'Double act' aims to dish up speedy profits at Selfridges' new eaterie
Mark Hix and Ratnesh Bagdai tell John Lawless how they made money in the teeth of the recession by avoiding the industry's two big mistakes
Sunday 07 March 2010
Achef who started his own business less than two years ago will tomorrow become the first outsider in Selfridges' 100-year history to open a restaurant in its flagship Oxford Street store. Ewan Venters, Selfridges food and catering director, says: "There are many fantastic British chefs, but Mark Hix represents the very best of British chef talent. It was a quite straightforward decision. We simply did not consider offering it to anyone else."
It is, however, the entrepreneurial streak of Hix and his partner-cum-finance director, Ratnesh Bagdai, that allows Selfridges' chief executive, Paul Kelly, to sanction a takeover of prime revenue-generating space on the store's mezzanine floor. Hix Restaurant and Champagne Bar will replace the Selfridges-run Gallery Restaurant under a revenue-sharing deal – which means that if Hix and Bagdai cannot turn a profit, Selfridges won't either.
In the past, they have – launching three restaurants into the teeth of the recession since May 2008, and bringing each to profitability in record time. "They are very professional," says Venters. "A definite double act. A winning combination."
As food director at Caprice Holdings for 18 years, where Bagdai was finance director for nine years, Hix made London's Caprice and the Ivy restaurants so valuable that they were taken over three times. But the deal he did to open his third restaurant, in Brewer Street, Soho, showed what he could do when his own money was on the table.
"I knew that the previous owners had spent in excess of £3m on developing a Japanese restaurant which went broke," says Hix. "The receiver was asking £400,000 for it. We finally got it down to £200,000. It was the bargain of the year."
Rivals had looked at the business. But no one made the right move. "Banks were not lending," says Bagdai. "We had the money. And Mark's pedigree. And we were able to do the deal within six weeks. It was an absolute steal. A no-brainer."
But Hix adds: "Quite a few of the others couldn't see its potential, because it was so Japanese."
Hix's cut-price solution for a too-high Japanese ceiling was to call in Tracey Emin and other artist mates to make mobiles to hang from a new tin ceiling. Damien Hirst created a me-too of his formaldehyde-soaked shark, out of anchovy-sized fish in blocks of clear resin, which now hangs above the bar. "I normally do swaps," says Hix, "exchanging art for food."
Clientele build-up was immediate. "We opened in October 2009, right in the credit crunch," says Bagdai. "By December, it was cash-generative." And it happened exactly like that at their other two new restaurants.
The Hix Oyster and Chop House opened at Smithfield Market, east London, in April 2008, needing capital investment just shy of £440,000, with half going on a new kitchen. "It was cash positive in just four months," says Bagdai. "The Hix Oyster and Fish House in Lyme Regis took just two months." Second-year accounts to the end of December show annual sales more than doubling to £3.4m. "We will be reporting profits for the year," says Bagdai. "For earnings before interest and tax, we will be looking at 15 per cent." He forecasts sales soaring to £8.3m this year, and sees no reason why Britain's thousands of restaurateur-wannabes shouldn't do the same. "We aim for food costs as 30 per cent of sales, and a 30 per cent wage cost structure on net revenue," he says. "Do just that, and you have a profit."
Hix and Bagdai have a method of assessing new restaurant sites which borders on the scientific. They measure the footfall generated by passers-by. "Brewer Street is on a one-way taxi journey into Soho," says Bagdai, "and our Lyme Regis restaurant is in one of two buildings which survived a cliff subsidence, which people have to pass to get to the beach."
They then assess how much of that footfall can be turned into lunch-time trade. "Dinner has always been destination-led," says Bagdai. "But lunch customers say, 'Where shall we go?', and it's invariably their regular place." The partners then judge how many times a table will be used each lunch time. "One table-turn is good," he says. "One and a half is great. Two is fantastic."
Their clinical style contrasts with the way in which restaurants are launched by people who, says Venters, "forget that the hard work starts at 7am every day, not when the first customer walks in at lunchtime".
Typically, two things make new restaurant owners go broke, says Bagdai. First: "It's when the owner has a non-presence. They buy their restaurant like an investment. They might as well buy shares for all the influence they have over their own wealth creation. Or loss." He adds: "Mark and I get daily quality of service and financial emails from all three restaurants, and we have a little game to beat each other in responding to them."
And the second big mistake? "By the nature of the business," he says, "it's drink. The new owner treats the restaurant as a little trophy. They prop up the bar and drink the profits. Friends come in for nothing. The attention to the financials is lost."
There's a third fault too; it applies to bigger corporates. "I hate the word roll-out. It's purely about numbers of restaurants. Doing a Pizza Express." To counter that, Hix and Bagdai already have a five-year exit strategy on future restaurants. "What we would like to do is to have our three restaurants and Selfridges," says Bagdai, "and maybe one more in London and another in New York. Mark and I went there last year. We have the partners who want to do it."
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