FT

Source: FT
Publication Date: 08 Oct 05
Last Updated: 07 Oct 05
Author: Nick Lander

When I finally caught up with Graeme Wait, he was carrying the tools of his trade, a briefcase and his motorcycle jacket and helmet, and he was standing in a typical location outside one of the 33 restaurants he has opened in the UK for the wagamama group alone over the past decade.
But Wait is not a chef or a restaurateur. He is, rather, an extremely knowledgeable individual who is bringing to the increasingly competitive restaurant business his grasp of the property world, knowledge which can easily tip the balance between success and failure.

As we slid on to the benches at wagamama, one of the successful chain of noodle restaurants recently opened on the new Festival Riverside by Hungerford Bridge (to which I should say that I am a consultant), Wait explained that while there were several agencies which specialise in trading restaurant properties and that he had one or two individual competitors, no-one performs quite the same role as he has done for wagamama.

I asked him to describe exactly what he does  for wagamama particularly but also in the past for Harvey Nichols restaurants, Planet Organic and Party Ingredients. “My generic role has been growing young restaurant businesses, in more prosaic terms designing and implementing a property acquisition strategy mainly for wagamama although I have worked for a number of other restaurant groups too. But where I am different from other agents, I believe, is that I am involved from the very beginning, from the finding of what we hope will be the right location to the opening. Along the way, a process that on average takes a couple of years but can easily take three or four if we are to be part of a new development I oversee all the practical and legal negotiations with the landlords and all the statutory bodies, I make sure that all the leases and agreements are signed and then, most importantly, I ensure that we open on time. It’s very exciting but it can be equally frustrating.”

Wait, an apparently youthful 53 thanks to his passions for skiing and surfing, initially spent 25 years as a chartered surveyor, a period which has imbued him with a particular perspective on how restaurants fit into the British property sector. “There is no question that restaurants are at the top end of the difficult scale because today they have to be sophisticated animals that incorporate air-conditioning, ventilation, drainage and disabled access. And most of the UK’s property stock has not been built to accommodate them easily. It’s either historic or built specifically for retail which means simply four walls. And when it is a new build most developers under-specify, sadly.”

To outline this point, Wait looked around the crowded restaurant. “Our minimum requirement is for a site that can fit 110 seats which requires a capital investment of £1.5 million. But although 40 per cent of the space is the kitchens and back of house that part takes up probably 60 per cent of the capital cost. And these monsters have to be built to last – our busiest site, for example, serves over 10,000 customers a week and we want to trade every day of the week from midday to 11pm.”

And to achieve this optimum level of business they have to open in the right location. “What we are always looking for, whether in a town or in a London village, is a micro-location where our potential customers live, work, shop and will want to go out and eat seven days a week, lunch and dinner. In age terms wagamama’s customers form a broad church but they are definitely those who appreciate that a bowl of noodles is a healthy alternative to a sandwich. And we don’t want to be in an area that is too heavily skewed towards night time drinking. This site here hit all the right buttons even though there is no shopping along the South Bank because instead it is an area where people spend a lot of leisure time.

“But I have walked away from a lot of potentially good sites,” Wait added, “because the rents were just too high. The telling question is can the restaurant sustain the rent through the troughs? It is sad to see sites which I turned down offered back to me because the restaurateur who took it on eventually discovered that they could not make it.”

If finding the right site at the right price is the skill which underpins the business plan of so many successful restaurant groups, Wait also believes that for the growing number of restaurant groups their property portfolio is their second most important asset after the balance sheet. “Obviously, the lease is any restaurant’s longest term commitment. You can do a deal with a company to supply you with beer or water for a year but a property lease is for 20 or 25 years. But if you need extra financing it is the property portfolio that the bankers will want to look at first and if they discover that there is anything untoward in there they’ll skin you. Your deals on the property portfolio are the key to any restaurant group’s long term financial health.

“And I think that the key to achieving this is just being accurate.” Wait added. “There are a huge number of details in any restaurant lease and very often a lot just get swept under the carpet so that the lease can get signed quickly. That’s not my style. I know of one successful restaurant company that was almost forced into bankruptcy because it signed a lease on the assumption that it could build new drains for the kitchen but then discovered that it could not and another that had signed their lease and then applied for their electricity supply only to be told that there was no spare capacity on the grid. And as the number of restaurants increase they are putting an increasingly big strain on London’s rather old infrastructure. I simply won’t accept any landlord’s assurance that I will be able to secure the gas, water or electricity that I know one of my restaurants will need without their written assurance that this is the case. Even simple upgrades can take months and cost thousands of pounds.”  

Instead, a small bill for £25 appeared for lunch and then two 53 year olds tried to extricate themselves from wagamama’s benches as gracefully as possible. Wait promptly donned his motorcycle gear and headed off to look at yet another possible site.