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Sandra Thomson: The saviour of Smollensky's?

06 March 2006
Sandra Thomson: The saviour of Smollensky's?

Meeting Sandra Thomson is a wake-up call for under-achievers. Behind the petite frame and quiet manner is a woman whose analytical mind and sound business and financial skills have turned around hospitality businesses across the world. She's also relaxed - impressively so for someone who has been chosen by the administrators to rescue the troubled Smollensky's Bar & Grill brand.

What had gone wrong? Started by Michael Gottlieb in 1986, Smollensky's on The Strand in London was bought in 1999 by the Mezzanine Group Plc, a then-AIM-listed company with a large portfolio of pubs and clubs. It proved to be the group's best-performing brand and was duly expanded to five sites in the capital. But by 2003 the company was in trouble, reporting losses of £7m in its end-of-year results.

"They expanded without any brand values," explains Thomson. "There was no consistency of style or quality. Smollensky's key customers are families, but they did their utmost to push them away."

Thomson, a 43-year-old turnaround consultant, was brought on board by the Bank of Scotland in 2004. By the autumn, she had been made chief executive officer of the holding company, Smollensky's Balloon, and given five years to build up the Smollensky's brand and improve the viability of the business.

As a result of her belief in brand values, we're sitting in the newly refurbished flagship, Smollensky's on The Strand. Its £800,000 upgrade has brought it in line with the chain's other sites so it's now lighter and more female-friendly, with cream banquettes and light-coloured wood floors. Gone is the now-dated macho US-style theming, as Thomson reckons that the days of the destination restaurant are over - the main difference between this outlet and its six sister restaurants now is that it still has entertainment every night.

Thomson is working her magic on the finances, too. A tough approach to budgets and systems boosted turnover at Smollensky's Balloon by 22% in 2005 to £6.4m, and the target this year is to lift it to £8m through acquisitions, sales and budget performance.

Difficult locations But it's a big job. Thomson has inherited not just the Smollensky's sites but countless other pubs and clubs, many of which are in difficult locations, and with long leases. Part of the challenge is to sell the underperforming properties while making acquisitions to expand the core brand.

Two Smollensky's in London have been closed - one on Finchley Road and the other near Ludgate Circus - but openings proved harder. The launch of the new casual brand, Smollensky's Metro, was delayed until November when the deal on three Greater London sites - in Richmond, Croydon and Charing Cross - was finally sealed.

"It has been a disappointing year," Thomson says. "We became a new company, but trying to acquire sites was difficult as there was no street cred left."

The new concept - a sort of mini-Smollensky's serving soup, salads, burgers and pasta - was devised to meet current demand for all-day quick service, particularly at lunchtime, where the average dining window is 27 minutes. The sites have started by taking about £14,000 a week but they are not expected to show their growth expectations until next year.

Metro is also seen as a flexible way to expand. Each outlet is only about 2,500sq ft, so the model could be moved off the high street into, say, shopping centres. A typical Smollensky's, on the other hand, is about 5,000sq ft, and there aren't many sites of that size that don't incur fit-out costs - as Thomson says, "Shells cause bankruptcy."

Last year's disappointment means that there is no target on the number of restaurant acquisitions this year - it will be driven by site availability. Having said that, three sites are pegged to open, although at this stage Thomson won't commit herself to whether they will be Metros or Smollensky's. The first will be in Sutton, Surrey, but the hunt is on as far afield as Scotland. One no-go area is the north of England, where Thomson says rents are high and businesses are going bust.

Further down the line, she wants to introduce franchising to expand into Europe.

Mix of clientele
According to Thomson, one of the biggest mistakes Mezzanine made was to open Smollensky's off the high street. The ideal location, she feels, is one that provides a catchment area for a mix of clientele that changes during the day from businessmen and tourists to ladies who lunch and families.

The London Tower Bridge site, for instance, is difficult to manage, with a rent of £250,000 and little footfall. To generate business, Thomson has gone for a wedding licence and appointed a sales executive to target weddings and events in other Smollensky's that have little lunchtime trade (she is reluctant to name these).

Despite this appointment, Thomson wants to keep the business team small and tight - just four people - while expanding the brand. "It ensures that we give the right attention to detail and everyone knows what their job is," she says.

Other areas such as creative work, HR and legal affairs are contracted out on a monthly retainer to keep costs down. Training is also contracted out. It was introduced last year in response to Thomson's strategy to start promoting internally, and works out as a cost of £40 per person per day.

This policy of contracting out work at a fixed cost reflects the backbone of Thomson's rescue strategy - implementing tight budgets. One area that Mezzanine blamed for spiralling costs was rising overheads. To control these, Thomson now asks a professional rent valuation service to go into new sites first. However, with the rest of the inherited portfolio, she says she's often "stuck working for the landlord".

And it's not just the rent that she worries about. "The good old days of property costs being 12% of turnover don't exist," says Thomson. "Within a property, you also have utilities - and these can be out of control."

Her love for detail uncovered the fact that although Smollensky's sites are all of a similar size, some record 100% higher energy consumption. This has led to regulating everything, right down to the number of light bulbs used per site. In addition, the budget now allows for property costs of 20% of turnover, including utilities, maintenance and repairs.

This policy of reining in budgets runs across the board. For instance, accounts are now properly broken down to show bar revenue and food revenue - which they weren't, under the old regime. The resulting tighter controls on stock have helped push the gross margin up to 75%, an improvement of 4% since 2004. "I'd like it to be more but I won't compromise on quality," Thomson says.

Similarly, canny handling of holiday cover and a strategy of adding costs into the budget to cover holidays has helped to push the wage bill for the 270 staff down by 1% - a £25,000 saving. The target this year is to get it down by 2%.

Service style
But Thomson isn't changing everything. Although the US theme has gone, the service style and food remain much the same, with options such as steaks, beef ribs and a Cajun jambalaya priced between £12.95 and £16.95. To lure families back, there are "under seven" and "mini adult" menus.

Thomson is good at playing to Smollensky's strengths. For instance, initial research showed that only one in 10 Londoners had not heard of the 20-year-old brand. Quick to spot an opportunity, Thomson invested in rebuilding brand awareness by advertising on taxis, Tubes and trains in the capital. She admits that the benefit is not measurable but says it lets people know the restaurants are alive and kicking.

"Our target is to get the lapsed target market back. We want to be a day and evening venue, with daily specials reasonably priced," says Thomson. "Smollensky's has legs."

Smollensky's financial snapshot

Turnover 2004 £5,303,566

Turnover 2005 £6,486,788

Increase (2004-05) £1,183,222

Percentage increase 22%

Ebitda* improvement 3.2%

Lost revenue due to bombings in July/August £295,000

Sales split: 50/50 food/drink

Average spend (differs across London):
Dinner (including drinks):
Strand & Canary Wharf, £35 per person; Other sites, £14-£18; Metro, £10-£11

Lunch (including drinks):
£10-£12; Metro, £8

\* Earnings before interest, tax, depreciation and amortisation

Sandra Thomson in a nutshell Few women have broken through the catering industry's glass ceiling. Sandra Thomson's quiet determination, however, means she has followed a career path that has taken her straight to the top.

She studied for ScoTEC higher national diplomas in hotel, catering and institutional operations and management in Edinburgh, and subsequently studied for an MBA (Hospitality) at Oxford Brookes University, completing in 2001.

By 1989, she had moved to London, where she worked as F&B manager for Forte and assistant operations manager for Le Gavroche. "There weren't many of us at that time. It was a very male-dominated sector," she remembers.

Other positions include a role as catering consultant/partner at Albert Roux Consultancy, for which she carried out feasibility reports and looked at business development projects in Europe and the USA. She was also senior operations manager at Catering & Allied and Avenance.

She lists among her achievements the launch of the five-star Grand hotel in Amsterdam, and the development and relaunch of the catering services department at InterContinental Hotels in Key Largo, Florida.

"I have the attitude that a business is someone's dream - and I want to help them," she says. "I am a caterer at heart."

Smollensky's snapshot
1986
Michael Gottlieb opens Smollensky's on The Strand and goes on to open a site at Dover Street

1990 Dover Street site sold to a brewery

1991 Strand site sold to Mezzanine Group

2004 Mezzanine Group in administration and Sandra Thomson brought in as turnaround consultant and CEO

2006 Current portfolio includes:

  • Smollensky's Bar and Grill: The Strand, Canary Wharf, Twickenham, Tower Bridge, Hammersmith (all in London); and Oxford
  • Smollensky's Metro: Charing Cross, Croydon and Richmond
    (all in London)
  • Three further openings due this year, including one in Sutton, Surrey
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