Patisserie Valerie is ditching its trademark can-can dancer logo and revamping stores as the cake shop and cafe chain tries to rebuild its fortunes after one of the fastest and most dramatic collapses in recent corporate history.
In October last year, Patisserie Valerie was still a go-go stock, a darling of the AIM market, valued at £450m and with nearly 200 outlets. Then, a black hole in the accounts was detected, which swiftly expanded into a £94m crater. In January this year, the 93-year-old business collapsed into administration.
The Dublin-based private equity firm Causeway picked up some of the pieces in February, paying only £5m for nearly 100 cafes and two-thirds of the chain’s 3,000 workers, and work began on rebuilding.
Patisserie Valerie’s managing director, Paolo Peretti, hired in the summer, is planning to spend more than £1m to revamp about 30 of its cafes and has plans to open a handful of new sites next year.
The chain is nothing like the business it once was. There are now 73 cafes, after Causeway closed down some of the outlets it had acquired, and there could be further closures if new deals with landlords cannot be agreed, as the business seeks a return to profitability.
Causeway wants rent-free periods on some sites to help fund its plan to strip out the old brown and cream colour scheme and replace it with a brighter, more modern look.
It will cost up to £150,000 to update each cafe, says Peretti, but he believes the facelift could increase sales by up to 15%.
“It will look and feel cleaner and less fussy. There will be less dark wood, mirrors and framed pictures on the walls, and the can-can lady is getting a well-earned retirement,” says Peretti, a former Leon and Pret a Manger boss, who has visited each of the brand’s cafes.
While all cafes and restaurants are under pressure from the rise in home deliveries and a squeeze on consumer spending, Peretti insists there is a future for Patisserie Valerie.
“It is about uniqueness. How many competitors do what we do across the country with patisserie and food? Out of London, I can’t think of anyone, so we do have a bit of an edge,” he says.
Peretti admits the company has work to do to dispel memories of its near-death experience, now the subject of a Serious Fraud Office investigation.
The incident trashed the cafe brand’s cosy image and also damaged the reputations of its former auditor Grant Thornton and the major shareholder and chairman, Luke Johnson, a serial entrepreneur who has said he was tricked by a false picture of Patisserie Valerie’s financial health.
At least five people have been arrested in connection with the accounting scandal and, if the case comes to court next year as expected, Peretti admits it may put off nervous customers, who are already hesitant about buying gift cards, for example.
“More lurid headlines about fraud and missing millions is not going to help,” he says.
There are few people connected to the previous management left in Patisserie Valerie’s head office in Birmingham. But the previous administration’s problems have left their mark.
Causeway said it found broken ovens, unpaid suppliers and a leaky roof at a key bakery site. Cost-cutting had been so severe that managers stopped using butter in the puff pastry.
Peretti has brought back the butter and reworked the menu, moving upmarket by teaming up with artisan suppliers such as Neal’s Yard Dairy, which provides the cheese for the croque monsieur.
In the new year, there are plans to introduce a vegan afternoon tea, more premium teas and coffees, and to test an online cake ordering system with Deliveroo.
Peretti says the problems under the previous regime ran deep. The chain was making a loss on its cakes, which account for 40% of sales. It also made “virtually no money at all” from cake counters in Sainsbury’s, which were closed down when the company collapsed.
Cafe managers were not told how much profit their store made and many have been shocked to discover their outlet was loss-making. Despite the losses, Peretti says many were earning regular bonuses based on sales.
Since Causeway took control, it has also closed four of the group’s bakeries.
Cafe chefs now add fruit and other finishing touches to patisserie products to ensure freshness and efficiency. The cafes are also making more fresh dishes to order, rather than warming up ready-made dishes delivered by suppliers.
The changes have cut costs and improved quality, says Peretti. Time and cash have been invested in staff training, but he is hoping the alterations will help attract and keep good employees.
“Making more stuff in the kitchens can help attract people that take real pride. It’s hard to take pride when taking something out of the freezer and putting it in the microwave,” he says.