Abraham's plan to put Chez Gérard back on track
If Britain is in recession, now is a period of great opportunity for both restaurateurs and their investors, says Neville Abraham, executive chairman of Groupe Chez Gérard.
"The sheep and goats get separated faster. When times are good, consumers are undiscriminating and even mediocre people appear to do quite well. During a recession I always say to my management team: ‘If you think you're good, now is the time to prove it,'" he said.
Abraham founded Groupe Chez Gérard with deputy chairman Laurence Isaacson in 1986. The company's chains are Livebait, Bertorelli and Chez Gérard.
Thirteen years after its launch, at the end of 1999, Abraham stepped down as executive chairman and was replaced by David Williams, who came from a retail background at Thorn EMI.
Williams's priority was to expand the group outside its London stronghold. His ambitious plans ran into difficulties last year, and in March this year Abraham was brought back on board as executive chairman to sort the company's problems out.
By the time Abraham returned, the company's share price had plummeted from a high of 350p in 1997 to 61p.
According to Jon Lake, finance manager at Deloitte & Touche, Williams's push for growth led to poor site selection and assumptions about how profitable certain provincial markets were.
Since Abraham's return, Chez Gérard has had to pay £250,000 to write off two undeveloped Birmingham sites to which it had committed £1.5m. Expansion has been halted and the group's priorities now are to repay debt and to concentrate on running the restaurants better than ever.
Since March three restaurants have been sold for £3.5m to reduce debt, but the Clerkenwell Chez Gérard remains unsold. It's on the market for £200,000, even though £600,000 has been spent on it.
Abraham is confident the company's current debt of just under £5m will be wiped off by the end of 2003.
He said: "Investors who lost patience - and there were many - have sold. The ones who are still there can see an undervalued company and, if anything, are increasing their stake. When the market is in turmoil and has taken a big drop, they all say that's the time for opportunity."
When Williams was in charge, he cut costs in the restaurants. Abraham has reversed that and re-employed a hospitality manager in each branch. He has instead cut head office costs by halving the floor space and staff from 40 to 20.
At a recent meeting, one manager with aspirations to become an area manager asked: "Do we actually have an expansion strategy?" Abraham replied: "Yes we do. It's to grow the business in your restaurant, that's what it is."
To make this happen, Abraham has lowered menu prices, introduced financial incentives for all staff and set about increasing a sense of ownership by the management team of each restaurant. However, it is, he stressed, too early to talk of results when 15% of London tourists have disappeared.
Looking to the future, Abraham said it was possible that in three years' time the company would have £10m in the bank and "it would be ridiculous not to either give it all to shareholders or build more restaurants".
But, by then, Abraham is unlikely to be at the helm. He said: "I'd be very surprised if I was running the company in five years' time. It's going to take someone younger and hungrier, with more energy. I'm not looking for anyone now because we need to put our house in order first."
Groupe Chez Gérard
- Groupe Chez Gérard comprises 25 restaurants - 12 Chez Gérards, 10 Livebaits (including one Café Fish) and three Bertorellis.
- Six of the restaurants are outside the capital, in Manchester, Leeds, Bristol, Cambridge and Oxford.
- The company employs 850 staff.
- JO Hambro Investment Bank owns 29.7% of shares. The board owns 18%, including Abraham's stake of 9%.
