Paul may have a 130-year history in France, but it’s still little-known outside London since the brand landed in the UK some 22 years ago. But that is hopefully about to change.
Currently operating 35 company-owned sites, the bakery and café chain only have two locations outside the capital – both in Oxford. These two have just been taking on by its first franchise partner in the UK – father and son duo, Graham and Matthew Alan, with the pair targeting a further 10 stores over the next decade.
Their territory runs from central England down to the south coast, including areas such as Reading and Windsor. “There is plenty of opportunity for them to explore and to grow,” Paul UK CEO Mark Hilton tells MCA.
“They are actively looking for potential locations at the moment, but obviously their first priority is to get on top of the Oxford stores and get those working well.”
The business has been angling to go down franchise route for several years now, and very much views it as the most appropriate way for them to expand nationwide, while focusing on company owned and operated sites within London – not that Hilton would say never to a franchise site in the capital – if it was the right opportunity.
Having known Graham from his days at Yum! he is confident in the pair’s ability to make a success of their franchise territory and is “hopeful and expectant” that they will be the first of a number of partners that it brings onboard over the next couple of years.
Hilton says the target he spoke about when taking over as CEO three years ago, of 100 stores in the UK, has not changed. But whether the business does it in the five years in envisaged pre-Covid is “slightly more debatable” he admits.
“There’s no reason at all that I can see why that number should change – 100 stores is a fair target,” he says.
Formats in focus
The business is looking to grow via two core formats: its traditional Paul units and its Paul le Café model.
While the model, found elsewhere in Europe, is not yet in operation in the UK, Hilton believes it could offer the business opportunities for growth in the future.
“We have identified a couple of stores that fit the criteria […] and I think that over the next 12 months we will refurbish and upgrade a couple of those stores into the Paul le Café format,” he explains. These are locations in areas where there is high pedestrian traffic, including a strong tourist population, and a customer base that wants something on the go. While its traditional format offers a greater variety of products with more equipment back of house for baking different products.
Both the traditional model – which has a greater variety of products – and the café format are what he sees as the key models for the UK market, with kiosks still an option for growth as an when the right opportunities arise.
While there are clearly more people working from home these days, he also views transport hubs are “still a very viable opportunity”. Its location in St Pancras station, for example, is doing very well.
But the business splits its sites down into three asset categories: the villages, such as Hampstead Heath and Wimbledon, the West End of London and The City.
What it found during the pandemic, like other operators, was that its London village locations performed very well during and continue to do so.
Paul is therefore looking to focus more on opening sites in those kinds of locations than other areas where it has a presence in the capital, Hilton explains.
“I don’t think that we are going to necessarily change any of the criteria in terms of where we put locations, and the key drivers of what help us determine a potential location as being viable, but I think we will change the priority.
“So, we will look more aggressively in those village-type locations, whereas in the past we were equally focused on The City or the West End.”
Outside London, it is looking to open in market towns and secondary cities, he says. “I think we will look at moving out in concentric circles, so our focus will predominately be around the capital to start with, because from a supply chain and operational support perspective […] that clearly makes things a little easier than planting flags in cities around the country.”
Footfall trends
While it has seen tourists come back, they have not been in the same numbers as they had hoped for, with London also quieter over the summer due to the volume of Brits heading abroad.
When you look at the look at this year as a whole versus 2019 “we’re clearly still behind”, admits Hilton, although a large chunk of that is down to Q1 being impacted by restrictions at the beginning of this year.
The second quarter was stronger, before softer trading in the third quarter over the summer period. But Q4 has started encouraging, he says, as more workers have returned to their offices since September. “We are seeing Monday improve, but Friday is still a pretty weak day.”
Hilton admits that some of the increase in revenues is down to a higher ticket price on items. “We try and keep any price increases as minimal as possible, but clearly costs are going up”.
He is anticipating that inflation will continue to be a challenge, as least through the first half of next year, and as a business it is difficult to pass those costs on, so it’s also about looking at efficiency all the time and what you can do to reduce cost in other places, he says.
The off-premise opportunity
Like the majority of businesses, Paul UK has had to adapt, says Hilton, with the pandemic bring opportunities alongside its challenges. “It really forced us to push forward with our website,” Hilton explains. While it was in place before the pandemic, it didn’t have the same level of focus as it does now.
“We used to do a lot of platters to offices before Covid […] and that’s bounced back very well since September,” he adds. “We think that off-premise can continue to grow and we are exploring opportunities as to whether there are a range of products that we could get into the wholesale market – that’s a work in progress.”
In terms of traditional custom, the strongest day-parts for Paul are breakfast and lunch, with breakfast growing significantly as people return to office work. It is also has done a lot of work on hot products, such as pies and pizzas, to ensure it has a full range for consumers as we move into the winter, both and lunch, and dinner – where it has weaker trading.
Overall, Hilton is expecting a challenging first half of next year, but thereafter he is hopeful that things will ease and believes “the future is very bright”.
It’s about growing points of distribution, to make Paul a more accessible brand, he says. “We we have got a strong operating pedigree and we just need to grow the brand and make it as accessible as possible to people outside London as well as within London. That’s what we are going to be working on over the next few years.”
