He just won't take it easy: Stelios goes brand building at a breakneck speed

Despite problems at his low-cost airline, internet café, cinema and car rental firm, the 'no frills' king is gunning for growth by forming partnerships in new business areas. Clayton Hirst and Tim Webb ask if the household name can take the strain
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Wanted: "enthusiastic, customer-focused", bus drivers for young and funky company. On top of the £18,000 salary, perks include a free uniform. If this doesn't appeal, then as long as you have a "can-do attitude", you could become a call centre operator for £10,000 a year. Or, if you have a "strong conviction in the low-cost business model" and 15 years' management experience in cruise liners, then why not apply to be chief executive of a new cruise business?

Wanted: "enthusiastic, customer-focused", bus drivers for young and funky company. On top of the £18,000 salary, perks include a free uniform. If this doesn't appeal, then as long as you have a "can-do attitude", you could become a call centre operator for £10,000 a year. Or, if you have a "strong conviction in the low-cost business model" and 15 years' management experience in cruise liners, then why not apply to be chief executive of a new cruise business?

EasyGroup, the private business empire of Greek tycoon Stelios Haji-Ioannou, is on a huge expansion drive. By the end of the year, Haji-Ioannou hopes to have doubled the number of companies he is running by diversifying into a bewildering array of businesses, including pizza delivery, bus services, cruises, hotels and mobiles.

He has much in common with the Virgin tycoon Richard Branson. Both are flamboyant, successful entrepreneurs whose new ideas have challenged the often fogeyish business establishment. Yet their strategies are quite different. While Branson has taken Virgin into markets where customers are poorly served, the easyGroup empire is founded on the assumption that a product which does the job cheaper than its rivals' will always sell - however crowded the market.

But as Haji-Ioannou presses the growth button, cracks are appearing in easyGroup's existing companies, which include the low-cost airline, internet cafés, car rentals and cheap cinema.

The biggest worry for Haji-Ioannou is easyJet, of which he and his family own 41 per cent. While he no longer has an executive role at the airline, he has been using it as a cash cow in recent months, selling small packets of shares to fund his new ventures.

On Monday, easyJet stunned the City by issuing its second profits warning within a month on the back of an escalating fare war in the low-cost sector and rising fuel prices. This cemented a dismal run in its share price, which has almost halved since the beginning of May. Shareholders have criticised the company for not issuing the warnings sooner and there are now calls for executive heads to roll.

Speaking to The Independent on Sun- day, Haji-Ioannou refuses to say if he is putting pressure on the company to make management changes, but he concedes: "There is room for improvement in investor relations."

He also refuses to comment on reports that he may launch a bid to take easyJet private. One source close to Haji-Ioannou says that he hasn't ruled out the idea, but may wait a few months to see if trading improves.

Meanwhile, he is planning to overhaul the business models of many of his easyGroup ventures. Haji-Ioannou wants to cash in on the "easy" brand by franchising it to other companies.

"I intend to monetise the 'easy' name by getting other people to share the risk with us," he says. "In the future, we will grow with partnership with experts in the field. We don't need to own cars, computers, even pizza delivery bikes. Franchising and licensing the 'easy' name is the way forward."

This, he hopes, will bring a rapid turnaround in the fortunes of his internet café and car rental operations. In the year to September 2002, the businesses made losses of £13m and £12m respectively. Both are understood to be still trading in the red.

Haji-Ioannou describes the early years of his easyInternetCafe venture, which today has 70 stores in nine countries, as one of his "biggest mistakes". Having lost about £100m since the first café opened in 1999, you can see why. The last filed accounts, for the year to September 2002, reveal that the company ran up IT bills of £44m during the year, working out at £6,500 for every PC installed. He says the company became technically insolvent in 2001 because it could not repay its debts - until Haji-Ioannou, and his millions from the easyGroup, came to the rescue. In September 2001 he settled its debts - he tellingly writes in the accounts - "in order to protect my reputation and that of the 'easy' brand".

Earlier this month, Haji-Ioannou signalled a big shift in strategy by putting the lease on easyInternetCafe's flagship store, in London's Oxford Street, on the market. EasyGroup claims the decision was taken because it would be able to make a "sizeable profit" on the sale. But well-placed sources believe that other stores will shortly go on the stocks.

Future growth of the cafés, says Haji-Ioannou, will be through partnerships with existing retailers. If all goes to plan, they will be springing up in more post offices, Burger King, McDonald's and Sainsbury's. "EasyInternetCafe wants to be in the internet access business rather than the property business," says an easyGroup spokesman.

Increasingly, Haji-Ioannou is looking to form joint ventures to cut overheads and keep operations slim, preventing a repeat of his costly mistakes with easyInternetcafe and easyCar.

The rental firm, launched in 2000 with a distinctive fleet of Mercedes A-Class vehicles, has been beset by problems. Its chief executive and finance director left last year and Haji-Ioannou began an overhaul of the company. He wrote in the most recent accounts that the "cost base of the company was unsustainably high relative to its revenue base". In plain English, costs massively outstripped income.

Haji-Ioannou, who has so far invested £20m in easyCar, announced a deal with the US rental firm Alamo last week. EasyCar and its customers will use Alamo's network of vehicles in 760 locations across 26 countries. "Who has heard of Alamo in this country? We have built the brand name; it is obvious to bring the two together," says Haji-Ioannou. Like the internet café partnerships, the deal will cut costs for easyGroup.

That doesn't mean he has lost his bottle. Far from it. Last summer he launched possibly his most audacious venture, easyCinema. Unfortunately, the early signs do not look good. Like his other ventures, the strategy uses a pricing model based on supply and demand. Customers who book a long time in advance for off-peak periods pay as little as 20p for a ticket. Haji-Ioannou's theory is that it is far better to pack out a cinema with cheap tickets than sell only a few expensive ones.

But the Hollywood film distributors have refused to play ball and supply easyCinema with new releases. This means the only easyCinema complex, in Milton Keynes, has been showing old releases. Critics also point out that, unlike with flights, filmgoers do not tend to book weeks in advance.

Haji-Ioannou is not downcast: "We have placed a bet, but it is taking longer than many eternal optimists thought it would. There is a cartel operating in the film industry so we have had to build a business without the blockbusters."

He is now pinning hopes of a turnaround at easyCinema on an appeal to the competition authorities. "I hope that the regulators and the courts might come to the rescue, but I don't expect a quick resolution."

With plans for the rapid growth of easyCinema on hold, and costs cut in other businesses, expansion of the easyGroup empire rests with the "easy" name. By franchising operations, Haji-Ioannou is gambling that customers will trust, and buy into, the brand, much in the style of Virgin.

But is he staking too much on the name? John Williamson, a director of brand consultancy Wolff Olins, believes the value of the "easy" name has diminished. "Virgin is more sexy than easyGroup. Stelios does not live the brand in the way that Branson or Michael O'Leary at Ryanair does. The 'easy' brand is worth less now than four years ago." In particular, he argues that the profits warnings at easyJet, over which Haji-Ioannou has no control, have damaged the "easy" brand.

Jez Frampton, the chief executive of Interbrand UK, warns that franchising new business ventures to third parties under the "easy" name could hit its value. "A brand is a promise," he says. "If you do not keep your promises then the brand will suffer. It is important for easyGroup to maintain control over its franchises."

Part of the problem, says a business associate, is that Haji-Ioannou is in too much of a hurry. It took the Virgin group 20 years to build an empire; he wants to do it in five.

Despite offloading some of the costs on to new partners, adopting a low-price model is never risk free, says Frampton: "The model may have been a contributing factor to its predicament. These companies risk being outgunned in a price war by competitors with deeper pockets." He suggests rebuilding the "easy" brand by extolling other virtues aside from its low prices, such as simplicity and convenience.

But Haji-Ioannou is not known for bowing to critics.

His stubborn streak is a big factor in his success, says the business associate. "He wants to prove people wrong. That's part of his motivation. It's not money that drives him; it's a question of having an idea and wanting to make it work. He is different to big businessmen in that sense."

Dr Palie Smart, a senior research fellow at Cranfield School of Management, picks up the theme: "Stelios has created new markets, usually at the lower end, which is often ignored. With easyJet, for example, he created a whole market of pensioners who in the past had never even been abroad because it was too expensive.

"I do not know if I would call it socialist, but there is something genuine about his business philosophy. You could say that easyGroup has a bigger motivation than making money."

Cynics might say that, on this basis, Haji-Ioannou is in a win-win situation. If he makes millions, he is one of the world's most successful and innovative entrepreneurs. Should he lose money, then he is a philanthropist in the Rockefeller mould.

As his new businesses take shape over the coming months, we will soon find out.

THE EASY EMPIRE - FUTURE AND PRESENT

ON THE DRAWING BOARD

easyPizza

Promises to "re-engineer the pizza delivery industry" by offering cheaper deals at off-peak times. According to its website, "easyPizza is searching for a celebrity chef who will be able to create mouth-watering recipes". It hopes to launch in the next few months.

easyCruise

With off-peak prices from £29 a night, the "no frills" concept is set to make new waves. Haji-Ioannou is refitting a ship and cruises to the Caribbean and Mediterranean will start next summer.

easyHotel

The first hotel is due to open at the end of the year in London's Kensington, with off-peak prices starting at £5. The aim is to develop the concept on a franchise basis and go international.

easyBus

To be launched this summer with a fleet of 10 vehicles, easyBus will rival National Express coaches, providing a shuttle between cities.

easyMobile

Going head-to-head with Virgin Mobile for customers, easyMobile will be a "virtual operator" leasing network capacity from an existing mobile provider. Rather than offering a phone, it is likely to sell a pre-paid SIM card to customers. An announcement on a telecoms partner is expected soon.

easyTelecom

Haji-Ioannou is examining whether to launch fixed-line and broadband internet services in the UK.

easyMusic

He is also exploring the possibility of offering music downloads from the internet. In particular, he is interested in music tracks that have no copyright.

easy4men

This will offer a range of cut-price men's toiletries. Again, an official announcement is expected soon.

UP AND RUNNING

easyJet

With a 72-strong fleet, easyJet dominates the "no frills" airline sector along with Ryanair. However, it is suffering from an industry price war and high fuel costs.

easyInternetCafe

It rode the internet wave, but is now struggling with its high-street sites. In the process of changing the business model, easyInternetCafes are being located in post office branches, Sainsbury's stores and burger chains.

easyCar

The business is turning itself into a franchise. It signed a deal with US car rental firm Alamo last week.

easyCinema

Having problems securing films from the Hollywood distributors. Only one easyCinema is in operation - a 10-screen complex in Milton Keynes.

easyValue

An internet price-comparison website in partnership with Kelkoo.

easyMoney

In partnership with Lloyds TSB, easyMoney offers a credit card and is looking to expand into personal loans.

Stelmar Tankers

The New York oil tanker company is 27 per cent owned by Haji-Ioannou and his family. He had wanted to merge the business with the US-listed OMI, but the rest of Stelmar's board rejected the idea. OMI withdrew its $653.8m bid for Stelmar last week.

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