Business Profile: Individual Restaurant Company

We have a very simple rule – as long as the request from the guest is legal, the answer is yes,” so Vernon Lord, managing director of the 35-strong Individual Restaurant Company (IRC), explains, in simple terms, this group’s philosophy of how its staff should treat guests.

“An example of trying to match every request would be, say, if they want to book at 8pm we will do what everyone else does and say ‘sorry we are full’ and offer 7pm or 9pm,” he continues. “If they say no to both, we may say if you come at 7pm there will be a bottle of wine on the table. They might still say no. OK, why don’t I book you in for next Saturday? But that should be the starting principle. We try as much as possible to find a solution. The golden rule is never say no.”

This can-do attitude runs through the whole of IRC, which was taken private in 2012 by a consortium led by leading shareholder Malcolm Walker and chief executive Steven Walker in a deal that valued the group at £17.4m including debt. And private it has been, with IRC having enjoyed staying out of the spotlight in recent years as it has looked to make the most of its current estate, which comprises 22 sites under the Italian brand Piccolino, 11 meat-focused Bar & Grill restaurants and two newer and more casual restaurant brands – Gino D’Acampo My Pasta Bar and Gino D’Acampo My Restaurant – in conjunction with the Italian TV chef.

Working the estate​

Late last year, IRC opened another Piccolino, in Alderley Edge, Cheshire, which Lord says does around £65,000 a week net, and it is currently on site to open a Bar & Grill in Chester, although it hasn’t got a huge stream of openings lined up. Instead, Lord’s focus is working with the company’s existing estate rather than rolling out IRC’s various brands across the country at pace.

Last month, IRC invested £1.3m to reopen its Manchester city-centre Piccolino after knocking through into next door under the new name Caffé Grande. The site has the addition of deli, gelato and pastry counters to give it a Harrods-style food hall feel and also features a pizzeria and meat, fish and shellfish counters as well as a cocktail bar and wine boutique. The company has carried out a £4m investment across other parts of its estate and the results, says Lord, have been “phenomenal”.

“In terms of a pipeline, we haven’t got one at the moment,” he says. “That is mainly because when we have spent money on our existing estate, the uplift in EBITDA (earnings before interest, tax, depreciation and amortisation) and the paybacks have been phenomenal. To go and spend money on a three-year payback new site when you can get an 18-month payback on development capex seems counter-intuitive. Some of the projects, not in profit but in cash flow, pay back within 10 to 12 weeks.

“We are blessed with a very good estate. We have some fantastic locations and we have a good number of them where we have got landlord, licensing and planning consent to do outside areas, roof terraces and the like.”

So far, some 20 per cent of the estate has been revamped, so Lord acknowledges there is still some way to go, but he says it will be worth it. “We are just about to come to our year end and EBITDA will be around £13m and we could easily see that getting to £16m, £17m, £18m over the next two to three years,” he adds. “Every year is now ticking up to be our best ever. It is because we had the foundation of that great estate and we are now going around and adding this theatre.”

The group is set to report turnover of £65m in the year to 31 March 2016 (in 2015 it was £59.4m).

The partnership approach​

One area of the business where more expansion can be expected, however, is with the premium-casual restaurant format that it launched with Italian chef D’Acampo. Gino D’Acampo My Restaurant made its debut in Manchester’s Corn Exchange in late 2015 with a 250-cover site that features a cicchetti bar and a large outside eating area that also offers takeaway.

This was followed quickly by a second restaurant at London’s Euston Station that was launched in partnership with SSP, which operates and franchises food outlets at stations and airports across the UK. IRC hopes to open at least three further restaurants during the next 12 months with the Italian chef.

Lord says the company is giving SSP operational support for the Euston site with the eventual aim of rolling the brand out across other travel hubs in the future. “We need to make sure that we are happy with the food, offer and standards. It is not a well-tuned brand yet. Plus SSP is not used to a full-service restaurant, so it is a learning curve for both of us. Hopefully, together we will do some more with them in other train stations and also airports. 

“We have also had other parties knocking on the door regarding taking on a Gino’s franchise, including The Restaurant Group and HMS Host. The Corn Exchange site is phenomenal. It is the highest taking unit in this development, week after week. It has never been anything other than number one.”

IRC also holds a stake in the chef’s current three-strong London-based, fast-casual concept My Pasta Bar, which is run as a separate entity, albeit with operational support. It has an agreement with SSP to open more of the My Pasta Bars in transport hubs.

So far, Lord believes the brand is yet to meet its full potential, with IRC having already put its mark on it. On getting involved, the group immediately closed the format’s one regional site in the Lakeside shopping scheme.

“The decision to go into Lakeside was made before we got involved with it and the footfall levels weren’t there, so we were in and out within four months,” he says. “The original site in Fleet Street is going OK, but the other two, in Leadenhall Market and Bishopsgate, need more work. In hindsight, they weren’t great locations.

“The opportunity for a grab-and-go Italian format is a big one, and that is why Carluccio’s has launched its Via format and Azzurri has acquired [pasta and sandwich chain] Coco di Mama. So we are developing a stable of Italian formats, with Piccolino being the premium end, Gino’s being in between that and the Prezzos and Zizzis of this world and then My Pasta Bar being for the grab-and-go market.”

This is very much a long-term goal. IRC’s focus over the next 12 months will be to understand what the My PastaBar opportunity is, with the company’s main focus being the continued capex across its existing Piccolino and Bar & Grill estate.

A private matter ​

Lord describes the past 12 months as the group’s “best ever year”, while a refinancing with current banking partners, which would see it extend its bank facility by £6m, will allow it to build on that momentum.

"We are very lucky because we have a very small group of shareholders that are very supportive. The decision to take the company private was transformational in terms of performance and mindset. Running a
private business is a lot easier than running a PLC.

“We are hypercritical of ourselves and a demanding company to work for. We’re very happy to churn out profits year on year as a privately owned business.”

He admits the group has received private equity approaches, but would not be entering any sales process any time soon. “More and more people are beginning to look at us. We have tended to keep our head under the parapet because we knew the opportunity we had here when we went private. Now we are in this ever-increasing circle of performance, so to add another £3m to £4m in EBITDA a year is easy to do.

“We have very good sites, but with Piccolino, Bar & Grill and Gino’s, we are blessed with three propositions that can grow. We know that city centres and affluent suburbs can take an upmarket Italian proposition like Piccolino, with Gino’s being aimed more toward the casual-dining category. We are confident that all three concepts could go into city centres and affluent towns and not cannibalise sales.”

Staffing and service​

IRC is equally confident that, when it does open new sites, it won’t have a problem finding staff. From site management upwards, Lord says that IRC has very low staff turnover. “I like to think we are a very good company to work with and for. Steven and I are very ‘hands on’ and involved in every part of the business.”

The company prefers to promote from within because it believes staff from outside the business, generally, don’t have the same attention to detail. “The job of a general manager and head chef is to find, nurture, kick, nudge and move people on in terms of promotion. I say to them that they have to think of themselves as Sir Alex Ferguson. He doesn’t play football, but is constantly looking at his team and
how it evolves and strikes a balance. So their job is people, people, people. If you get that right, you have more time to spend concentrating on your guests. 

“Everyone who is central is part of the support team; we don’t call it the head office. The support there, whether sales and marketing or maintenance, means that the people in the restaurants can concentrate purely on the job in hand.”

The benefit of this attention to supporting its staff – and training them to never say ‘no’ – is highlighted in the group’s ever-growing loyalty scheme, which currently has more than 600,000 members. “The reason we set the loyalty programme up was so we could know when a certain customer is in one of our sites,” says Lord.

“Now they might be on our reservation system three or four times(mobile, office number or more than one person under that name) but the job of the staff on that day is to find any golden nuggets about that customer to go on our system and continue to build up our knowledge on what makes a great restaurant experience for them – whether in our Manchester site or Tunbridge Wells restaurant.

“It was inspired by the Four Seasons hotel group’s system. It still feels that we are at the start of the journey on this.”