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Restaurants: At the gates of doom

06 July 2006
Restaurants: At the gates of doom

Before you blame location for the repeated failure of a restaurant site, think again. Some sites tick all the boxes as far as views, visibility, access or footfall go, but they just don't pull in the business.

One site that's been something of a poisoned chalice is the second floor of the Oxo Tower, on London's busy South Bank. Despite million-dollar views along the Thames, this modern space has seen off a number of restaurants including: River Walk, headed by executive chef Richard Sawyer; Richard Neat's eponymous restaurant; and Bistrot 2 Riverside, owned by Simpson's of Cornhill.

Which makes restaurateur and consultant Dominic Ford either foolhardy or damned clever, because he and business partner Pat McDonald have just opened their new restaurant, the 120-seat Tamesa, there.

Ford believes that it's not the site that's the problem, but rather the type of operation that has previously been put into it. He reckons his predecessors made the mistake of trying too hard to compete with Harvey Nichols's highly successful Oxo Brasserie on the eighth floor. He should know, of course, because he used to be Harvey Nichols's restaurant and food retail director.

"They'd see Oxo doing £13.5m a year and think OK, if they can do that we can take £8m. So, they'd spend £1m on a refurb and employ hundreds of people on the basis that they would be doing thousands of covers a day," Ford explains.

The reality was that they made their menus too expensive - critics joked about taking out a second mortgage to eat at Neat London - so they became destination restaurants. Diners would then weigh up the prices and decide they might as well go for the panoramic view on the eighth floor.

Armed with this knowledge, Ford and McDonald have spent only £100,000 to open the restaurant, bought the bar furniture off E-bay and are targeting local custom by making it fun and affordable at £20 for lunch including wine, versus £35 upstairs at Oxo. Some 75% of the wine list is under £25.

Also, unlike their predecessors, they have opened the restaurant in partnership with the landlord, Coin Street Community Builders, which means the overheads are unlikely to be as high as for the other operators.

"We are moulding the offer to the site and listening to the people who own the building," Ford says. "It is a targeted approach to get customers who live and work in the area. Oxo is a destination; Tamesa is informal and relaxed."

The theory that it's the food and pricing that matter as much as the location is borne out through example. Increasingly, operators are seeing the benefit of taking on unpopular sites. Restaurant chains such as Prezzo, for example, manage to pick up premises with lower rents at the wrong end of the high street and still make them work.

Brand loyalty
"It's a good test of a brand's equity and loyalty if it can open up off prime pitch and still drive traffic," says Peter Antenen, principal at management and marketing practice Antenen Consulting. "Also, this is a good site-type for stronger brands to pick up as often they come at cheaper rents if there's been a history of restaurant closures."

David Abramson, agency director at Davis Coffer Lyons, cites Wagamama founder Alan Yau as a restaurateur who has always had the faith in his concepts to take non-prime sites.

"We handled his first-ever deal for Wagamama in Streatham Street in an obscure location off New Oxford Street - a basement with only a minimal impact entrance. The rest is history," Abramson says.

But Yau has not always had success with this strategy. It took a newcomer to turn around the fortunes of a site in Baker Street that had seen several restaurants fail, including Yau's short-lived Anda. That newcomer is Galvin Bistrot de Luxe, which has enjoyed critical acclaim and a burgeoning reservations book since its launch back in September. It was the affordable rent resulting from a bad track record that initially attracted co-owners Chris and Jeff Galvin, as they couldn't pay prime rents for their first solo venture. Besides the food, one of the secrets of their success is that they drew up a tight, conservative business plan and prepared themselves for a slow burn - although ironically it meant they initially struggled to cope with the unexpected volume of bookings.

Outside London, Simon Wright, a consultant on the TV show Ramsay's Kitchen Nightmares, reckons that the location factor, such as whether a restaurant is on the first floor, in a basement, or out on a limb matters less. "It's still important but less so because outside the capital it is so hard to find anywhere decent to eat," he says.

Even in London, food and quality of service are paramount, as shown by the fact people will travel to a one-off destination restaurant - the likes of Hakkasan, the Ivy, Amaya and Zuma - in non-mainstream London streets. However, as Abramson at Davis Coffer Lyons says, the surrounding area must have a certain level of affluence for a good-quality restaurant to work, otherwise the right clientele can be deterred even from real destination restaurants.

"Hakkasan, for example, is not on a prime site itself, but is nonetheless in the heart of the West End," explains Abramson. "Similarly, Hush is in Lancashire Court, tucked away at the back of Bond Street, yet it continues to draw great crowds there."

Just jinxed?

While some sites fail because of bad menus or poor locations, others just seem inexplicably jinxed. Take Pharmacy, which replaced another restaurant on a prominent site in London's fashionable Notting Hill, but closed after six years, having made huge losses for owner the Hartford Group. This is despite the fact it had been designed by artist Damien Hirst, was well funded and, as food critic Matthew Fort says, was "a well-received concept that was not wildly over-priced".

It was subsequently re-let by the landlord to retailer Marks & Spencer. So why did it fail as a restaurant site?

"Maybe there's something about the feng shui of a place," Fort says. "If someone opens a brilliant restaurant with great food, you'd think it would thrive."

It's an idea he examined in a recent Guardian review of Jan Woroniecki's Chez Kristof restaurant in Hammersmith Grove.

He wrote: "It's run by a talented restaurateur, in a spot surrounded by moneyed professionals desperate for a swanky local restaurant… on paper Chez Kristof looks a goldmine. And yet… as suggested by the dearth of punters the night we went, something about it isn't quite right."

Fort admits, as a fan of Woroniecki's Baltic restaurant, to being disappointed with the cooking at Chez Kristof. But he also wonders if the fact it is on a troublesome site - it replaced Sam and Sam Clark's failed Maquis - might be part of the problem.

"You want it to work, but the room is too big and grand for a local place and the food wasn't quite good enough. Maybe it's also got the veneer of disuse," he says.

Just because a site has failed previously as a restaurant, however, it doesn't mean that it will fail again - Galvin being a case in point. Fundamentally, it is the offering that is the most important element. So how should an incoming restaurateur of a "troublesome site" handle the publicity?

"For restaurants opening on sites with a past where there is no named chef or established group behind it, we would recommend that the owners undertake a really good marketing campaign before embarking on PR," says Gaby Riley of PR company JRPR.

"In this way, the local residents and businesses, which are the bread and butter for the restaurant, are notified of the changes and encouraged to adopt the restaurant - and it gives the owners an opportunity to check that their product is right."

Riley adds that PR can be useful later on to cement the restaurant's standing and help promote it as a destination venue. This means the press come in and review the food in a bustling atmosphere, so they are less likely to concentrate on the bad reputation of a predecessor.

Needless to say, then, reputation is crucial. Outside London people often have to make a journey to find good food, so a bad review of food, service and ambience can mean that journey is never made.

Poor reviews
The story in London is pretty similar. Pengelley's - backed by the hugely successful Gordon Ramsay Holdings - opened on the site of Jamie Oliver's Montes in Sloane Street. But it had a run of poor reviews and it closed within 10 months of opening. Besides the menu, one of the problems cited by observers is that he didn't do enough to bring local residents on board.

But life goes on. The chef, Ian Pengelley, is about to open a new restaurant in Camden called Gilgamesh, while Gordon Ramsay Holdings is bringing ex-Greenhouse chef Bjorn van der Horst into the vacated Sloane Street site with a fine-dining venture called La Noisette. Watch this space.

Checkpoints

  • Are the socio-demographics correct - does your target customer live nearby? Do you know details of pedestrian footfall, right down to the direction in which people walk around the area at different times of the day and night?
  • Is one side of the street busier than the other. Businesses have been known to fail simply because they are on the wrong side of the road.
  • Is there local transport? If you are in London, check whether the restaurant is located on a Red Route. Are there double yellow lines outside? Is it easy for customers to park nearby? Can you be found easily? Where are your competitors?
  • Consider the sight lines of the unit and its prominence. If they are limited, see whether they could be improved with signage or clever lighting.
  • What level is the unit on? Traditionally, it has always been difficult to attract diners upstairs, although basement venues in the majority do work.
  • Finally, check with the local planning office to see if there are plans to redevelop the area that may affect the business - either in a positive way by improving it or in a negative way.

Difficult sites

  • Trocadero, West End - always suffered an identity crisis and poor-quality tenant mix despite 20 million-plus footfall.
  • Cocoon site, 65 Regent Street - in a tourist area but the entrance is in a side street and the restaurant is in a long, narrow configuration on first floor. Used to be L'Odeon, but let's see how the present incumbent fares.
  • Fleet Street has been a graveyard for many fast-casual start-ups, with fierce competition and a discerning market.
  • Guildford - rigorous local policies can be disruptive to business.

Survivors

  • Texas Embassy Cantina, between Pall Mall and Cockspur Street, has surprised observers as not only is it a Tex Mex concept, but it has also survived in a notoriously difficult location where there had previously been several high-profile business failures.
  • San Carlo at King Street West in Manchester is successful, but is on a site that has seen many incarnations.

One to watch…

Alan Yau's transformation of Shumi, formerly Che, into a Japanese restaurant. Previous owner Steamroller Restaurants was forced to close its controversial Italian-Japanese concept on St James' Street restaurant after 18 months.

Source: Peter Antenen, principal, Antenen Consulting; David Abramson, agency director, Davis Coffer Lyons

Why restaurants keep failing

  • The basic attributes of location are missing, such as footfall, access, visibility, parking, neighbouring complementary activity, and so on.
  • The neighbourhood profile has permanently changed, but this has not been recognised by operators. For instance, the media and publishing businesses moved out of Fleet Street in the 1990s but the new office population critical mass had yet to be generated - as a result, wine bars were no longer appropriate.
  • Onerous operating conditions enforced by local agencies - delivery times, outdoor dining constraints, EHO checks, noise and nuisance controls. Some boroughs are particularly hot on enforcement, which can be disruptive to trade - Guildford, for instance, is a town where many restaurants fail to survive.
  • Locations with perennially high base rents and rates with big annual or five-year increases, particularly if an area is dominated by absentee institutional landlords as this drives up break-even to an unsustainable level.
  • Some buildings are simply jinxed: 123 Regent Street, the site of England's first electric cinema, is currently being refurbished by Habitat. It has been looked at by most restaurant operators and feasibility studies and due diligence have been drawn up for at least six concepts, including movie and football theme restaurants. However, the site is heavily listed, far too large for most restaurants and has design quirks, such as an immersion tank on the stage recently used for mass baptisms. It would have lost any entrepreneur a small fortune but should work well for a big-box retailer.
  • Misunderstanding or misreading of traffic flows: some ostensibly high-volume sites suffer from having mixed markets - office workers, domestic and overseas tourists, day-trippers. With no one segment strong enough to sustain trade, it becomes difficult for the operator to know who to target. Halfway down Haymarket on the right hand side has seen a number of high-cost big-theme restaurants come and go. Some of this was down to a flawed concept, some down to the particular nature of this street.

    Source: Peter Antenen, principal, Antenen Consulting

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