How To Spend It

Food

Turning the tables

Every year some of the Square Mile’s finest trade the stock market for the stockpot. Bill Knott talks to four about the challenges – and rewards – of opening a restaurant. Portrait by Trent McMinn

November 01 2012
Bill Knott

Nicola Horlick, entrepreneur and sometime stellar fund manager, is sitting at a table in a café/restaurant on Barnes High Street, just a few miles up the Thames from where her fortune and fame were made. If there is a certain air of satisfaction on her face, it may be the proud expression of a businesswoman who has seen the fruition of her latest project: the restaurant in which she is sitting. In this, she is not alone. Of the 100 or so restaurants that open each year in London, many are the culmination of a dream that started in the City.

Horlick’s venture is named Georgina’s, after her eldest daughter, who died of leukaemia in 1998. “Georgie loved food, and opening a restaurant was something we talked about endlessly.” Busy with family life and as chairman of Rockpool Investments LLP, Horlick finally launched her restaurant earlier this year.

Georgina’s has 55 investors. “They fall into three groups: close friends, about 15 of them; locals, whose main motivation was that they wanted a good restaurant in the area; and people who frequently put money into Enterprise Investment Scheme businesses. They get 30 per cent income tax relief on their investment and there’s no capital gains tax on any profit.”

Does her interest in restaurants spring partly from experiences of liquid lunches in the City? “Actually, no. I only really did a handful of lunches. Meals with sherry, then white, then red, then the port. That used to be traditional, certainly, but at Warburg drinking at lunch was a sackable offence. ‘Alcohol impairs judgment,’ they said.” The idea for Georgina’s may have arisen in part from sentiment, but it was given the same steely attention as Horlick’s other ventures. After all, she has been running businesses for 26 years.

At first glance, the transition from City star to restaurateur seems a curious one: any financial advisor worth his Maldon sea salt would tell you that catering is a notoriously unpredictable sector, with a high level of failure and only slim chances of real success. Why, then, do so many of the Square Mile’s finest think they can trade the stock market for the stockpot?

Take Francesco Ortone, the 37-year-old Roman owner of Cotidie, a newly opened, high-end Italian restaurant on Marylebone High Street. Ortone worked for 12 years in wealth management and derivative sales, first finding success as an analyst at Morgan Stanley, then meeting with adversity during Lehman Brothers’ demise in 2008, before joining Citigroup and reviving his fortunes.

It was the experience at Lehman that forged his determination to leave the City and move, as he puts it, “to the real world. I only thought about opening a restaurant after the collapse of Lehman. I wondered, ‘How can I work so hard for seven and a half years and it come to this?’ I went to Citigroup, and the indices recovered, but the banking sector was still shrinking, becoming a more boutique sort of job.”

Ortone’s frustration and disillusionment were compounded by a growing disaffection with the industry. “There was no satisfaction except money, not in derivative sales, in any case. I thought that I hadn’t built very much in my life, and I wanted to do something tangible. And I had made some money in real estate, as well as banking, so I had the means to start a business.

“The idea for a restaurant came from the passion for food I inherited from my parents. Cooking’s one of their great hobbies. I met a chef called Bruno Barbieri through a friend in the City. Bruno had spent 10 years at Arquade in the Villa del Quar hotel, a Relais & Châteaux property near Verona. He was ready for a change of scene and wanted to be a partner, not just an employee.

“I financed the whole venture entirely in cash; banks won’t give you a loan if you don’t have a job. I found a good site – Marylebone isn’t as overcrowded and competitive as Mayfair – I had a great chef and I created a beautiful restaurant. ‘This should be easy,’ I thought, but it’s been a lot harder than that, and I had to make my projections more conservative.”

Ortone is very hands on in his approach to his business – “it’s much harder work than banking: I get here at nine in the morning and I don’t leave until midnight” – but few ex-City restaurateurs can be more dedicated than John Devitt, owner of Koya, the much-praised Japanese udon noodle restaurant in Soho.

Devitt had worked for eight years as an independent trader in financial derivatives, until June 2000 – “on-screen trading was coming in, and it wasn’t really my style” – and was determined, like Ortone, to do something more product-based. “I was selling things that didn’t exist, not even wheat or pork bellies, just options on futures of intangibles. I’d always wanted to work with my hands, so I decided to seek employment in a kitchen.” Devitt took a lowly job with Giorgio Locatelli, who was then at Zafferano, and stuck it out for two years, learning each station in the kitchen and rising to the level of a junior sous chef. “The pay was terrible: £12k a year, less than I’d make in a very bad month in the City.”

Six months at Hoxton restaurant The Real Greek followed, before he was lured back to the City for a while. “An old trading friend wanted a manager for his firm, to move its clearing house to Goldman Sachs.” He invested his original City nest egg in a couple of properties in Notting Hill, and went back into the restaurant world, this time to work front of house at Pengelley’s, on Sloane Street.

His first major investment was a converted pub called The Island, in Kensal Green. “It took four years of my life. My business partner had had a couple of successful bars and restaurants already, and I thought that would make it all happen. I didn’t pay enough attention to the details: we had the wrong tables, the wrong chairs, the wrong floor… even the airflow through the restaurant was terrible.”

Devitt sold out to his partner. “One thing the City taught me is not to be afraid of losing money. If there’s a noose round your neck, you need to cut it, however much that might cost. In fact, if you see a restaurant that opens and closes in just a few months, there was probably a City boy behind it.”

Devitt came up with the concept for Koya during a pilgrimage to the Kagawa prefecture of Japan’s Shikoku Island, where he discovered thick, stiff sanuki udon noodles: the same variety that he now serves to queues of customers in Soho. Everything is done with supreme authenticity – “we import four key ingredients that nobody else in London has” – even down to the treading of the dough for the noodles. There are plenty of hands-on proprietors in London, but not many can claim to be feet-on as well.

Others have had greater success with their first culinary venture. Soren Jessen, the Danish owner of 1 Lombard Street, cut his City teeth on derivatives and fixed-income bonds at Merrill Lynch in the late 1980s, when the long lunch was still de rigueur. He became an executive director at Goldman Sachs before he was 30, “and I spent a lot of my time in the best restaurants around the world”.

His professional interest in restaurants started when he was the backer of his friend Oliver Peyton’s new project. “He was passionate – a visionary – with wacky new ideas, and I believed in him.” The premises were called Atlantic Bar and Grill, in a cavernous basement just off Piccadilly Circus. “We took £10m in our first year, from a business opened by someone who’d never opened a restaurant before, backed by someone who’d never backed a restaurant before. Even complete idiots would have made money on that sort of turnover.”

Jessen opened 1 Lombard Street in 1998. “It was a terrifying prospect, changing direction at the height of my career, but I was convinced the City needed something new. I’d had 10 years working as a banker in the area, and I knew exactly who my clients were. City restaurants were built around five lunches a week: if we couldn’t create an evening business, I knew we’d fail within a year.” He started by encouraging people to come to drink in the evenings – “expensive beer and cheap champagne” – and they began to stay for dinner. “Women came, too, and we had a good mixed crowd.”

Jessen has opened and sold several restaurants, as well as a nightclub, since then, all successful except one: Graze, a short-lived bar/restaurant in Maida Vale. “That place taught me a serious lesson. Restaurants usually fail for one of two reasons: either they are undercapitalised or they have a bad lease – and we had a very bad lease.” A long lease is fine if the business works. If it fails, you can end up paying rent for years on an empty building.

“Actually, if I’d known what was involved in running a restaurant, I might not have opened 1 Lombard Street. You really have to throw everything into your business just to make maybe 10 to 15 per cent margins. And you have to deal with the archaic nonsense of upward-only rent reviews every five years, and you get taxed on everything, especially employing people.”

What advice, then – apart from “don’t” – would our restaurateurs give to others who might be thinking of trying their hand? Jessen agrees with Devitt about having a hardheaded approach. “In the City there’s a saying: ‘Never fall in love with a trade.’ The same is true of restaurants. Of course, you have to be passionate, otherwise you might as well go and make widgets, but you need to keep an eye on the figures. And ensure you have an exit strategy: few restaurants last longer than 10 years, so a good way out when the time comes is vital.”

Devitt believes that his employees are the real key to success. “People say that you should always put the customer first, but if you don’t look after your staff, they won’t look after the customers. The best restaurants I know keep theirs for years, which isn’t easy. Most staff working in restaurants don’t want to be there; after all, not many people have dreams of becoming a waiter.

“Also, don’t try to educate the masses. At Koya, we have an excellent product, but the point is that it’s very cheap. City people might be used to chic and exclusive places, but our secret is to make it really accessible.”

Staff are important to Horlick, too. Lacking restaurant experience herself, she needed somebody to take charge of the kitchen and the menu. “Staff turnover is huge in this business. We’ve been lucky to keep a few key people, and we pay them more than the average.” Adam Byatt, of Trinity restaurant in Clapham, is her executive chef; he has installed his protégé Greg Hunter as head chef.

“And actually, most business plans are fiction,” she adds. “We’ve ended up with roughly the same revenue I thought we would, but weekday lunches are huge, which I hadn’t predicted at all, and nights early in the week are quiet. So we’ve listened to our customers – we’re a community restaurant; nobody would drive here from Hampstead for dinner – and are going to hold wine-tasting evenings and events with our suppliers to attract customers on Mondays and Tuesdays.”

Ortone’s sole partner is Barbieri; he gave the chef a slice of the company when he joined. “If you can afford to do it on your own, try it that way first. And it certainly helps if your friends come to eat, but don’t rely on that. Also, pay attention to the details. The floor, the furniture, even the water glasses. Successful restaurants like Zuma and Hakkasan are amazing spaces, not just places to eat. You need an edge, too: it’s a very competitive business, and there aren’t many bargain properties around. You can spend £10m plus and hire an unknown chef; or you can find a talented one, as I did; or you can have a big personality front of house and pull people in that way.”

If all that makes the life of a restaurateur seem unbearably onerous, be reassured that there are benefits. As Jessen puts it: “Instead of staring at computer screens all day, I’m putting a new wine list together. When I was in the City, I often found myself flying to Maastricht on a Friday morning to visit a pension fund in an office block; this weekend, I’m flying to San Sebastián to have lunch at Arzak. And I can call it research.”

See also

Restaurants, London