When David Page stands up in front of an audience of investment analysts, he likes to remember his training as a primary school teacher.
He knows he can afford to be jovial and off the cuff while still being serious, as long as he never makes a promise he cannot keep. Just like a class of kids, the trust of investors is almost impossible to regain after it has been lost.
So far, Page has managed to keep everybody in line in the City as he seeks to repeat his trailblazing success of taking Pizza Express into the FTSE 250 by playing a leading role in the consolidation of other cuisines, notably Greek and Indian, into national chains.
His earlier career moves were less assured. He grew up in Wimbledon and was educated by the Jesuits, until he was expelled in the summer of ‘68 for sneaking off to lie by the pool at a friend’s house. He then trained as a cartographer, but was sacked for having long hair and not wearing a tie.
After losing his next job in a neurology unit for taking life too easy, Page concluded that his Jesuit upbringing might not suit him for a life in business, so he signed up for three years at a teacher training college. He loved it, only to find that standing up in front of a class of unruly 11-year-olds was harder work than he’d imagined.
However, while at college, he had paid his bar bill by working as a kitchen porter at Pizza Express. He moved up to waiter and, when the franchiser decided to open a new branch in Kingston in 1977, Page was offered the job as manager on double his teacher’s salary. He jumped at the chance.
By 1981, Page was ready to take out a second mortgage and open his own franchise in Chiswick. It took off and in the next ten years he opened another nine restaurants around London and the M25.
For Page, it was a golden time because Pizza Express had the high street to itself. Until Café Rouge opened in 1989, it was the only middle class casual-dining chain available and was perfectly placed to pick up on the trend for families wanting to eat out more often.
Pizza Express’ founder, Peter Boizot, had spent 15 years living in Italy. ‘He appreciated good service and knew that food in the UK was appalling, so brought in chefs and suppliers from Italy,’ says Page.
By 1992, when there was more competition in a tough economic climate, Boizot decided to sell up. Page did not want to become a franchisee for a large corporation and decided to engineer his own bid for Pizza Express, which was on the market for £13 million, by reversing into a listed shell company called Star Computers.
It was sitting on £2 million and had two young directors, Luke Johnson and Hugh Osmond, both fellow trailblazers in the making. ‘Back then they didn’t have any money at all,’ reflects Page. ‘I taught them all they’ve ever forgotten.’
For the next ten years the three of them worked together and took Pizza Express from 25 restaurants to 300 and a listing. It was at this point that the business seemed to lose its pep.
He says: ‘Corporate governance becomes more onerous and independent non-execs were appointed who may not have had a full understanding of the business.
‘In addition, all the options that had been put in place had been exercised and cashed in. We wanted to re-energise everybody in the company, but we found it difficult to create incentives to grow as fast as we had over the last ten years. The whole point of working began to lose its attraction.’
Then, after the bust of 2001, Page told his shareholders that profits were coming down from £53 million to £50 million, although the business was well situated to recover strongly in two years. He advised them to hang on to their holdings. They sold and the share price fell from £9 to £2.
Within a year, Pizza Express had been bought by TDR Capital, which made five times its money in 18 months. Six weeks after the sale of Pizza Express in October 2003, Page had left and set up Clapham House, raising £22 million to invest in buying small restaurant groups and turn them into UK chains.
‘The only national cuisine at £10-£15 per head that has been consolidated so far is pizza,’ he says. ‘Other cuisines, like Japanese, Turkish, Greek, Indian and Chinese, are all fragmented in the UK. Even though you see a lot of chains, more than 80 per cent of restaurants in the UK are still independent. We are looking at that figure to go down to 60 per cent in the next 10-15 years and want to share in that consolidation.
‘We like to see a simple operation with queues out of the door and good financial characteristics. You can easily have a popular restaurant and not make any money.’
Page quickly snapped up the Gourmet Burger Kitchen, The Real Greek and The Bombay Bicycle Club. Earlier this year, he bought Tootsies, a chain of 30 units which had fallen on hard times.
‘Burgers are the star turn at the moment, but Indian cuisine is coming up on the outside. Because The Bombay Bicycle Club is a delivery kitchen, it makes no money in the first year, a bit in year two, lots in year three and tons in year four. You have to wait for a return on capital, so you can’t open too many,’ he says.
In total, Clapham House now has 67 restaurants in its portfolio and Page is looking to expand beyond London along the same lines as Pizza Express ten years ago.
All the restaurants are on leasehold. ‘When you open a restaurant, your return on capital can be 30 per cent. So buying the freehold is a poor use of money,’ he says.
The Gourmet Burger Kitchen is leading the way at the moment with openings in Brighton, Bristol, Guildford, Cambridge, Manchester and Birmingham. Page is deliberately opening near competitors like Nando’s, confident that he can take £5,000 or £6,000 off them straight away.
In the longer term, the advantage of having four brands is that he can expand across the best areas, as he has already done in Putney, giving Clapham House the chance to maximise its share of the local market.
Page does not envisage himself buying any further brands as yet: ‘We still think there is value in what we have bought, so we are going to grow them.’
Even though it is following a similar model to Pizza Express, Page has deliberately chosen not to expand through franchising: ‘There is no point in franchising if you know what you are doing and have access to capital. You operate units yourself and give your managers an incentive to perform.‘
Each brand has its own management team with its own identity, which represents a high overhead at this stage of the business: ‘If you have ten units in a chain, but want 50, you have to put the management in now and pay them. If you are at £10 million then you have to put in the management for sales of £25 million.’
Analysts are expecting turnover to reach £45 million this year with a rise of 50 per cent in the following year. Although it has had a strong run recently, Clapham House is still trading at a discount to its competitors, mainly because it is the fastest-growing company in its sector.
He says: ‘If we trip up, it hurts. The analysts are a bit fixated on numbers in the short term. If you say you are going to open 20 units and you only open 16, then they will say it is all going horribly wrong. In fact, you have done rather well and might open 24 the next year.
‘Our message is that the most important number for us is cash generation. We are currently expecting £4.5 million this year and £8 million in the following year.’
Beyond making money for his shareholders, Page is clear about his own motivation: he wants to prove that Pizza Express was not a one-hit wonder. He says: ‘We like the business model of rolling out restaurants to the public across the country. We are still on a mission to make eating out decent and affordable.’