William Baxter may have a feeling of déjà vu. In May, he launched his second eponymous company, BaxterSmith, having resigned last September as chairman of Baxter & Platts, a subsidiary of what was then Granada and is now Granada Compass.
Baxter has been joined by Mike Smith, who left his position as managing director of Baxter & Platts in January. Smith had joined Baxter & Platts in 1988 as the company's first area manager and had gone over to Granada when it paid a rumoured £15m for Baxter& Platts in 1997. Prior to the sale, Baxter & Platts had a turnover of £35m and 130 contracts. With the Granada purchase and the rebranding of two other companies, this shot up to just shy of £100m and 300-plus contracts. But, despite the money, Baxter and Smith decided that life with the big boys wasn't for them and aimed to go back to the front line of food service.
First, though, Baxter honoured his three-year non-competition agreement, saying that "Granada has been fair to us and we wanted to be fair to them".
Starting his own company for the second time is quite different. Last time, second mortgages paid for first-year salaries, and the office started off as a spare room in Baxter's home in Amersham, Buckinghamshire.
BaxterSmith, however, has been privately financed by Baxter, Smith and directors Clare Parkinson and Jane Stallard, and has offices three miles from Baxter's home in a former bank on the high street of old Amersham.
Both Parkinson, who joins as sales director, and Stallard, who is finance director, worked at Baxter & Platts before and after the Granada sale.
The new business's target market is the headquarters buildings of corporate businesses, the same market that Baxter & Platts sought. It is the principals' area of expertise and, because they are already well-known, Smith says that they are talking to the type of clients it took Baxter & Platts five years to reach first time around.
"We are talking to top-level companies already, based on our names and track record," says Smith.
However, it will still take two or three years for the company to turn in a profit, as they are investing heavily at the outset in information technology. "When Baxter & Platts started, all we had was a typewriter," observes Smith. Times have changed, and now BaxterSmith boasts e-mail addresses and its own Web site.
Mike Smith on the record
Why leave a company like Granada?
We are entrepreneurs and we enjoy being on the front line of the business. When you have 3,500-4,000 staff, a £100m turnover and reports to make to a plc, as we did at Granada, you just are not on the front line.
Isn't the creation of massive giants such as Compass/Granada a bit scary for small companies?
No, it just highlights what we are all about. There are advantages to being big but, having worked for Granada, I also know that there are disadvantages. There is room in the market for big and small players. What is interesting is that three of the big companies we have just pitched to are considering only small contractors. That is a direct result of people not being sure who they are dealing with [at larger contractors].
How long before you're both smoking cigars on the beach?
Both William [Baxter] and I are 40 and this is the last time for the both of us. I am here until I retire, and I give it a minimum of 10 years - I can't sit around fishing for 25 years. This time, we want to be the market leader. We have the experience to take the market forward, and that is what interests us. We are not doing it to make a quick buck.
4 Market Square, Amersham, Buckinghamshire HP7 0DQ
Tel: 01494 432900
Owners: William Baxter, executive chairman; Mike Smith, managing director; Clare Parkinson, sales director; and Jane Stallard, finance director
Started: 18 May 2000
Contracts: Four contracts, 14 proposals on bids
Split of nil subsidy and cost plus contracts: 50:50
Projected turnover 2000/01: £2m-£3m
Tim Cookson was tired of being bought - which was why he founded Senate. At Gardner Merchant, now called Sodexho, he was managing director of the education division, having been president of Marriott UK when GM bought it. Prior to that, Cookson had worked for Russell & Brand, which had been taken over by Marriott. Earlier in his career, he had been at Sutcliffe when it was purchased by Granada.
"I had worked hard to position companies to succeed, only to see them sold - and I had no control over the sale," he says. "I've watched the early promises disappear as the striving for high margins comes in. The only way to improve the margins is to take more and more resource away from the customer face and redeploy it, and it is the client who loses out. Now, if someone wants to buy Senate, at least it's my decision."
Senate Food Services began life in September 1999 when Cookson invested £350,000 to focus on school and college feeding. Back then, the company operated out of Cookson's front room, but now it is sited in offices in Walton-on-Thames in Surrey, with two more offices open in Hartley Wintney in Hampshire and Halifax in West Yorkshire.
It has certainly grown quickly. By November, Senate had acquired Oasis, which operates security and office support services. In May, Senate merged with Catercheck, the consultancy and purchasing group owned by Vic Tippins, and created a holding company called Servicespan. Four further limited companies were also formed under the same umbrella: E@tdot, Acquire Services, Calculus Evaluation Services and Senate Support Services (see Caterer, 11 May, page 4).
Each of the six companies under Servicespan offers specialised services - for example, E@dot and Senate Food Services are the catering arms - while central support in finance, human resources and sales and marketing comes from a team of 12 at Servicespan.
E@tdot focuses on the state school market and works in three ways.
First, for schools that want to cater in-house, it will franchise school marketing materials, send an adviser and provide access via the Internet to menus and development ideas. In the school year just started, 25 schools have taken up this option.
Second, E@tdot is available to other caterers that hold contracts at schools. Finally, E@tdot can go into schools as a traditional managed contract. The company has seven contracts already, with a further six possible for January. Some 53 potential franchised and managed contracts are in the pipeline. All contracts are nil-subsidy, with the profits going back to the schools.
Senate Food Services serves the independent and collegiate universities as well as blue-chip, white-collar, city centre office headquarters. It currently has 21 contracts operating on the basis of fixed cost with a performance guarantee.
Focusing on one niche per company appears to be working. In the first 11 months, Senate and Oasis reported a turnover of £3m, which, if annualised, would have equalled £5m due to the company's growth. The forecast for 2001 is that Servicespan will record turnover of £8m.
Tim Cookson on the record
What do you think about the Granada/Compass merger?
I think it was inevitable that the big three would become the big two. Now there is a whole host of very expensive and experienced resources out there who will either be jettisoned or who will spend the next two years trying to make the business work, rather than watching the customers.
The Sodexho/Marriott merger was a disaster in terms of retaining Marriott business long-term, because no one concentrated on the customer. Fewer than 50% of the Marriott contracts acquired are still with Sodexho.
So when do you get to sell up and retire?
In 10 years' time there should be seven companies ripe for management buyouts because of the way we have structured the company. And then maybe I can buy Leeds United. But I don't think I'll retire - what would I do?
(Including E@tdot and Senate Food Services)
Senate House, Walton-on-Thames, Surrey
Tel: 01932 234100
Owners: Tim Cookson and Vic Tippins (owner of Catercheck). There is also equity allocated to each individual company for the management to have share scheme options
Start-up capital: £350,000
Contracts: Senate Food Service, 21 (all fixed cost); E@tdot, 7 catering, 30 licensed uses of e@tdot (all nil-subsidy)
Source: Caterer & Hotelkeeper magazine, 31 August - 6 September 2000
Published by: The Caterer