Having won £5.4m in new business this year, contract caterer Blue Apple is ready to take on the big boys, as chief executive Brian Allanson and sales director Ruston Toms tell Janie Manzoori-Stamford
You launched Blue Apple together in 1998. How did the partnership come about?
Brian Allanson: We were working at Initial Catering. We used to sell contracts, but I was keen to see that they were being operated properly after I'd sold them. Unfortunately, that wasn't always the case. We thought we could probably do this ourselves and make a better job of operating it.
Ruston Toms: We were both on decent salaries and driving BMWs, but we decided to hand in our notice and take the plunge. We each took loans of £15,000 and had equal backing from some minority shareholders.
BA: At the time, it was a lot easier. The start-up costs were low and our expectations weren't overly high. We just wanted to work for ourselves and see how it progressed.
Where did the name Blue Apple come from?
BA: We'd both worked for large organisations that were brand led. Allanson Toms sounded too much like a solicitors' firm and it also directly associated us with the business, whereas we knew that as the company got bigger, it would be about more than just us.
How important is such an exercise?
BA: You've got to have a target to aim for. If you haven't, you'll just disappear. It was very important to both of us to get this brand identity and discuss what we wanted out of the business. Our goal was to turn Blue Apple into a John Lewis-style partnership, where everyone has a say in how the business is run and everyone shares in the profits. It's still something that we're aiming for.
RT: We said we wanted to create a workplace foodservice brand that stands for fresh, healthy and high-quality food, commensurate with BMW's standards. So, not necessarily the cheapest contract caterer out there. â¨I think we've stayed true to our core values.
As foodservice operators have become alive to the principles of fresh food and staff training, how do you stand out from the crowd?
RT: There are no USPs in contract catering. The industry is always moaning about the skills shortage, but we buy our food from the same core suppliers and it is hard to differentiate. Healthy, nutritious, contemporary-style food is a given; you've got to do that if you're going to succeed. It comes down to surrounding yourselves with great people, from board level to the team member who prepares the lattes.
You describe your contract with Blockbuster in 1999 as a landmark win. Why?
RT: Geographically, it was great: just outside London and in an old country house. It was being refurbished and we worked with a designer to create an American diner with a film theme. It was a great reference site, with the emphasis on quality fresh food and great staff. That's what you need to start your own business: great people, self-belief, a bit of luck and some great reference sites to get you going.
In Blue Apple's first year, it turned over £72,292. Now it's £12.2m. What do you expect to achieve over the next reporting period?
BA: Our run rate is £14m, so we've put on 15%. We've always been conservative in the way that we've handled our finances and, other than the minority shareholding, we've never had any borrowing. Three years ago, we bought out those shareholders through cashflow, with the final payment in January this year. About 18 months ago, we decided to invest in our people. Our profit forecast now is 40% higher because of that investment, so it's starting to pay off.
RT: We were always closely involved in winning new business and had to be at the meetings. But that's not the case all the time any more because we know the team is on-message.
BA: We're a patient company, so we don't try to force things. We've been around for a long time, but I think our time has come. We've built a good portfolio of clients and we've got the people to take the business to that next level. If we keep doing what we're doing, we'll be turning over £22m by 2020, with an EBITDA of £1.5m.
Does the level of consolidation in the industry in recent years, with many smaller operators being snapped up, present an opportunity?
BA: Definitely. That's one of the reasons we've put this strategy in place for the next three years. The admin involved in restabilising a larger organisation means that clients are going to be neglected - and there will be fallout. But we haven't really seen that happen yet. The influx of new business that we've had hasn't been due to that fallout. We're looking at next year, which is probably when clients are going to start looking at their options.
RT: On that point though, we are interested in some sort of deal with other caterers, if the right opportunity presents itself.
Are you looking to be bought or to buy?
BA & RT: To merge.
BA: We're looking at how we can find a similar-sized like-minded business with which we can accelerate our growth. We talk to companies all the time. And we've been approached several times over the years. One potential future exit we're keen on exploring is a management buyout in about five years' time. We'll be in our late 50s, and while I've still got a lot of energy to give, I don't want to put it into a business that stagnates. I want to put it into one that's still growing and gives us that buzz. So the team we've got now is the core that will grow the business.
RT: We're planning our exit in a careful way. That's not to say we'll put a 'for sale' sign up. We'll all sit around the table and see what our options are, either with our existing team, which may want to do a management buyout, or a like-minded business that wants to merge.
Which contracts has Blue Apple won this year?
RT: We got our first City lawyers, DAC Beachcroft, which has two central London sites and one in Bristol. We won Whitbread's group headquarters in Dunstable, Bedfordshire, and also a contract with TATA Technologies' new European HQ in Leamington Spa. The combined turnover of these contracts is about £5.4m.
It has been a year shrouded in economic â¨and political uncertainty. What has been â¨Blue Apple's experience of 2017 so far?
BA: It has been very positive but I think it's a timing thing - it's still to filter through. Food costs are now starting to hit a bit more, but even through the recession, we didn't feel it to any great extent, other than during 2008/09, when we bought Zest and could have gone backwards. That added another £2m in turnover to the business and it was the only period that our growth in turnover wasn't organic.
RT: But that's contract catering. It can weather storms. It's a different type of competition from the high street. People are still going into the workplace and eating there, though they might not be spending as much. But driving spend in our contracts is something we think we're good at. We've invested in our marketing team and we're producing apps, loyalty schemes and all sorts of promotions - high-quality marketing and merchandising collateral.
What do you expect to be your biggest headaches in the next 12 months?
BA: That's difficult to answer because, from where I'm sitting, it's the most successful I've ever felt in the whole of the business. The economy will present us with challenges. And the way the world is presents difficulties. People are fearful after incidents like Manchester and London Bridge. They might stop wanting to do things; there might be more working from home. So we could lose customers there.
RT: If companies decide to disappear to Europe with Brexit, that could have an impact, but maybe not on us because we don't have a great deal of City business. It will probably be the big financial institutions that might want to move.
And what are the biggest opportunities?
BA: We're at that stage where we're ready to challenge the big boys and take on larger contracts. Probably more City contracts now that we've got Beachcroft. We've got AXA as well, which gives us an opportunity to get a foothold. We're used to operating small to medium-sized businesses, so we're ideally suited to know what the minutiae are in a business and to adapt them to a larger organisation. The future is bright. Our time is now.
RT: That's what I say to clients in pitches. They're getting a business that's really in its prime now. We're big enough to cope, but small enough to care.
Need to know
Key clients EasyJet, Monarch Airlines, â¨TATA Technologies, AXA, â¨DAC Beachcroft, Whitbread
Blue Apple's growth
â¨2015/16 £11.1m (actual)
2016/17 £12.2m (actual)
2017/18 £15m (on target)
2018/19 £17.5m (forecast)
2019/20 £20m (forecast)
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