An Appetite for Growth Steve Richards, CEO of the PE-backed restaurant company, Casual Dining Group, talks to Mary-Anne Baldwin about how he’s overhauled the business teve Richards is a man who works restaurant business externally for some “The first thing I did was hire an Sat speed. In the two and half years as six months, he became CEO in early experienced team of executives who CEO of Casual Dining Group he’s taken 2014, just weeks before embarking on shared the vision and were capable the business through every conceivable a radical transformation programme. of executing it”. milestone, including the divestment of one restaurant chain, the purchase of “It was trading poorly, highly leveraged Tragus Group, had 355 restaurant two others, two re-financings, group and, because it had such a large amount property leases and wanted the best 180, and restaurant chain rebranding and of debt on its balance sheet, it hadn’t so there needed to be some early ‘heavy international expansion. been investing in its brands or people lifting’. It trimmed down the number for quite some time,” Steve explains. “The through a process of disposals and He’s just as quick at explaining all this business was declining, there was a high corporate reorganisation. “It was a bit like to me during a half hour interview, turnover of people and low customer peeling back the onion skin,” says Steve. yet he does so with the precise detail feedback scores. Basically the brands and calm momentum that comes with were tired and losing customer relevance”. “Having rationalised the property footprint years of experience in transforming we then right-sized the balance sheet and large complex businesses. During the months before being took the debt EBITDA ratio from double appointed CEO, Steve had composed figures to three. We then right-sized Steve first started work on the business a plan that for the first year alone the head office and rebranded as Casual in 2013 when it was still owned by comprised a mind-blogging set of Dining Group [CDG]. That was stage one Blackstone, operated under the name undertakings − including the sale of and the first 12 months had flown by.” Tragus Group, and consisted of the high Strada within the first seven months. street restaurant chains, Strada, Bella While the first step was to create a Italia and Café Rouge. “We had a clear vision to create an highly profitable and focused business, industry leading multi-branded restaurant stage two was about investing in its The business was acquired by a new business, one that was highly scalable property, people and products. The group consortium of shareholders led by Apollo and capable of generating sector leading ploughed £70 million into refreshing its Global Management where Steve was an consumer, employee and financial metrics,” existing restaurant brands while creating operating partner. Having worked on the Steve explains. a pipeline of 25 new sites each year. > Timeline October 2013 May 2014 Sept 2014 February 2015 December 2015 June 2016 Steve Richards begins New Management Sale of Strada Company rebrands as Second refinancing Creates incubator work on Tragus team hired First refinancing Casual Dining Group with KKR funds for start-ups March 2014 June – August 2014 November 2014 July 2015 Apollo acquires Group CVA and First new site openings £85m purchase of Las Iguanas Tragus Group property reorganisation £20m purchase of La Tasca Steve Richards August 2014 October 2014 becomes CEO HO reorganised with £70m brand refresh March 2016 30% cost reduction programme begins Starts international expansion with first restaurant franchise in India www.criticaleye.com An Appetite for Growth 2 It also bought the Latin American Scanning the Horizon While all of these elements are building restaurant chain, Las Iguanas, in a to what should be a rewarding exit, Steve keenly fought £85 million deal, as well as As a PE-backed CEO, at some stage is pretty philosophical on when this will paying £20m for the Spanish restaurant a valuable exit is inevitable but this happen. “You have to accept that as a chain, La Tasca, just one month later. is not Steve’s only driver. He sees CEO you can’t totally control the timing his role as building a sustainable of an exit,” he says. “Today CDG is the UK’s second largest business that’s primed for long-term multi-branded restaurant company. It growth and that only by doing so “Part of the role is living with uncertainty generates a return on capex of 35 per will he be able to maximise value. and being flexible enough to make it cent and total growth north of 20 per work. A CEO in an SME probably has cent per annum.” Steve explains. Part of that mission involves the more control over the exit process, which opening of more than 30 new sites maybe relatively quick and management Mapping the Business this year and next – more than any led. But if you’re leading a large scale other UK restaurant brand. It’s been vehicle you’re generally much more Such dramatic changes could easily have bolstered by the business’ second debt focused on your shareholders. destabilised the business further, yet the refinancing, which came from PE-giant plans Steve made prior to taking the hot KKR in December 2015, and through These comments were shared on seat allowed him to keep a clear sense the support of a consortium of blue- the side lines of Criticaleye’s recent of direction and purpose. chip US investors, led by Apollo. Private Equity Retreat, at which Steve Richards was a key speaker. “I structured the business in such a “We’ve also started franchising our way that each restaurant brand operates brands abroad, opening up our first as a standalone business with its own Café Rouge in Dubai, Bella Italia in Steve Richards management board, strategy and KPIs,” India and signing a deal to open 18 CEO says Steve. “At group level we agree restaurants in Saudi Arabia,” Steve adds. Casual Dining Group the strategy with the brands, assess Steve is the CEO of Casual Dining their growth plans, approve capex and Further acquisitions maybe on the cards, Group, the multi-branded restaurant resources, and basically support the although Steve won’t be drawn into group backed by Apollo Global management teams in delivering their specifics. For now, CDG is raising a new Management and York Capital, brand plan. The only people who report sidecar ‘incubator fund’ that focuses on which comprises restaurant brands into me are the brand MDs, property backing start-up entrepreneurs, often Cafe Rouge, Bella Italia, Belgo and director and group finance director. with only two or three restaurants but Las Iguanas. strong growth prospects. “As a group we’re able to move very fast Steve sold his former business, Novus Leisure, in 2012 to LGV in terms of the individual brands and while “We want to create a safe harbour and Hutton Collins for £100 million we were acquiring or turning around one for them to grow, provide finance, having formed the company in 2006. brand it didn’t affect the others.” back-office support, property and purchasing expertise. Basically, we Steve is currently NED for a pan- One hurdle still to overcome is recruitment. will remove the barriers to early-stage European budget accommodation This year, CDG will have to increase its growth, giving the select few a boost business and Chairman of the ALMR, current crop of 8,500 employees to 14,000 and the freedom to deliver their vision. the hospitality’s leading trade body, within 24 months. “That creates its own By backing early stage talent we hope which lobbies Whitehall on behalf issues and strategies,” says Steve. “We put to be involved in some of the exciting of its 220 member companies. innovation occurring in the sector and in place specialist recruitment, training and Contact Steve through: development teams, but at the end of the pick some winning scalable brands,” www.criticaleye.com day finding talent is never easy.” Steve explains. 2016 © Criticaleye www.criticaleye.com Email Share Tweet An Appetite for Growth 3.