Following the launch of the first new Gaucho restaurant in seven years, the group's chief operating officer, Tracey Matthews, tells Janie Manzoori-Stamford why quality rather than quantity is what sets the tone for the business
The Gaucho on Colmore Row in Birmingham (opened 8 May) is the first new site for the Argentinian brand in seven years. Why the hiatus?
It was a case of waiting for the right site at the right time. Our chief executive, Zeev [Godik], is constantly looking at where we can be. There were lots of other cities that we looked at, but he's had his eye on Birmingham for about five years. Also, we wanted to get some of our refurbishments under way and, now that we have, we've got a new feel to some of the restaurants, so it's the perfect time to go into Birmingham.
What do you look for in a new site?
It's as much about finding the right building as the right city, and then you've got to be in the right part of the city for it all to come together. Colmore Row is a pretty perfect example in that it is right in the heart of a business district, while also being a destination. The whole area is starting to boom in its own right. You've got great shopping just a 10-minute walk away.
Gaucho likes to have something with a little bit of a twist and the building itself is unique. When you go in it is half ground floor and half basement, with beautiful sandstone, huge doors and a big reception area.
Which other cities did you consider?
We're still big fans of Edinburgh and we've gone over to Dublin several times to look at potential sites. When we opened Richmond in 2007, Zeev wanted that building. He was offered dozen of others in Richmond, but he said he would wait because for Gaucho in Richmond it was the perfect location: on the river, a little bit away from everything else, with a beautiful terrace. Nothing else compared.
Knowing your own brand and the people you want to reach out to is key to being successful. It is better to wait and do it right rather than rush and realise you made a mistake.
Is this the start of a new expansion drive for the Gaucho brand?
We're all very excited about Birmingham and I want it to be absolutely perfect. The great news is that Birmingham is very excited, too. If we can make sure Birmingham falls in love with us, then I absolutely think we can go into other cities. I don't see us suddenly going to five [openings] a year, but I'd like to think that the excitement that Birmingham has had about us coming means we can now do one or two a year for the next few years, especially because the new look has been so well received.
Recent expansion in the group has focused on your casual-dining concept, Cau. What does that say about consumer spending and eating out habits?
We realised that Gaucho shouldn't be on every high street, but Argentina should. We needed to find a different way to do that and Cau was perfect. We have guests that eat out at both brands for different reasons and people recognise the beautiful differences: Gaucho is pampas and the grandeur of the tango hall, while Cau is Buenos Aires and the kooky collision of cultures of such a vibrant city. Cau can do whatever it likes because that's what Buenos Aires does. The brands work in beautiful harmony.
What is the difference in average spend per head between Gaucho and Cau?
Gaucho used to be a fixed spend per head, but guests can now come in and have steak, chips and everything for £25 to £30. At the same time they can upgrade in Cau and spend the same. What we've done with Gaucho is make sure there are more accessible price points because even our regulars need us for different things at different times.
Gaucho spend per head differs between every restaurant. On some days it can start at £30 and there'll be other days when the big boys in Broadgate have had a great day in the City and will be out drinking red wine, so average spend will be £80. It's the same with Cau, depending on where you are. Some days it will be £40, other days it will be £20.
How does average spend per head compare with the wider industry?
We regularly do a sensitivity check to look at how we appear and make sure we're represented in the best way. I think there is an expectation that the spend per head is going to be massive because the restaurants are quite grand and beautiful. But if people are going to spend and go that extra mile, you have to make sure that everything else matches up. That's why huge investment goes into things like training, look and feel.
How much of Gaucho's ingredients are imported? And what impact has inflation, at its highest since September 2013, had on the cost of ingredients?
The beef and the wines are imported. But we have our own vineyard, so a lot of the wines going onto the list were made two years ago. And we work closely with all our other suppliers, looking at what we do and how we do it. We're keen to maintain our pricing because we think that's important.
Inflation means we have to constantly make sure we have exceptional chefs, the right systems in place to minimise wastage and control the things we can. And that's not a bad thing. Inflation and other things going on in the big wide world have made us sharper and leaner. The things that aren't negotiable are what we focus on front of house. The guests must constantly feel loved and that they're getting the best possible experience and the best value.
How has the Gaucho offer evolved since its inception in 1994?
The focus on provenance and quality of ingredients has driven things. The change started in 2005 when we introduced things like ceviches. We've always known we have amazing grillers and incredible beef and we wanted to make sure the rest of the menu stands up to the beef.
Since we launched the Gaucho Academy in 2006, we've been fanatical about service. That continues to be one of our biggest investments. It's a massive undertaking to make sure that even in challenging times you don't cut the corners with training. It's a core value.
A hunk of steak accompanied by a robust glass of red has very masculine connotations. How do you make sure the Gaucho brand has broad appeal?
In 2000, when I joined, Gaucho was a very masculine restaurant with lots of wood, metal and stripped-back brick, and it's become more feminine, which I love. The clientele at our City restaurant in 1991/92 was about 90% male. And now we have a good 40% that is made up of women.
We were really conscious that the restaurants needed to be about more than somewhere the guys could came for a hunk of beef and a glass of Malbec. But I also think the world is different now and women are also quite happy to have a hunk of beef and a glass of Malbec. It's about making sure they feel just as comfortable doing that.
The UK eating out scene is continually evolving and fickle consumers mean that brands seem to have shorter shelf lives. How do you ensure Gaucho remains relevant?
The beautiful thing about steak and a glass of red wine is that it has been around for so long. It's such a core part of dining out in this country that while it's aspirational, it is also comforting; something to be relied upon rather than completely fashionable and of the moment.
What issues do you expect to encounter in the coming months and years?
The challenge over the next couple of years will be people. I've always had a passion for making sure people understand hospitality is a profession as much as any other. So we're going to work hard to get the Gaucho Academy accredited so people coming into it see that all the work we do gives them something at the end.
When you ask millennials to work every Friday and Saturday night, they look at you like you're crazy, so we need to work really hard to make it an engaging place to be. It's not about asking them to change; we've got to change. It's their arena soon.
The bottom line
Gaucho chief executive Zeev Godik and the group's financial and commercial director Frank Bandura talk figures
Gaucho Holdings' losses hit £13m for the year ended 31 December 2012, as turnover fell to £53.7m. What caused this?
This was because of three major factors, including the closure of Gaucho Beirut due to security concerns, reduced footfall in central London as a result of the 2012 Olympics, and Euro 2012, which meant that guests were glued to their TV screens or watching the games in pubs rather than eating out.
The loss before tax of £12.6m is not an accurate reflection of the group's performance as it contains interest costs that relate to the financing structure in place at the time and also includes many non-cash items, such as depreciation and amortisation of intangible assets. We prefer to consider earnings before tax, interest and depreciation [EBITDA] as a measure of business success. In 2012 it was more than £10m, which shows that the business generated a healthy amount of earnings despite the challenges mentioned.
The company's most recent figures point to an increase in annual turnover to £70.3m (£61.4m), while pre-tax losses fell to £6.1m (2014: £9.5m). What was the strategy to get to that point?
The company's strategy in the past five years has been to roll out Cau restaurants nationally as well as maintain Gaucho's reputation for quality and service, encouraging repeat guest visits. The Cau estate has grown from two in 2012 and now numbers 23 restaurants.
If you consider EBITDA rather than loss before tax, then we see that EBITDA has actually grown to £11.9m, so on this basis the group is already showing a healthy earnings level.
The company's ownership structure has previously changed several times, including a spell on the stock market. When Luke Johnson was appointed non-executive chairman in 2016, Godik described Johnson's record in launching IPOs as "second to none". Does that mean the Gaucho Group is looking to go public again?
Luke Johnson has been a considerable asset since he joined us last year, particularly with his experience with national hospitality brands such as Patisserie Valerie. This is especially relevant for our Cau expansion plans. With regards to the possibility of an IPO launch for the group, this is something that we could be considering in the future, and again, Luke's expertise in this area would be of great help.