D&D London has ambitious expansion plans in spite of the troubled economy. Its chairman (Des Gunewardena)and managing director (David Loewi) explain how they`re weathering the storm.
Des Gunewardena, chairman and chief executive of D&D London, is talking about hugging. Hugging customers, no less. Specifically, he’s referring to an article in the New York Times, in which critic Frank Bruni described the change in attitude of restaurateurs as they seek to woo the customer in these troubled times.
“They’ve seldom wanted you so bad, so they’ve rarely treated you so good,” writes Bruni, as he explains the concept of ‘hugging the customer’.
That change in attitude, agrees Gunewardena, is noticeable. “Service in New York is fantastic because they’re so keen to keep their customers,” he says. While he and D&D’s managing director David Loewi aren’t asking their managers to hug their customers – at least not in the physical sense – they are emphasising the importance of great service.
“We’re saying to our managers you have got to up your game now because it’s a tougher environment and it’s about getting people to come to your restaurant rather than somebody else’s,” Gunewardena explains.
Arguably the most successful fine dining company in the UK (it was sixth in our R100 list last year and currently has a turnover of around £75m), D&D London emerged in 2006 as the reincarnation of Conran Restaurants, with Des and David (hence D&D) at the helm, but with Conran Holdings retaining a 51 per cent stake in the business.
With a portfolio of 30 fine dining restaurants, D&D finds itself at the more vulnerable end of the restaurant scale regarding the effects of the recession, something both Gunewardena and Loewi are acutely aware of. “The top-end is the hardest hit, of course,” says Gunewardena. “The £10-15 a head market, that’s where people seem to be doing quite well. Of course our market is going to suffer more, but that doesn’t mean the very good restaurants won’t thrive. In a downturn, you have a flight to value and a flight to quality. Good restaurants will continue to do well.”
D&D’s big-hitting restaurants seem to bear this out: its upper quartile – the top-performing 25 per cent of restaurants within its portfolio, places like Launceston Place, Skylon and Bluebird – are ahead of last year. But overall, the company’s turnover has dropped 10 per cent since the credit crunch began to take its toll back in September. “We think it could get worse before it gets better,” adds Gunewardena candidly. “And all our plans are for it to get worse. But we’re hoping it won’t.”
To combat the downturn, Gunewardena and Loewi have adopted a two-pronged approach: cutting costs and improving the restaurants. “It’s quite difficult to do both,” admits Gunewardena, “but I think we’re doing okay on that front, and as a result we’re holding our turnover a little bit better than some other restaurants.”
In terms of cost-cutting, they’ve worked hard at becoming more efficient in every area of the business. And in terms of the restaurant experience, along with a focus on service, they’ve looked carefully at offering value for money in each of their sites. “This isn’t a mild downturn, this is a recession,” says Gunewardena. “So it’s very important to examine your business from the top to the bottom to make sure your business model works, that you’re giving the customer what he wants at the price he wants and that you can make a profit at the end of it. It’s been a good exercise for us because we’re looking slightly more dispassionately and more radically at what we’re doing, and our managers are doing that too.”
As a result, they’ve adjusted menus and pricing across the board – but these are tweaks rather than huge changes. Unlike some restaurant groups, D&D is in the enviable position of having every one of its sites profitable. “So we haven’t had to completely re-invent anything,” explains Gunewardena. “But we will re-invent things if we have to; if things get much worse.”
So far though, as everyone in London’s restaurant land knows, footfall is generally holding up. But it’s the corporate spend, or lack of it, where fine dining has felt the pinch. “Corporates have cut back sharply,” agrees Gunewardena. “But in terms of people going out and spending their own money, that’s been quite resilient.”
Two things have characterised D&D since its inception: firstly, its commitment to quality food, evident in the small army of top-class chefs it’s attracted to its ranks, stars such as Tristan Welch, Lee Bennett, Helena Puolakka and Brian Fantoni to name but a few; and secondly, its ambitious expansion plans, both in the UK and abroad. In the UK, it opened Skylon, acquired Image Restaurants, relaunched Launceston Place (previously owned by Image) and co-opened The Modern Pantry with chef Anna Hansen. Abroad, it opened three restaurants in Copenhagen and two in Tokyo (to add to one in Paris and one in New York).
Expansion has been financed by profits generated from the business. “We’ve got no more debt than when we acquired the business,” says Gunewardena. “And that’s how we’ll continue.”
As yet, the downturn has yet to get in the way of further expansion. There’s a site in The Cube development in Birmingham set to open next year and, as Restaurant reported in April, D&D has entered into a joint 50-50 venture with a Malaysian company to build a number of restaurants in Malaysia, Singapore and Thailand over the next few years. The venture’s first project will open in Kuala Lumpur early next year.
Gunewardena also has his sights set on opening a group of restaurants in the Middle East. “We’re absolutely out there looking for more opportunities, with the proviso that we’re sensible businessmen and we won’t jump and spend huge amounts of money until we have a fairly clear view of where the economy is going,” he says.
And ultimately it’s their emphasis on the smaller picture – the scrutiny of each restaurant, the driving out of costs, the commitment to “making sure our customers enjoy themselves” – that will continue to underpin D&D’s growth.