When Nick Tolley joined his younger brother and sister in London less than 10 years ago and said, “let’s start up a business”, the idea that the three Australians would now be running one of the fastest-growing coffee-shop chains in the UK, with their expansion bankrolled by one of the world’s largest retailers, would have been laughable.
In fact, even as little as four years ago, Nick himself would have found it pretty unbelievable.
Yet, here he is, sitting in the Cannon Street branch of Harris+Hoole (H+H), the premium café brand turning over c.£230,000 a week from a 30-strong portfolio that is on course to at least double this year, discussing the pros and cons of working with his siblings and with Tesco, which part-owns the chain.
“Serendipitous” is how he describes the way he initially ended up having a discussion with a senior figure at the supermarket giant in 2011. He was introduced by a mutual friend, the outcome of which was H+H, the joint venture set up by the Tolleys’ Taylor St Baristas business (which owns the eponymous chain of nine coffee shops, eight of which are located in the City of London and one in Brighton) with Tesco as a minority shareholder.
The fact that close family members had the complementary skills to set up a successful business with him in the first place is equally fortuitous. Brother Andrew is the coffee expert – an award-winning barista who got a taste for the art back in Oz and at the time of this interview was in Guatemala talking to farmers about coffee beans. Laura, one of two sisters (the other, Heather, is the ‘baby’ of the family and lives in Australia), is the design guru and deals with everything related to the look of both Taylor St and H+H. Nick believes the combination of their individual areas of expertise played a massive part in getting them off the ground in the early days.
“We were three kids, fresh off the boat almost but Laura was able to make us look a million bucks; Andrew gave us that level of detail, and I had a freshly minted MBA from a good school and so was able to talk around a business plan with authority,” he recalls.
The trio’s different skill sets also enable them to work together – clear areas of responsibility help avoid clashes, Nick says – that and the fact that he acted on some advice that stuck with him from business school.
“I remember some very wise words from an entrepreneur who gave a lecture – he said, ‘whatever business you set up, make sure you love it because you are going to eat, drink, live and breathe it and if you don’t love it, you’ll end up resenting it’.”
Coming from Australia, where the premium coffee scene is long-established and ingrained into the culture, it wasn’t too difficult for them to settle upon the brew as the core of their first start-up, especially as they found London at the time surprisingly lacking in quality coffee establishments.
The ‘eureka moment’
Their initial model, however, was a sandwich shop. Both Nick and Andrew worked at Benugo for about nine months to hone their experience. Together with Laura they detailed their plan and took it around the banks to try to get the £250,000 to £300,000 they needed to get it off the ground. They had no joy and, while the investors they discussed the idea with were much more receptive to it than the banks, they wanted hard proof it would work before handing over any money.
“We were in a catch-22,” Nick says. “We had got to the stage where we weren’t even sure how we were going to pay the next month’s rent and I remember sitting in a pub trying to think how we would get this thing to the high street.
“We looked at the floor plan of the sandwich shop and realised the most lucrative bit would be the square metre where the coffee machine stood.”
That ‘eureka moment’ made them scrap their plans and instead Nick used a credit card to buy a £6,000 coffee machine.
They then went into shops in Richmond, south-west London, and the third one they visited – Source Foods deli in Richmond (now the site of a Sainsbury’s) – jumped at the chance to have a quality coffee offering that was more in keeping with the high standard of everything else they sold than their existing cheap press button coffee machine. That initial concession soon had people queuing out the door and thus Taylor St Baristas was born.
“I would recommend to anyone trying to start a business to find a low-cost way of testing their ideas,” Nick says. “After a few months we were able to show banks our profit and loss and cashflow and they gave us money for the next site, so we were able to move to a high-street model.”
Andrew and Laura now share their time between Taylor St and H+H, while Nick is totally focused on the latter. He says having Taylor St at the vanguard of the constant drive forward for better coffee is very much to H+H’s benefit – and is essential to it thriving.
“When you look at the Allegra Strategies surveys into the coffee market over the past few years, you can see how quality is becoming increasingly important to consumers when they choose where to buy their coffee.
“Taylor St and Tesco took a long-term view that that is where things are going and that is why we didn’t just want to create a new mainstream brand like Costa, Starbucks and Caffè Nero. We thought if we could position ourselves as premium we would be ahead of the curve.”
Inevitably, the fact that a Goliath-like Tesco is involved in this venture has drawn criticism from certain quarters, particularly from what Nick calls the “Guardianistas”. It irks him that incorrect assumptions are made about the quality of H+H as a result and that he has to keep explaining that the brand operates totally autonomously.
He admits that he was rather naïve in not expecting the level of attention that the Tesco tie-up would bring, as demonstrated by the recent Daily Mail-esque shock horror reports that three of the coffee shops have alcohol licences (none of which have been used yet and Nick says they were applied for in response to requests from local H+H users who want to hold the occasional evening event, such as a poetry recital, and have a glass of wine or craft beer while they’re there).
Also, the rate of expansion the partnership enables means that Nick’s desire to keep the ‘small company feel’ for customers and employees is constantly challenged. He has quickly learnt to keep geographic growth of the brand in clusters (this year will see several cafés opening, both within Tesco stores and standalone sites, in Berkshire, Cambridgeshire, Essex and Kent), to enable staff to have their own H+H community and to allow satellite kitchens to freshly prepare food for several shops using local suppliers – things that are at the heart of the H+H brand. Recruitment practices have been overhauled too.
Potential staff members are auditioned and a strengths-based profiling system is used to match people to jobs that suit their talents, the idea being (and Nick is confident this is borne out in practice) that this leads to a highly motivated and passionate workforce, who in turn better engage with the customer. Despite these ‘downsides’ Nick understandably says the advantages of working with Tesco are huge – not just from the funding perspective. For a start there’s the relative ease in finding sites and the fact there is just one landlord to deal with; there are also the lower overheads from concession rents based on turnover plus more accurate staff rota-ing and stock ordering thanks to Tesco’s customer footfall data. On top of all that he gets to benefit from the experience of Andrew Fowle, the former Mitchells & Butlers CEO, who is now chief executive of Tesco’s family dining division, which includes H+H and provides further useful networking opportunities with fellow stablemates Giraffe, Decks carvery and Euphorium Bakery.
Transport hub vision
In addition to the ongoing expansion of H+H through Tesco’s vast property portfolio, Nick says that – within the next 12 to 18 months, once he is confident there is a suitable version of the operating model –H+H is likely to make its transport hub debut. Longer term he feels there is potential for the brand overseas, particularly in Eastern Europe. In the meantime, there is also investment under way in technology – after a week’s trial at the beginning of March, the chain is planning to roll out payment by phone and the next step will be remote ordering so that you can have your coffee ready to pick up when you arrive at the shop.
It’s a small but important step for this fast-growing company and the emphasis that this unassuming entrepreneur places on it is a good example of how he’s managing to keep developing H+H the way he wants, despite the demands his unique business set-up places on him.