One of the original ‘better burger' brands, Gourmet Burger Kitchen (GBK) has been reinvigorated following its £30m acquisition by Capricorn Ventures in 2010. Chief executive Alasdair Murdoch tells Neil Gerrard about the company's rebranding and plans for the future, and why a good digital strategy is key
You completed a rebranding of GBK at the end of 2014. How has it bedded in?
The rebranding exercise helped us to focus on key areas and sharpen what we do in terms of our execution. All of our brand-awareness scores have moved forward quite significantly. Customers also tend to be coming back a bit more often than they were before. Ultimately, that has led to quite strong like-for-like sales growth over the past two or three years.
Can you quantify how strong that like-for-like sales growth has been?
We have significantly outperformed the Coffer Peach tracker for the past three-and-a-half years. We have been in quite strong singlefigure like-for-like sales growth for the past 12 months, and that continues. If you look at all the shopping centres that we operate in, we would be in the top three performing outlets in terms of like-for-like sales growth for the past two or three years.
Has the profile of your customers changed with the rebranding?
I don't think it has. We are still very much focused on 18 to 34-year-olds. Typically, the individuals we see a lot of will be young professionals,
pre-kids, in their late 20s. Perhaps we are slightly more female-biased than we were. I think the reason for that is the work we have done on our food and driving the quality not just of our straight burger offer, but also the great chicken burgers we do, or some of the vegetarian or no-bun options.
Your sites all have a fairly individual look, which you achieve by using different designers. Can you say how much more your fit-outs cost than a standard restaurant fit-out?
Probably not, but I can say that we are spending around £100,000 more per refurbishment than most of our competition. When they are refurbished, they achieve good double-digit growth for a couple of years afterwards, so we get quite good returns.
Given the youthful profile of your customers, digital must be important to you. How much of an influence do you think it is going to have on the way restaurants do business in the future?
I think digital is very important and the casual dining industry has perhaps been a little slow in working out how to use it. It can add value, both to the customer and to the business. Because we have never had a great deal of marketing spend, we have spent quite a lot of our marketing funds on digital. We are very proud of our app, which has nigh on 450,000 users, more than 300,000 of them active users.
There are a lot of fun challenges on there, and it can be used as an online loyalty system as well. We have just issued a click-and-collect upgrade, so you can order before coming down from your office, rather than standing in a queue and waiting. We think that we perhaps do digital better than some of our competition and we want to stay ahead of that.
Where do you think some of the next innovations may come?
I would imagine that in businesses like ours, people will be able to sit at a table and ordervia a smartphone. The issue isn't the technology, but how you execute that within your own system and operationally. For a table of six the complexity is that one person might order via their handheld and someone else might order via theirs - so how does that all get put together? It sounds quite simple, but it is quite difficult to make sure it all gets timed correctly. But clearly that is coming.
There has been an explosion of better burger brands in recent years. Has that helped or hindered you?
Largely it is a good thing because if you look at the penetration of the burger market in casual dining versus the penetration of something like pizza, there is a long way to go. What is important is making sure that whatever your offer is, you are differentiated from your competition and that is something we think about quite a lot. I am less concerned by people who have one outlet or two. The competition that we focus on is chains of our kind of size. So, yes, if we open next door to Byron or Byron opens next door to us, that is going to have an effect on our sales or their sales. Is there room for both brands to flourish? Of course.
So how do you differentiate yourself?
There are obviously a number of different ways. First, our fast casual service model is different to the others. GBK was the originator of the better burger movement in the UK, so we have a bit of that heritage, which we play to, but by the same token we are really trying to drive innovative, pioneering, fun food for the customers.
A good example is that one of the original founders of the business, Peter Gordon, has created the Peter Gordon menu, which was on for six weeks [in April/May]. It offers a high level of quality and that we believe is differentiated from a lot of our competition. On that menu, for example, was a duck confit burger that was made fresh every day in the restaurant. Almost all of our sauces are handmade in our restaurants, and there's a level of skill in our kitchens that a lot of our competition don't have, and we think we are beginning to see the rewards of that from our customers. A lot
of our menus get informed by the specials we put on. Some of our bestsellers, such as the Taxidriver or the Don, or the Cajun Blue, have come from specials.
What is the typical average spend in a GBK?
It is probably about £11 net. One of the key things is that we have tried very hard not to take price and that is one of the reasons that we believe our sales have gone so strongly. Value isn't all about price, but there is an element to value which is price-led. So, ultimately, if we look over the past two years, we have probably taken less than 0.5% price across the whole menu and I think there will be no one in our industry who can say they have done that.
How much of a challenge has that been?
It is obviously a challenge, but two-thirds of our sales growth has come from more customers. I always say to people when they ask me about the health of a business that they should look at its sales growth and see how much of that is coming from more customers or the same customers coming more often, and how much is a result of getting more money out of the same customers.
Is there an opportunity for us to take price from customers at some point in the future?
Yes, there probably is. Are we in a desperate hurry to take that? No. You have overhauled the ways in which staff at GBK are motivated and rewarded, and staff turnover has dropped by 60%. What changes have you made?
Since we came in and bought the business four-and-a-half years ago, we have worked tirelessly on it. Are we exactly where we want to be? No. Is it a lot better than it was previously? Yes. The biggest difference is that we have driven up the quality of our management. A lot of our managers are still the same, but we have improved the strength of the management population and massively reduced their turnover, so we have higher qualified, better paid and better rewarded managers who are staying for longer. They largely beget better training and so on.
On top of that, we've put a lot of work and structures in. We now recruit our team members better than we did before and have created a career path, so people can clearly see when they come in, where they start and how they can move through the business. Probably about 60% of our area managers have come from within. We are not a minimum wage payer in the sense that any person who comes and works for us within a month and a half has an opportunity to earn above the minimum wage once they complete their training.
What is the working culture like?
I am always slightly concerned that one doesn't over-process and over-train, because one needs to allow the personality to come through; so one of our values - and it sounds a bit cheesy - is all about having fun. We spend quite a lot of money, time and effort having fun. Every restaurant has what we call a fun fund - the managers get a pot of money that they can go and spend on their teams. We also create things like family days, so anyone can come and bring their boyfriends, girlfriends, partners or children to a family day, and we have that once a year.
We are also about to launch an apprenticeship scheme and in the first year are going to put between 20 and 30 people through it. You are owned by Capricorn Ventures, which also owns Nando's and Wahaca. Is there any opportunity for the businesses to learn from each other?
We have a very good relationship. Rob Papps who runs Nando's [managing director UK and Ireland], Mark Selby who runs Wahaca and I myself probably get together once every three or four months. Where it suits us to work together, we will, and where it doesn't, we work on our own. For example, does it suit us to buy electricity together? Of course. Are we forced to buy the same POS system? Absolutely not.
What plans do you have for the future of GBK?
If we look at our total sales growth or our total EBITDA [earnings before interest, taxes, depreciation, and amortisation] growth in the past three years, it has been really quite convincing and we would see that carrying on at that level. That means opening a number of restaurants every year and then maintaining our like-for-like sales growth. This year we have a goal to open 10 to 15 restaurants. We don't want to open too many because we want to make sure our business grows profitably.
We are quite under-represented outside London. Of our 63 sites, 33 are within the M25, so there is a lot of opportunity. The casual dining market is set for strong growth, but with all these businesses declaring plans to open new sites, are you wary of it overheating?
Everyone goes out there and says they are going to open 10, 20 or 25 restaurants a year. I don't think everyone is going to be able to do that. I am slightly worried that because traditional retail is not strong, landlords might be looking to put in too many restaurants, so we are careful about the rents we are paying, will pay and do pay.
One of the reasons that a lot of our growth is outside London is not because we wouldn't like to grow more in London, but that we are not necessarily prepared to pay some of the rents that people are paying. That's not to say that we are not ambitious and we won't carry growing in London, but we are going to do it in a more opportunistic way.
GBK by numbers
UK sites 63
Middle East 9
Turnover £50.5m* (£40.6m in 2013)
Operating profit £1.25m* (£219,000 in 2013)
Pre-tax profit -£118,000* (-£687,000 in 2013)
* year to 23 February 2014
Growth 15 consecutive quarters of like-for-like growth
Murdoch's career to date
1993 Area manager, Taylor Walker pubs (Allied Domecq)
1995 Area manager, Pizza Hut
1999 Operations director, Pizza Hut
2002 Operations director, KFC
2004 Chief executive, Pizza Hut France
2006 Chief executive, Pizza Hut UK
2009 Chief executive, PizzaExpress International
2010 Chief executive, Gourmet Burger Kitchen