade from A1. 

Predominantly A1 eat-in/takeaway concepts such as Pret, Subway, Wasabi and Itsu owe a lot of their success to the fact that they were able to spring up in desirable, high-footfall areas without the need for costly applications that are prone to being blocked by local authorities. 

Canteen’s most recent project – an extended pop-up in Covent Garden’s Market Building, which wound-up earlier this year – had a limited kitchen and stripped-back menu, and Edney and the team’s experience there have fed into the research and development for an A1 version of the format - Canteen-lite, if you like. 

“We trialled some A1 elements and the results were impressive,” says Clayton-Malone. “A lot of our key products are suited to being reheated, pies and stews in particular. We’ve got stacks of recipes and ideas, there are a lot of possibilities.” 

Despite this latent potential, Canteen’s expansion will focus on traditional A3 sites for the time being. “We’re keenly aware that it’s a very different business model, we’d probably need to set up a new division within the company and we’re not at that stage yet. There are a lot of opportunities for the brand and we have to rein ourselves in. For now we need to concentrate on running great A3 restaurants,” says Lake.

Expansion plans​ 

Even with a degree of uncertainty over which direction the business should take, the pair are bullish about the brand’s long-term expansion prospects, although this self-assurance is tempered by a more realistic goal of a total of 15 restaurants within the next three to five years. 

“Canteen has the potential to grow to between 70 and 100 units around the country, but in terms of skill sets we may not be the people to do that,” says Clayton-Malone. “At the moment our pace of expansion is measured. We like to do things our way. We haven’t opened anything [permanent] for a couple of years and that’s been our choice. We have to be very careful about where we go as a comparatively young independent business.”

Expansion outside London is on the cards, with Bath, Bristol and Manchester mooted, but the pair give the impression that London remains the current priority. The tiles on the table are being considered for Canteen’s fifth restaurant, set to open on the former Livebait site adjoined to the Lyceum Theatre on Covent Garden’s Wellington Street next month. 

Canteen’s expansion has been aided by the group’s use of the Enterprise Management Incentive scheme, a tax-efficient Government initiative geared towards helping smaller businesses attract and retain good staff. The share option scheme is available for all senior staff down to branch head chefs and GMs. The key benefit for Canteen employees is that gains made on shares realised fall under capital gains tax as opposed to the higher income tax rate. The rollout is being funded from profits with minimal external backing, and it’s hard to see how Canteen will fulfil even its short-term expansion ambitions without private-equity involvement. 

Site selection​

Limited resources have made site selection a slow process – Canteen can’t rush in with its chequebook like the more leveraged chains. 

“There’s a high level of competition for good locations, it can get very expensive to get into central London sites,” explains Lake. “We have to work hard to develop relationships with landlords. 

For example, the Livebait deal came about because the landlords are big fans of what we do. We need to think creatively about site selection and consider more unusual locations. But the good thing about being an independently owned group is that there’s no pressure to leave our comfort zone at the moment.”