Stormy journey to refinancing triggers a bright future for Brasserie Bar Co
8 min read
20 July 2017
When we first worked together my long-time Brasserie Bar Co business partner, Ian Glyn, told me "all we need to do is win". Easy to say; difficult to do. And never truer than today.
We at Brasserie Bar Co, the operators of the 20-year established Brasserie Blanc and the relatively new, dynamic White Brasserie Pub Company, are no strangers to tackling business challenges. We have the bruises to show for it.
Experience with developing our company (and our previous incarnation which we sold to Greene King back in 2007 – Loch Fyne Restaurants) tell us that the road is rocky and growth can come in fits and starts.
The right financial backing is critical. But, above all else, you must constantly be prepared to find new ways to overcome the problems which come your way – not just from being involved in a highly competitive market, but being victim to wave after wave of government policy that turns the simple joy of providing a great place for people to eat and drink into the Labours of Hercules.
It’s all the more gratifying then, that we at Brasserie Bar Co can confidently now plan for a genuinely exciting future by way of a refinancing that is borne on the back of a strong trading year.
The journey to how we got here and what we have had to counter and overcome may well be instructive for others contemplating similar new financial commitments.
Three or four years ago Brasserie Bar Co faced issues in both businesses.
Brasserie Blanc had taken too long to integrate the 2011 Chez Gerrard acquisition and was stalling in negative growth. With an ageing customer base, we knew it needed an urgent update and refresh.
Conversely, the fledgling White Brasserie Pub Company was struggling to attract sufficient debt funding so it could take advantage of an innovative new lease structure we have devised that would allow the company to realise value.
We had successfully trialled the concept in our two tied pubs. It all seemed promising. We were ready to roll-out and urgently needed to grow in order to secure the best sites and stay ahead of the pack.
So, two projects with large, simultaneous and immediate capital demands, both promising but neither risk free. The big question was: how do we fund it?
Private equity was not going to be the way. These were not bull market days and, in any case, private equity-backed businesses work to tight time lines and frankly we had taken too long to get to where we were.
Indeed, we were fortunate that our sponsors then, and still now, Core Capital, had sufficient courage and patience to recognise that turning opportunities into strong businesses sometimes require even more time, investment and support.
Clearing banks too were a cul-de-sac. They remained nervous of ambitious small companies and their requirements to exercise tighter management restraint through covenants were simply unworkable.
Brasserie Bar Co had a need for a roll-out fund for pubs and a sizeable investment to reinvigorating the tired Brasserie Blanc that precluded us from conventional senior debt.
After much anxious consideration, we dived into short-term financing. We knew it was a risk and meant an eye-watering interest rate. Only at these rates could we have the latitude to execute our plan unfettered by covenants. We needed that flexibility. It is not for the faint-hearted.
Frankly, we recognised the cost would set our plans back a couple of years. But, had we not taken this action, it is inconceivable that we would be in the positive position that the company enjoys today.
So, we went about executing our two-fold plan: completely refresh the whole Brasserie Blanc estate; new look; new menus and new venues; and the roll-out of the pub business to more choice locations across the south east – and north west.
Just as we did that, the grey skies of the broader market place got darker. The whole context in which we trade became even tougher.
We have encountered a perfect storm of challenges. The sector is suffering from unprecedented recent cost increases through rates, minimum wage, auto-enrolment and apprentice levies.
Subsequently, despite warnings, investment has fallen to its lowest level for many years. Administration activity is on the rise. Worse, the post-Brexit-vote world and its impact on sterling has led to food inflation now running at nine per cent.
And don’t get me going on the whole issue of immigration, the treatment of our employees who are EU nationals and recruitment!
As the environment gets tougher you can shout and moan as much as you like, but you then have to get back down to finding that way to win.[rb_inline_related]
Confidence in our team and plan drive us forward. But operators without an easily recognisable differentiated brand and a focussed property strategy find life increasingly challenging.
Brasserie Bar Co now has two brands in strong like for like growth. The Brasserie Blanc brand and estate is completely new and we have gone from two White Brasserie pubs to 15. We employ circa 1,400 people.
And our ability to find a way to win meant that, with a lot of the plan executed, we could then look for a new finance partner to fire us into our next stage of growth.
After a protracted search, we recently partnered with the exceptional OakNorth team. We have enjoyed in them a unique partner focussed on entrepreneurial businesses, committed to evolving a next generation of mid-sized companies who aspire to be the economic backbone of the future.
This has enabled us to pay down the vast majority of the expensive debt.
Why we can be so positive about the future after the re-financing is because of a number of factors.
Firstly, we have a strong, experienced and competitive team. Secondly, we have a clear strategy with differentiated businesses. Thirdly, and what will set us apart, is our continued investment in all things customer-facing, particularly our brilliant people.
So, this is why we remain optimistic despite the challenging environment. Our experience uniquely equips us for a testing future.
But being well, and appropriately, financed will be key to flourishing in the coming years.
It’s all part of recognising that “all we need to do is win”.
Mark Derry is CEO Brasserie Bar Co