Paul Campbell has been involved in the creation, development and sale of leisure businesses including trailblazing restaurant chains and health and fitness clubs. Mel Flaherty finds out more about the man who has gone on to establish private investment company Hill Capital Partners
“Someone said to me the other day that Gourmet Burger Kitchen (GBK) is the grandfather of the burger restaurant sector. I pointed out that it is a very young grandparent, when you consider it’s only been around 15 years or so.”
Paul Campbell could be talking about his own status as an industry veteran. Yes, his career in the restaurant sector goes back to the mid-1990s, when he first joined forces with fellow restaurant guru David Page on the board of PizzaExpress, but when you look at where he is now, his investment vehicle Hill Capital Partners is involved with such a mix of young and upcoming businesses that he is still very much at the cutting edge of this world. And he has the energy and enthusiasm to match.
“When David and I see each other, we always say we thought we’d be semi-retired by now, but far from it – probably because we’re having too much fun.”
Of course, the pair’s history together is more recent than those seminal PizzaExpress days. Page also now has his own investment business, Fulham Shore, but both started on the investment career path together, forming The Clapham House Group, which famously rolled out and sold GBK, as well as Bombay Bicycle Club and The Real Greek, among others, following the sale of PizzaExpress to TDR Capital and Capricorn Associates in 2003. They sold Clapham House in 2010 for £30.4m to Nando’s owner Capricorn Ventures before going their separate ways.
Crash and burn industry
Campbell is often asked if he’ll ever work with Page again. He doesn’t rule it out completely (and despite consistently saying no to the idea of running his own business ever again, he has now downgraded this to a “who knows, maybe”). The pair are firm friends and so far have not been offered the same investment opportunity – not that it would be a problem if they were; they’d just phone each other up and discuss it. In fact, Campbell said last year that they set up what they hope will be an annual cricket match between teams made up from the businesses they respectively invest in.
“It was lovely; we got a whole bunch of the guys together and had a great day – that’s the beauty of the industry.”
Getting into competitive bid situations is definitely not Campbell’s game. The businesses he gets involved in, such as Tortilla, the Mexican restaurant brand, Hawksmoor, the London steak chain or Vinoteca, the wine bar operator, recognise they get more than just money with his backing. It is not surprising that he gets many approaches about his potential involvement with restaurant projects, but Campbell says it amazes him just how many are out there at the moment: “I probably get on average two approaches a week, including the crazy business plans not going anywhere.
“Restaurants are a crash and burn industry – lots of things can go wrong and there are a lot of risk factors. When you look at the stats, the success rate is very, very low.”
After all the sifting (he makes sure he replies personally to each one), and due diligence, Campbell says the number of ventures he actually gets involved in each year boils down to around two. He only gets involved with fairly mainstream food ideas (although admits to getting it wrong about the potential future of previously non-mainstream foods like sushi in the past); with businesses where the founder plans to stay on to grow the business and understands what is required to scale it.
Campbell says a big part of the reason for the increase in interest in new restaurant concepts is the changing profile of the industry. His generation often came out of the ‘academies’ of PizzaExpress, Café Rouge and Wagamama whereas now, graduates and ex-City workers also view setting up a restaurant business as a valid career.
Campbell says that earlier comment about GBK sums up how the restaurant sector has changed during the years.
“It shows the speed the industry is going,” he explains. “In 2003, there were far fewer concepts, and GBK was the hottest thing on the market. Now the restaurant industry is evolving so fast – if you create something special, someone will replicate it quickly.”
But Campbell believes this will lead to challenging times in the immediate future.
Valuations are becoming unrealistic, he says. Admittedly it’s not too unusual for an investor to want prices to come down, but he is speaking with genuine concern.
“Last year, businesses with a couple of sites were getting valued at the same level as those that were already scaling. A small restaurant business can be amazingly full of potential but there is an enormous amount to do to take it from one or two sites to 10,” he explains.
Caution advised over rents
Property prices, too, worry him – not personally because he is confident that the businesses he is involved in are run sensibly enough not to overpay.
“I have seen some rents in regional cities that would have been racy in London three years ago. There may be some businesses with investors that haven’t done this before who may pay them and that will lead to less return on capital, so it depends whether the industry is prepared to survive on less. But maybe it will correct itself.”
Campbell predicts a squeeze on spending during the next couple of years as whatever Government comes out of this year’s election is bound to rejig budgets.
For these reasons, Hill Capital is probably going to be less active in terms of new investments. It would be easy to attribute his caution to his accountancy background (he started working life at PriceWaterhouseCoopers), but his entrepreneurial roots have never left him (he used to help his father on his market stall in his youth).
Campbell has already proved his versatility and flexibility – in 2012, he teamed up with another investor, LDC, the mid-market private equity arm of Lloyds, to invest in New World Pub Company, a new division of Living Ventures. For a multi-concept company to take private investment into one concept is certainly unusual (the joint venture fund with LDC has no further investments imminent but would consider further deals if the size of investment required warranted it). And despite previously saying he would not be into start-ups, last year, Campbell became non-executive director at Café Pistou, the all-day Provençal-style brasserie launched by Charlie McLean, the ex-financial director of Gaucho, the Argentinean steakhouse. He will be backing a second start-up opening this year, but is not prepared to give details. He also believes there is scope for a mainstream Oriental concept, but doesn’t offer a link.
“Any start-ups I get involved in will depend a lot on the people involved because as an investor it is riskier, but it is also about as much fun as it gets,” he enthuses.
Campbell also thrives on variety. Aside from his restaurant investments, he backs Halcyon Hotels and Resorts, a group of luxury family hotels he frequented with his wife and two children, when they were younger, and last year became chairman of Gymbox, the seven-site strong, quirky London fitness club brand that offers classes such as Yoga Rave and Tone and Twerk.
After this interview – his second meeting that day – he was off for a site visit with Vinoteca, then to catch up with Gymbox and finally for dinner at Hawksmoor. It’s a schedule that could be exhausting even for someone at the start of their career, but it’s how Campbell likes it and what keeps his experience applicable to current and future leisure industry operators.
