One Track minds

When Granada bought the Catering Guild in 1995, David Jenkinson saw the company he'd spent eight years developing and building for owner Gallahers destroyed overnight. "It was the first of Granada's acquisitions and they immediately absorbed it, dismantling the ethos and philosophy that had established the brand," he says.

Shocked, angry and disillusioned, Jenkinson left Granada and within a few months had set up Restaurants at Work with Nick Jones, Helen Pezaro and John Dicey, all of whom had worked at the Catering Guild before the takeover. Within five years the new company had reached 42nd on the Fast Track list of the 100 fastest-growing companies, with 96% growth. It has 36 contracts and a turnover of £6m.

But this growth rate is not fast enough for managing director Jenkinson. Having taken the Catering Guild from 0-120 contracts in eight years, his aim is to do the same with Restaurants at Work. Business doubled in 2000 and he plans to double it again in 2001. But the company is not prepared to take anything offered.

"It's important to get the business right and we only want to work with people who see catering as a worthwhile benefit to the employee. We have turned down some business because we felt the ethos wasn't right," says Jenkinson.

Having started from scratch with Gallahers in establishing a contract catering brand company, Jenkinson and his team knew the score when setting up Restaurants at Work.

Six-month embargo

This time, though, there were two important differences. At Gallahers, Jenkinson was more or less given an open cheque book, whereas Restaurants at Work had only £80,000 available. More importantly, Granada slapped on a six-month embargo preventing the new company from approaching any existing or potential clients.

The embargo's timing was disastrous, as many clients wanted to change supplier quickly following Granada's takeover. But the company survived to achieve a turnover of £536,000 in its first year. Previous clients eventually formed about 30% of its business.

Unlike many smaller independents, the company is not geographically limited. "Big companies want total control and to centralise responsibility, and dialogue is always about profit-driving," says Jenkinson. "When you're small, the focus is on delivering service and quality. Profits derive from getting this right."

Jenkinson's aim is to reach a point where familiarity with the company's brand will lead to the company's own level of growth. He managed to achieve this in eight years with the Catering Guild - his former creation shines as a constant beacon - but can such phenomenal growth be maintained?

"Starting small makes it relatively easy to achieve a high percentage of growth," says Peter Smale of Turpin Smale catering consultancy. "The difficulty comes when a company reaches around 150 contracts. They've got to have operational resources so they can open and bed in new contracts, and the right funding in place to invest in new business.

"At some point, these companies will not be able to offer the personalised service that won them the original business. They, in turn, will have smaller new companies snapping at their heels."

Catering Alliance, listed 18th in Fast Track with 116.4% growth, was formed in 1995 when directors Michael Scott, Russell Scandrett and Sean Hagan, all senior personnel with Compass, decided to go it alone.

"We wanted to take control of our destiny, so we scraped together £30,000 and didn't pay ourselves a salary. By the end of the first year, we'd made a profit of £3,019 and wiped out our costs," says Scott, who initially worked in one room with a plastic garden table and a laptop. "We had over 50 years of experience between us and were determined to offer a superior package."

By 1999, turnover increased from £735,000 to £9.9m. Sales for 2000 exceeded £16.5m and the target for 2001 is £24m. The company has 126 contracts, mostly blue chip, with an average turnover of £200,000. The largest, won in December, is with the Peugeot Motor Company and is worth £1.65m.

"We'll probably make the Fast Track next year, but this is not our primary objective. We'd like to grow but want to keep clients happy," says Scott. "This is how we sell our business, by taking prospective clients to see existing business and letting them talk to clients. We don't chase business and will not bid for cost-driven, fixed-price contracts. This is not good for our reputation - or that of the client and his employees."

The company now has five regional offices, including one in London. Originally based in the Midlands, it is currently targeting the South-east, where two-thirds of the contract catering market is centred.

Scott aims to have staff in place before winning business so resources can always support the expansion. He is recruiting a third senior operator for the South-east, despite having only 12 contracts in the area.

"Because we're not driven by outside shareholders, we can afford to be overstaffed to cope with growth and can restrict the number of operations managed by area staff to 10," he says. "All contractors say they provide fresh food and personal service, but we don't just talk about it."

But the success of these two contractors should not be seen as a sustainable trend for smaller independents. This has more to do with the fallout of clients disgruntled by the Compass and Granada mergers, not to mention the acquisition flurry that has wiped out most independent contractors.

Market share growth

The British Hospitality Association Contract Catering Survey 2000 shows the share of the business and industry contracted market has grown only 13% in 10 years, compared with education and healthcare, which have doubled and tripled respectively.

According to Miles Quest, who compiled the survey, the rapid growth of new contractors in the last five years is unusual.

"Smaller independent contractors have always been able to carve a niche in the market by offering what the client perceives as a more individual, personal service," he says. "Contracting requires very little financial capital to start a business. But the market is finite. This recent growth is unusual and unlikely to continue at its present rate."