All options for its future remain open for Loungers, the Bristol-based café/bar group, but for new managing director Nick Collins, keeping the company’s culture intact will be his main goal. Mark Wingett reports
Grey hair. That, according to Nick Collins, managing director of Loungers, is one of the keys to running a successful business and is an answer borne from experience.
Back in 2004, Collins – after leaving the LSE and spending five years at Arthur Anderson involved “very badly in corporate practice” – launched sandwich concept Fuzzy’s Grub with his wife.
He says: “It was an amazing journey. We got to our first three sites and it was going tremendously well, queues out the door. We were young and quite ambitious and thinking ‘let’s go for it’. So we opened a fourth and a fifth, and it was still going well. So we borrowed some more money from the bank and opened a big central kitchen facility just east of Tower Hamlets with the capacity to supply up to 35 sites.”
The company opened its eighth site in June 2008 and breached a bank covenant a month later. “The business was then sold through a pre-pack, which we were not allowed to participate in,” says Collins. “It still sold for quite a bit of money and we were left owing a small amount to the bank. We moved on, but it was amazing experience and an amazing learning curve.”
“We were guilty of youth and over ambition. The biggest mistake we had was that we never had someone with grey hair on the board to tell us to calm down or ask us whether we had thought certain things through. The timing was also bad with the recession and everything that was happening in the City.”
The exit itself was, says Collins, the interesting process and led to the next stage in his development. “I was lucky enough that a friend of ours worked for the national press and managed to get a story about the company going under in The Times and from that I met Clive Watson of Capital Pub Company who – although soon realising that Fuzzy’s wasn’t right for a new arm of Capital – I got to know.”
From there, Collins pretty quickly joined Capital to initially work on the food side of the business, but it soon became apparent that his financial background might be helpful and so he became the group’s finance director and “had the pleasure of working for Clive for three years”.
At the start of the recession, the company’s share price was around 35p and when the company was sold to Greene King in July 2011 for £93m it stood at 235p. Collins said: “I learnt a huge amount from Clive, espec-ially the way he empowered his people, letting the general managers run the business, and the way he understood how important it is to incentivise people. When Capital was sold, Clive and I were slightly disappointed that we didn’t have the opportunity to take the business further.
“As soon as it became apparent that the business was going to be sold we went about getting the best possible price. The exit to Greene King was a fantastic result for shareholders. When the deal went through, I felt working for Greene King was not something I wanted at that time. I wanted to work for another small entrepreneurial business and that’s when I got introduced to Alex [Reilley]. My wife and I had moved to south of Bristol just before the introduction so it was good timing in that respect.”
Collins met Loungers co-founder and now vice-chairman Alex Reilley in the original Lounge at Bedminster and had “a great chat”. “I have been in catering since I was 16 and it is in my blood and what I love doing. Alex and I definitely share that passion and we get on well, which is extremely important. The first time I went out with them (fellow founders Jake Bishop and Dave Reid) was the opening of Cosy Club Stamford. We had a huge night and then I had to sit in on my first board meeting the next day, which was a baptism of fire.”
At this stage, with Collins the newly appointed finance director of the burgeoning chain, Reilly raised the possibility of succession and it has “been on our agenda from that point”. The other early discussion revolved around private-equity interest. Collins says: “I joined in the first week of February and we started preparing the data for a deal in the second week. The deal was done with Piper Private Equity on 6 April. It was a great way to be introduced to the business, there was no gentle introduction. I went through that process on the back of the Greene King sale, which meant I had been in transaction mode for about a year. It was a great way to get to know the business and Piper.”
Collins says his career at Loungers from that point, which saw him move to chief operating officer in January 2014, was based around “immersing myself in every facet of the business” in pursuit of the goal of stepping up to managing director.
He says: “Alex and Jake were hugely supportive of that and in the first three years we worked well together as a team.”
And what about taking that step up and becoming the managing director of a company on track to operate 100 sites by 2017 with a run-rate turnover for its current financial year forcast to rise to £78.8m producing a run-rate site EBITDA of £17.4m?
Collins says: “It has felt very natural. I am very honoured to be in this position and very excited. We are fortunate to have a long-term plan in place. The move to chief operating officer allowed me to move away from the finance side and see what the wider business needed.
“Initially the COO role was planned purely as a stepping stone to succession, but then it became clear to us that we needed a COO because the day-to-day operation of the business is very intensive, which goes alongside the accelerated rollout that has a lot of development work involved to make sure that side is keeping up. Alex and Jake have helped make that process very easy. They are not getting involved in the day-to-day running of the business, which I appreciate.”
But does he feel under pressure to make his own mark on the business, after stepping up to the role of MD in January this year. “There is always going to be the challenge of following Alex and Jake as founders, but they have made that process for me, Justin Carter (chief operating officer) and Andrew Percy (finance director), very easy. It is their culture, but it doesn’t belong to them any more, it belongs to the c1,500 people who work in the business.”
Whatever the options for the group, and an IPO is now appearing the favoured option, Collins is keen that the culture play is kept intact, aided by what the company calls its “Glue Crew” – a mixture of senior and junior employees that the company uses as a bellwether or steering group of how the group’s culture is developing.
He says: “We have seen the success of the Patisserie Valerie, SSP and Fever-Tree listings, so value and returns are clearly a factor. Alongside this, our pipeline and potential scale (400 Lounges, 100 Cosy Clubs) would, we believe, be well received by the markets and institutions providing a long-term growth strategy and regular news flow in excess of a 10-year period. In addition, the culture within Loungers is fundamental to its ongoing success, and an IPO would allow employee participation and help protect that culture.”
