Business profile: the Chestnut Group

10 November 2017 by
Business profile: the Chestnut Group

By snapping up underperforming businesses in East Anglia and bringing in investment, the Chestnut Group has built a multifarious brand in just five years, as its founder Philip Turner explains to Tessa Allingham

The Suffolk village of Long Melford swoons with pastel-prettiness. Its picture-perfect cottages line the slope from the green up to the magnificent 15th-century wool church as if on permanent photographic standby. Tourists, full of Lovejoy fantasies, can't get enough.

The Black Lion
The Black Lion is the Chestnut Group's sixth property, and is receiving the full force of owner Philip Turner's attention. He pours out his vision at hyper-caffeinated pace: he wants the Black Lion to be at the heart of the community,
but also a draw for local businesses and visitors, for dogs to be as welcome as their owners, and its spaces to be relaxed and comfortable.

The food - pitched at a slightly lower price than at the group's first property, the Packhorse Inn near Newmarket - will be "good modern British", while Amanda Turner's eye is behind every interior detail. Philip and his wife have repurposed items, picked up pieces from antique shops rather than going to conventional interior suppliers as they did for the Northgate in Bury St Edmunds. In time, 10 spacious bedrooms will have beautiful views towards the stately home of Melford Hall. "I want to do this place bit by bit, grow the look organically," he says. "I've learned this much: things don't have to be perfect from day one."

The Black Lion, Long Melford, Suffolk
The Black Lion, Long Melford, Suffolk

e engages easily, is interested and interesting - and has no qualms about being the new kid on Suffolk's hospitality block, accepting that he has everything to learn and all the mistakes to make. He says he's a "ferocious delegator" (but insists he won't leave staff unsupported), is unwaveringly commercial and relentlessly decisive. As a former chef employee puts it: "He makes things happen, and fast, and I prefer that, to learn from mistakes rather than ponder over them and miss the boat."

Miss the boat is something Turner is unlikely to ever do. Which is why, five years ago, sniffing the breeze of East Anglian opportunity (improving transport infrastructure, the dynamism of the tech and science businesses around Cambridge, and the appeal of the region to east London's affluent young population seeking work-life balance), he ditched a punishing commute between Suffolk and a high-flying City job as global head of structuring at Royal Bank of Scotland to buy his flagging local pub and a "passion project". He plugged into the government-backed Enterprise Initiative Scheme (EIS) to raise £600,000 from private investors, finally relaunching the pub as the Packhorse Inn in Moulton, food-led and with eight glamorous bedrooms, in autumn 2013.

Subsequent equity raises to the tune of £7.5m (80% from high net worth individuals and 20% via wealth management firms with private clients) have enabled growth, mainly through the acquisition of freehold properties, the target being hospitality businesses that have been under-delivering because of low capital investment but that have the potential to fit Turner's brand (he uses the word comfortably, but spurns the chain word). In its third year of trading, the Chestnut Group turned over a respectable £5m, twice its year-two turnover and £1m over forecast. Turner is vague about his exact stake in the business, but admits it is between a third and a half of the overall value.

"Five years ago I remember thinking, how difficult can it be to run a pub? Now I know, and I'm learning all the time. The excitement I feel now far outstrips any excitement I felt in banking. In the City you'd have to go through 55 people to get anything approved. In hospitality, you can make things happen fast."

Acquisition spree
Indeed, the door had barely closed on the Packhorse opening party than Turner completed on the £700,000 purchase of the Rupert Brooke in Grantchester. He then negotiated a management arrangement with the owners of the White Horse pub in the Suffolk village of Easton, near Framlingham, using cashflow to fund a refurbishment, before buying the Blackbirds Inn, Woodditton for just over £500,000, reopening it as a family-friendly country pub. The Northgate, a boutique hotel, bar and restaurant in Bury St Edmunds ("I want a Soho House feel, but without the membership"), is a far bigger project, which opened in November 2016.

The Packhorse Inn, Moulton, Suffolk
The Packhorse Inn, Moulton, Suffolk

h time there has been a problem, Turner has tackled the issue head-on. When the White Horse's initial fine-dining menu, designed to nudge Michelin and the AA, didn't gain traction, he swapped it for "good, honest food", with a menu incorporating pizza, local pork sausage and steak (plus a £2 dog menu).

Likewise, when the Rupert Brooke failed to take off as a Packhorse-like smart pub, he reinvented it as a brasserie, targeted corporate customers nearby, and differentiated it from local rivals.

And when market research by local A-level business studies students revealed that the overriding perception of the Northgate was of somewhere "pretentious, snobby, expensive", he dusted himself down and tweaked details.

"I was devastated by that, of course," he admits, "but I come back to what Robin Hutson says, that the key is getting lots of little things right: maybe it's the way you greet a customer, or how you phrase things. I won't let my people 'take an order' - that's aggressive; we ask what they'd like to eat. I'm selling an experience, the whole F&B package."

The Rupert Brooke, Grantchester, Cambridgeshire
The Rupert Brooke, Grantchester, Cambridgeshire

The fab four
The food part of that package is vital. Dissecting menus with his newly appointed group food manager, Phil Skinner, formerly head chef at the Packhorse and then the Northgate, he worked out that 25% of the customer base eat just four of the dishes - steak, fish and chips, chilli squid and fishcakes. "We'd be mad to screw them up, let alone take them off the menu," he says. He talks of "optimising" them (and of buying centrally as a way of mitigating rising food prices) - some City ways die hard.

Phil Skinner

e optimises his marketing too: "I'm obsessive about making sure every communication with staff or the public is on-message and effective."

Fortnightly internal updates are delivered by video, and engagement has gone from zilch for conventional newsletters to "off the clock".

There is an internal WhatsApp group, while the dynamic communication is being applied elsewhere.

"What's the point of posting a photo of a menu, or a static recruitment message? Far better to film the chef making a dish," he says. Everything ultimately tracks back to the 140 individuals that make up the Chestnut Group workforce. "You can spend all the money you like on a kitchen or interior, but if you haven't got the right team and team spirit, then everything will be lost in translation."

As well as launching the Chestnut Hospitality Academy (see panel on previous page), Turner has introduced whole-team job swaps to foster camaraderie. He has proposed the distribution of 10% of the shareholder equity among team members (from kitchen porter up, and based on tenure of employment) to encourage loyalty.

In return, he promises a career path. "But they're different these days, the 22- and 23-year olds," he says. "When I was that age I was like a Jack Russell, I wanted to work hard and earn. Now, young people put work-life balance as a top priority." He shrugs as if to say he doesn't get it. "We have to work with the way young people are because they are our future. I'm trying all the time to understand what motivates them, how to light their fire."

In a perhaps unguarded moment earlier this year, Turner declared his ambition to have 10 Chestnut sites by the end of 2018. He has tempered that goal (although he's "always looking") in favour of boosting turnover by 15% by raising footfall, upping spend per head "and just being better at what we do".

But what about in five years or so, when shareholders might expect a liquidity event? He talks of raising turnover by at least 40% in that time frame, with maybe two or three more properties. "Everything boils down to return on investment," he says, City brain engaged. "I'm the one most financially at risk, but I'm hugely aware of my responsibility to investors. We're becoming better operators, but in five years, maybe we'll have to decide whether to continue through acquisition or grow organically. The existing business requires an awful lot of personal effort…" It's the first time he hints at an exit strategy, but doesn't linger on the topic.

For now, he fizzes with enthusiasm. "The moment I don't feel my stomach wrenching at a negative comment, I'll stop doing this. We're young, we still have a lot to learn, we are far from perfect. But I'm committed financially, and I'm committed emotionally."

Chestnut Hospitality Academy: the manager maker

Tommy Lawrence, just 20, is the sort of bright young recruit hospitality businesses dream of.

One of seven on the two-year Chestnut Hospitality Academy course, he works a mix of straight and split shifts five days a week, and is paid "well in excess of the minimum wage".

Tommy Lawrence
Tommy Lawrence
"I love the idea of learning from the bottom up," he says. "I've made some rookie mistakes, like getting cutlery changes wrong, but last night I was pretty much running the restaurant because Stefan \[general manager at the Northgate\] was looking after the chef's table. It was a great feeling. For people my age, hospitality is seen as a part-time job, not a career. It's hard work, but when it goes smoothly it's so exciting." Lawrence is part of the student team that delivered the damning local verdict on the Northgate, and deferred a university place to join the Chestnut Hospital Academy programme. If he completes it successfully, he is guaranteed a management position and will gain several recognised qualifications such as food hygiene level 2 and the award for personal licence holders (APLH). "I am staggered by the staff churn in this industry," says Turner, "and with Brexit it will only get harder to find people. I don't think we will be as affected as the bigger national chains because we recruit locally, but I want to invest in people and offer a career." Just 5% of Chestnut staff are non-British, compared with the national average of 75% of waiters, 25% of chefs and 37% of housekeeping staff, according to British Hospitality Association figures. Set up in 2015 and overseen by Sophie Worne (group training and personal development manager), the Academy costs the Chestnut Group over £140,000 in salaries and administration. Mentored by departmental managers, students spend six months in the restaurant, kitchen and bar, five months with housekeeping, and a month at head office. The first half-dozen: Chestnut Group's portfolioGroup annual turnover (to April 2017) £5m Key personnel Philip Turner (founder), David Minchin (finance director) and Steve Smith (group manager) The Packhorse Inn, Moulton, SuffolkFormat Pub-restaurant with rooms Opened Autumn 2013 Land Freehold Pre-opening budget £750,000 Covers 76 Average spend per head £37 Split Dry 55%, wet 30%, rooms 15% Bedrooms 8 Rate £100-£200 Average occupancy 85% Staff 24 (65% front of house, 20% kitchen, 15% housekeeping) The Rupert Brooke, Grantchester, CambridgeshireFormat Brasserie Opened Autumn 2014 Land Freehold Pre-opening budget £400,000 Covers 110 Average spend per head £29 Split Dry 65%, wet 35% Staff 18 (70% front of house, 30% kitchen) The Northgate, Bury St Edmunds, SuffolkFormat Boutique hotel, bar, restaurant Opened Autumn 2016 Land Freehold Pre-opening budget £900,000 Bedrooms 10 Rate £100-£250 Average occupancy 82% Covers 70 Average spend per head £32 Split Dry 55%, wet 30%, rooms 15% Staff 24 (65% front of house, 20% kitchen, 15% housekeeping) The Blackbirds Inn, Woodditton, CambridgeshireFormat Pub with rooms Opened Spring 2017 Land Freehold Pre-opening budget £125,000 (further £400,000 available to build accommodation) Bedrooms Nine under construction Rate £90-£150 Covers 68 Average spend per head £27 Split Dry 60%, wet 40% Staff 15 (70% front of house, 30% kitchen) The White Horse, Easton, SuffolkFormat Pub Opened Summer 2016 Land 25-year leasehold Pre-opening budget £180,000 Covers 68 Average spend per head £25 Split Dry 60%, wet 40% Staff 15 (70% front of house, 30% kitchen) The Black Lion, Long Melford, SuffolkFormat Hotel, bar and restaurant Opened November 2017 Land Freehold Pre-opening budget £300,000 Bedrooms 10 Rate £90-£175 Covers 68 Staff 20 (65% front of house, 20% kitchen, 15% housekeeping)
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