Jonathan Kaye: Restaurant chain hopes to make a lot of dough

The king of the Italian restaurant chain Prezzo is mindful both of his family heritage in the industry and what the future may hold

The restaurant trade is in the blood of Jonathan Kaye, the chief executive of Prezzo and its eponymous chain of 137 Italian restaurants. His family is one of Britan's most successful restaurant dynasties, which began when his late father, Reginald, and uncle Philip Kaye opened the Golden Egg chain in the 1960s. They followed this with Deep Pan Pizza and Garfunkel's. His cousins, Sam and Adam Kaye, also served up the Ask and Zizzi restaurants, along with their father Philip.

Perhaps it was not surprising, then, that Jonathan, when he was working at Ask, decided to set up another Italian restaurant in 2000 at the tender age of 22. It was initially called Jonathan's, but was later rebranded as Prezzo.

"It didn't feel, despite a plethora of these Italian brands throughout the country, that there was not enough room for another," he says. Prezzo also operates nine Chimichanga, three Ultimate Burger and two Caffè Uno restaurants.

A cursory glance at Prezzo's rapid growth to 151 restaurants over the past decade – and a recent 21 per cent jump in half-year profits to £6.2m – suggests Mr Kaye has been blessed with the family Midas touch. However, some of Prezzo's first branches struggled and the last recession caused him to reassess "every element" of the business, from improving the raw ingredients to changing the plates and dishes.

Despite Prezzo continuing to grow sales and profits, Mr Kaye describes 2009 as a year of "consolidation" and says: "I now look at the recession as a thing that took us to the next level."

After Prezzo opened a record 34 new premises in 2007, Mr Kaye says, in the following year "all of a sudden, there was no disclosure on the economy; no one knew what was around the corner and we decided to slow down the expansion, rather than spending millions of pounds".

More specifically, Prezzo focused much of its development activity on its existing estate, which included sprucing up restaurants that were "not bad to the naked eye, but were not cutting-edge sharp", he says.

In the past year alone, Prezzo has refurbished about 35 restaurants, although some only involved minor tweaks. Perhaps a bigger change made by Prezzo was its decision to embrace promotional activity during the downturn. "We never used to engage in any marketing activity. We would just open the doors and it tended to work," says Mr Kaye.

But now Prezzo is on Facebook – where it has more than 50,000 fans – and on Twitter. It also launched an iPhone app at the end of last month. "We have now got a massive database that we can send our promotions to," adds Mr Kaye. "The promotional activity has unquestionably worked."

Many of the changes that Prezzo introduced during the downturn are now helping to drive its continued growth and have given it the confidence to open 20 new outlets during the current financial year. While Mr Kaye has been the main force behind Prezzo's growth, his uncle Philip has played a key role. He provided Jonathan with some of the funds to establish the business in 2000 and was instrumental in its floatation on London's Alternative Investment Market back in 2002.

Mr Kaye says: "Quite honestly, with my uncle behind it at the time, I think if we had been selling horse manure we would have been able to float. I think, in truth, with four restaurants at the time, we were ahead of the game and it is his reputation and record that enabled us to do that." The Kaye family still accounts for nearly 70 per cent of the company's shareholding. That said, Mr Kaye himself has also learned a thing or two in his career, which started in restaurants at the age of 13 as a "bus boy", the person who "scrapes and cleans the crap off plates", he explains.

Such an instinct was behind Prezzo acquiring 11 Caffè Uno Brasserie restaurants for £3.1m in August, plus an additional fee for the brand. It subsequently snapped up another Caffe Uno restaurant. Of the 12 Caffe Unos, the company will convert nine to Prezzo, one to the Chimichanga brand and the other two to new Caffè Unos.

Mr Kaye remains tight-lipped about his plans to revive Caffè Uno, which he admits is a "tired" brand, but says that it is likely to focus on "more of an all-day offer". "When you see something that is known and recognised and you can see it is tired and knackered, you know you can fix it," he adds.

Mr Kaye admits that the outlook for consumer spending in the wake of VAT rising to 20 per cent in January is unclear. He describes paying the Chancellor an extra 2.5p for every pound that Prezzo takes will be "pretty painful". It is also likely to lead to most restaurateurs increasing prices early next year. But overall, he remains remarkably upbeat about the long-term prospects for the eating-out market, particularly at Prezzo, where the average customer spends £14 including VAT.

This is partly because he feels that eating in restaurants has become embedded in British culture and that it does not face the structural challenge from the internet that retailers with hundreds of shops face. Overall, what he likes about the restaurant business is that there is no direct substitute for dining out. He says: "If anything it seems to be growing; it seems to be embedding more in our culture and I think it is becoming more reasonable to eat out. So I think it feels like a good space to be."

If you can stand the heat...

* When he looks back on setting up Prezzo in 2000, aged 22, Mr Kaye says: "It gives me the shivers. It is driving around with loads of dough balls and pizza sauce in your car and you have run out of this and that and the manager is off and the head chef has left that branch. It strengthens your resolve."

* He is single and lives in London's Belsize Park. Unsurprisingly, he describes one of his hobbies as eating out. "I am not a great home cooker." Knowing how much goes into serving up a meal, he says: "I must be one of the few people who is happy to go into a restaurant and have a bad experience."

* Mr Kaye has just read Any Human Heart by William Boyd and waxes lyrical about his "wonderful" new Apple iPad.

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