We meet the ever-outspoken former Channel 4 chairman, investor and restaurateur
Luke Johnson is known for coming out with salacious soundbites. He famously decried Google as โmonstrousโ and seems to relish now telling me itโs a โparasiteโ.
He also thinks the dominance of Apple, Amazon and co is โunhealthyโ, because these tech giants are โvery good at not paying much in the way of tax locally, and actually they donโt employ that many people locally either, relatively speakingโ.
Well, you can say that again โ news broke on Wednesday that Expert advises Brits of upcoming โpayments on accountโ deadline to avoid a 7.5% HMRC interest charge.
What else? โWhen [Brits] go on holiday they contribute to the trade deficit,โ says the former Channel 4 chairman, investor and entrepreneur. โIf the French holidayed abroad as much as us theyโd have a huge trade deficit, much bigger than ours.โ
He is defending the hospitality industry, which he feels people โtotally underappreciateโ. (He was and is prolifically involved with restaurants and food, having built Pizza Expressโ share price from 40p to 900p in six years, and founding then selling Strada for ยฃ60m.)
VAT on hospitality and leisure needs to be cut, he says.
As for the Office of Fair Trading, โas it happens, I donโt think thatโs a well-run organisation โ Iโm glad the man that was running that is leaving.โ
Harsh? Maybe. But Johnson, in his early 50s and dressed in a purple polo shirt and brown khakis that crumple over his slight frame, is not the type of entrepreneur who feels it necessary to radiate sunbeams of unerring enthusiasm and joy in a bid to enchant everyone else. Heโs notoriously a rather unnerving character, not only because of his commercial prowess but because he can come across as distinctly frosty. When I suggest there is a snobbishness among university-leavers about working in entry-level hospitality and leisure jobs, he retorts: โShould they be journalists on online websites?โ At other points heโs warmer, but never quite reaches the point of full-throttle friendliness.
The roll-call of his past business achievements is far too long for one paragraph: as well as restaurants and media, he founded Dental Holdings, which he sold for ยฃ100m within 10 years; is non-exec director of Metro Bank; and has/had a vast swath of stakes in businesses as diverse as greyhound racing (GRA) and Topps Tiles.
Food is his big thing though, along with media. As founder and chairman of private equity firm Risk Capital Partners, he is part-owner of Giraffe, Patisserie Valerie and a spread of other food-related companies.
He laments that the British attitude to the restaurant and hospitality sectors isnโt more like โin France, and to a degree Spain and Italy โ they have a tradition of it being a long-term career and itโs taken rather more seriouslyโ. He says it is getting better here, but still โambitious, clever people miss that itโs a great way to run your own business. [โฆ] Thereโs always innovation, thereโs always room for new players to come along.
โLondon is the quarter of all that inventiveness, where 95% of all the new ideas and the clever, fresh brands come from. The different cuisines, the original offerings, are independent. Theyโre not corporates or groups [which are] generally hopeless at coming up with the new ideas.โ
โThereโs a wall of money out there.โ How do people get their hands on it then? โHave a compelling proposition.โ Right.
His unwavering belief that โanyone with some fire in their belly and some nous can run their own businessโ would perhaps feel a tad more inspiring if delivered with more enthusiasm, but I actually quite like the fact he doesnโt over-egg recipes such as: โFor those who want the independence and the freedom of doing their own thing, delaying it [because of the economic climate], waiting for the perfect situation, is not realistic. I think they should get stuck in, make it work, and move on if they pick the wrong opportunity.โ
But does he really think the pace of growth he achieved with Strada and Pizza Express is achievable in todayโs climate? โWhy not?โ Well, thereโs no finance around for a start. โThatโs rubbish. Thereโs a wall of money out there.โ How do people get their hands on it then? โHave a compelling proposition.โ Right.
โVenture capital is quite scarce, but Britain is awash with private equity. Admittedly your companyโs got to be of a certain scale before you raise that kind of capital, but, like I say, itโs not easy and it never has been.โ
Johnson actually does make it sound misleadingly easy, sounding blasรฉ about how he grew Pizza Express from 12 to 250 branches in six years, and Strada from scratch to 30 units in the same length of time: โIn the first year you open a few branches, next year five or six, then 10 then next year, then 12.
โYou gradually recruit good people,โ he explains, reeling off the list of key characters, โideally promoting from within if possible so youโve got talent who understand the business and are loyal.โ
Johnson clearly has an innate grasp of business, but he studies hard too โ no doubt a trait picked up from studying medicine at Oxford, where running club nights gave him the taste for entrepreneurialism. Heโs got at least 200 of his business books lining the room weโre in, โand theyโre only a fraction of my books. Iโve got several more bookshelves in the rest of the offices, and many, many, many more business books at home.โ
โIf youโre exiting, thereโs an awful lot of private equity houses out there who will want to invest.โ
But no amount of swotting up can fully safeguard you from setbacks. โEach location I ever open is a gamble. [โฆ] Iโve opened loads and loads and you never know which are going to be the winners and which are going to disappoint. Itโs part of the excitement of it.โ
When it comes to expansion, โYou probably want, in my experience, to grow as fast as you reasonably can without falling over.โ Warning signs of over-expansion are quality standards falling, and new outlets failing to perform. โYouโve got to have controls of cash and youโve got to have proper reporting of the numbers,โ he advises.
โThere will always be moments of chaos [โฆ] but you need a sufficient critical mass in the centre thatโs highly profitable and working well before you start, you know, going mad, opening up everywhere. Quite often people get excited and blow their brains out.โ
As for the companies he invests in through Risk Capital Partners, weโre talking businesses turning over less than ยฃ50m, with ยฃ3m-ยฃ5m profit, and, of course, great growth prospects. He likes โcomplicated or messy circumstancesโ where there is some kind of problem to be unravelled, some potential to be unlocked using the contacts or expertise of him and his partners. โThat helps secure the deal, if you like.
โIf youโre just another provider of capital then youโre the same as everyone else, then youโre a commodity.โ He would rather โadd some value, help make a differenceโ.
Returns have been longer since recessions version one and two. But, as most in the space seem to agree, thereโs large demand for good businesses. โIf youโre exiting, thereโs an awful lot of private equity houses out there who will want to invest. But theyโre finding it very difficult to deploy money because an awful lot of companies have blotted their copy book in the sense that, you know, theyโve had hiccups [in growth].
โSo I think itโll take a year or two more of recovery for businesses that have suffered in the downturn to resume their progress.โ
Short supply is also pushing prices up on the acquisition side. โWe go into an auction to buy a business, and if it has highly-regarded management, and wonderfu
l track record growth and lots of great prospects, then prices are normally too rich for us.โ
Floating rather than selling is not the option it once was for companies looking to exit. โWhen I was younger companies went public. Hardly anyone goes public now. The stock markets are moribund. And I think itโs a great shame. But itโs too expensive, itโs too highly regulated and restrictive, and there are alternative sources of capital.โ
Does Johnson buy into the argument that itโs easier to float in the US? โTheyโre more regulated there. Iโve sat on the board of an American public company and, believe me, they report quarterly there โ itโs a much more onerous regime than here. So that isnโt true. Itโs a bigger economy and theyโve got more money, so of course itโs a more popular place for IPOs.โ
Thereโs not much chance of Johnson moving Stateside though, despite the rather unexciting activity shortage here. โIt was 38 degrees yesterday in New York. Is that what you want? 38 degrees and 95% humidity. Thatโs unspeakable.โ
Besides, โLondon is arguably the greatest city on earth in terms of places to visit. We donโt have the weather, but who cares about that? And this is alright. Obviously I want some sunshine but weโre here for culture [he was appointed chairman of the RSA in 2008 and invests in theatre], for museums, theatre, music, restaurants, celebrities, history, galleries.โ
Well, thatโs something to be cheery about.
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