Yahoo Finance ‘We secretly raised our wages and pinched our rivals’ best staff’
“Franco Manca is not cool anymore,” admits David Page. As chairman of the pizza chain’s parent company, Fulham Shore, it is surprisingly candid.
Years ago, the pizza restaurants were a favourite haunt of South London hipsters. “There’s a cachet that comes with being a small business with only a few stores,” he says. “But I’m afraid the people of Peterborough, Kingston and Canterbury wouldn’t buy into this idea that we need to keep it small. They’re pleased we’ve opened stores there. Because what we’re selling is just very nice pizza, even if the restaurant has stopped being cool.”
Page is speaking as Fulham Shore embarks on a major expansion - not just of the Franco Manca chain but also its The Real Greek restaurants - buoyed by stellar sales which have yet to show signs of the cost of living downturn.
From a current estate of 66 Franco Manca sites and 23 The Real Greek restaurants, Page says there is significant headroom. The plan is to eventually have a total of 250 restaurants in the UK across both lines, with the majority - around 180 - as Franco Manca.
Here, the 70-year-old has bags of experience. In the 1980s and 1990s, the industry veteran was part of the key team which took Pizza Express from a handful of branches to around 300 restaurants. Having originally started as a dish washer in 1973, in the kitchen of the Wimbledon High Street branch, Page went on to become chief executive and chairman of the company, before leaving in 2003.
“The whole market was different because there was less competition back then,” Page explains. “I think, now, 200 is the maximum you can open in the UK because it is so much more crowded.”
It is a theory not every restaurant chain abides by. Pizza Express, for instance, still has more than 350 restaurants in the UK. “Obviously in my opinion, that may be too much,” Page says.
He thinks many chains “should have been bolder” in recent restructurings amid the pandemic, arguing some should have doubled how many restaurants they shuttered.
The point, he says, is that the property market is the best it’s ever been. Recent changes in planning rules mean restaurants can easily find former retail sites, vacated during the pandemic downturn - a step which has “cut the legs away from the landlord’s values on rents”.
“Once you’ve come back to your core business, now you could start expanding again and those sites will be a third of the rent of the ones you lost in the CVA [company voluntary arrangement]. But I’m not here to tell other people how to run their business,” Page shrugs.
He treads carefully over criticising Pizza Express directly. While the entire hospitality sector faced a financial blow during the pandemic, Pizza Express was already under pressure, struggling to meet interest costs on its £1.1bn debt pile. It slashed 2,400 jobs in 2020.
Still, for now, the situation at Page’s former employer appears to be benefiting his new venture. “We have just gone into a site that was a very high-earning Pizza Express which I opened 25 years ago. They did their CVA and they tried to reduce the rent, and the landlady, I’ve known her for 25 years, rang me up and said….” Page adopts a high-pitched Scottish accent. “‘David, would you like to take over the Pizza Express site?’ And I went, ‘yes please’,” he laughs.
Pizza Express was told its lease had come to an end and Franco Manca was moving into the site. “We’ve actually offered on three or four other Pizza Express sites.”
Page says there are “so many sites available” that only once has Fulham Shore faced any competition from a rival restaurant business for a property. In others, it is getting the property for much less: “In Kingston, in the old Oasis, we’re paying half the rent they did. And so, when utilities go up, we can afford it because the rents are much lower.”
But as costs soar, utilities are hard to keep a cap on at the moment, he says, while labour costs have been on the rise, as a talent squeeze rips across the UK.
Fulham Shore secretly put wages up 25pc late last year, after having struggled to open all its restaurants in the autumn. “Guess what, within a month or two, we had enough people and we’d made our competitors really cross. We pinched all their best staff,” Page grins.
Despite this, talent remains tight as other restaurant groups embark on major expansion drives - names such as Rosa’s Thai and Pho. It is, Page admits, “a very crowded market”, one which not only makes it tougher to recruit but can be difficult to get customers to keep spending. “People have massive choice - anybody selling food between £10 and £20 is a competitor.”
With other pizza chains having struggled, including Jamie’s Italian and Prezzo, it is easy to assume that perhaps Britain has simply fallen out of love with pizza. “It’s funny, when I got involved with pizzas in 1973, my father said it was just a fad. But now, it is still one of the most popular foods on the planet.”
However, pricing is key, Page says: “You just have to keep your head above water and try to keep prices as low as possible.”
For Fulham Shore, it is a strategy that seems to be paying off, with sales more than doubling in the past year to £82m and the company back in profit. But, so far, that has not been reflected in its share price, which is down 34pc since its September 2021 high.
Talk of a potential takeover of the business is shrugged off by Page. Would he sell? “Not at the price the stock is currently at. Of course, we’re a public company, so people can buy shares whenever they like.”
Fulham Shore is not alone in facing a dip in shares, amid anxiety across the hospitality industry. The recent hike in National Insurance and return to pre-pandemic levels of VAT are weighing on many smaller operators.
“We’re one of the successful companies at the moment, so with VAT, I’m not as exercised about it as other people. But obviously, parts of the industry have a much worse time,” Page says. “I can see where [Wetherspoons chairman] Tim Martin is coming from. His view that you can buy beer cheaper at a supermarket is right, and it’s outrageous that supermarkets are not penalised like pubs are.”
It is something that could soon change, depending on whether Rishi Sunak or Liz Truss is successful in their Conservative leadership race. Page shies away from throwing his support behind either candidate, although he says Sunak’s team recently got in touch to hold an industry roundtable at a Franco Manca restaurant.
“We had a chat about football. He was absolutely charming - not that I’ve ever voted Conservative in 70 years, mind you I’ve never voted Labour either,” he guffaws. “Am I allowed to say that?”
With his own race on, to expand at pace and find the best sites, it seems Page has little time to mess around. “We get letters from people in Watford saying, ‘what’s wrong with Watford?’, people in Reading, saying ‘what’s wrong with Reading?’. Our response is, ‘OK. Find us a site’.”
