Oliver Meakin seems to be in good spirits, all things considered. As CEO of Gaucho Restaurant Group the business he runs is currently in administration and seeking a buyer having just undergone a messy divorce from its loss-making sister brand Cau. Yet he is sitting in Gaucho’s capacious Piccadilly restaurant with a smile on his face - part of a charm offensive to show that the Gaucho brand is still very much alive and kicking.
Given the recent response of a taxi driver who informed Meakin that the Gaucho he wanted to lunch at was closed, it is unsurprising. The steakhouse chain has held the headlines for the past few months with readers following the saga of its unsuccessful sale and then slip into administration, with the performance of Cau making for grim reading and its association with Gaucho tainting the steakhouse brand.
And yet for Gaucho it is ”business as usual” insists Meakin, who is keen to distance its parent brand from the woes of Cau.
Problems with Cau
So how did we get here? Cau launched as a more casual offshoot of the Gaucho brand in Amsterdam in 2010, before making its UK debut in Guildford in 2011. Created as a more casual, affordable version of the steakhouse brand it featured a Buenos Aires-inspired menu that went beyond steaks with sandwiches, burgers and even pasta on the menu, served in a dining environment that featured ‘grass’ walls, white PVC banquettes and ceilings painted to look like the sky.
In a statement, administrator Deloitte said that Cau had “struggled in the oversupplied casual dining sector with rapid over-expansion, poor site selection, onerous lease arrangements and a fundamentally poor guest proposition”. Is this something that Meakin agrees with?
“Operationally Cau was well run, it had good teams, but the fundamental problem was its proposition, which the consumer didn’t get,” he says. “It didn’t resonate with them, particularly in a market that has had a lot of brands flood into the casual dining space. It lacked identity from the offset."
Meakin, who replaced Zeev Godik as CEO at the start of the year, isn’t entirely new to the steakhouse category, having previously worked at Miller & Carter. Thanks to his most recent job as CEO of electronics retailer Maplin he also isn’t a stranger to the current tough operating climate affecting the high street (Maplin closed its final store six months after his departure).
“My fundamental view is that the proposition [of Cau] was confusing for guests,” he adds. “On the one hand you have a restaurant fit out with white corrugated iron, pictures of clouds on the ceiling and grass on walls and hosts and hostesses running around in t-shirts and trainers, which gave the impressive of an Argentinean Wahaca - more fast casual with send per head of £12-£15 with customers in and out in 45 minutes.
"And yet at its core it had really good beef, and that became a bit confusing when people walked in expecting one thing and got something else.
"Those expecting a fast casual experience thought it was expensive, those who wanted a good steak didn’t want to sit in that environment.”
The administration process
In July this year Gaucho group looked to find a buyer for both its Gaucho and Cau restaurants with the company at risk of falling into administration if unable to secure a sale to cover an unpaid tax bill, reported to be £1m. According to Meakin, the company ran a sale process which saw talks of around 20 interested parties, with it receiving around 10 offers of varying values and combinations.
“There was a huge appetite for people to get their hands on Gaucho but not Cau,” he says. “We went through a sale process but the offers on the table were presented to the lenders and deemed not to be sufficient - we had no choice but to put down notice of intent to appoint administrators because there was no prospect of a solvent sale of the business.”
The company couldn’t have sold or closed Cau without going into administration because of the lease arrangements of its 22 restaurants. “The reason why Gaucho has been caught up in this is that the leases for 22 restaurants were guaranteed by Gaucho. We couldn’t say ‘Cau isn’t performing, let’s put it into administration or through a CVA’ because all the landlords would give the leases to Gaucho.
"Given the level of debt we couldn’t take on the lease obligations of the Caus. That’s why we had to go through the sale process and why it’s been difficult because of the interconnectedness between Cau and Gaucho.”
Cau ceased trading on 19 July, with the loss of 540 jobs, when Gaucho went into administration. A bidding process for Gaucho has since begun, with serial entrepreneur Luke Johnson - a former chairman of Gaucho - US buyout firm Carlyle and UK investor Aurelius Equity Opportunities among the rumoured interested parties. According to Deloitte, the sales process is likely to be concluded within two to three weeks.
Meakin is bullish about the sales process, and about Gaucho’s future. Described by Deloitte as a brand that “continues to trade well in its market segment, is profitable and has a strong underlying brand and guest loyalty,” he is confident about finding a buyer for the business and of its future success.
The future of Gaucho
Without knowing who Gaucho’s new owners will be it is difficult for the company to make any concrete future plans. Nevertheless, Meakin does outline where he sees growth for the company as it approaches its quarter century.
Being unshackled from a loss-making brand, he argues, will make Gaucho a stronger and more efficient performer in the coming years.
“In 2016 the business spend £9m on opening seven Caus, but the like for likes were negative 6%. We have opened Gauchos in Birmingham and Edinburgh which are making money, so why wouldn’t we spend more on opening more Gauchos?
“Gaucho makes good money. It’s got great heritage and longevity (it turns 25 next year) and has some fantastic and iconic sites around London and the UK.
“Taking away Cau will enable the management team to focus exclusively on Gaucho and invest in the brand and the business.”
Meakin believes there is scope for another six to eight Gauchos in the UK - the only former Cau site it is interested in is in Liverpool - with other locations mooted including Newcastle, Glasgow, Cardiff and Dublin. He also says there are a few more London locations in which Gaucho could work, such as Notting Hill, Holland Park and Battersea.
It is outside the UK, however, where bigger growth opportunities lie, with western Europe a target. Gaucho’s beef supplier exports 90% of its meat into Germany, so cities including Berlin and Frankfurt seem to be a no-brainer for Meakin, as well as places such as Madrid and Barcelona.
Beyond Europe, Meakin says he wants to build relationships with hotel groups in the Far East for Gaucho to become their F&B offer. “If you look at the Gaucho model in terms of the margin it generates, that margin before rent it is a pretty healthy EBITDAR (earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs), which makes it an attractive proposition for a hotel group. They’ve got the real estate, they are paying the rent so they want to put in a proposition to drive a healthy margin.”
Gaucho also operates restaurants in Dubai and Hong Kong and Meakin says he would look to do more franchise restaurants in the Middle East and Far East.
In the short term, however, it is all about showing customers that the Gaucho brand isn’t going anywhere. “We remain in a very strong place,” insists Meakin. “It is very much business at usual.”
A longer version of this article will appear in the September issue of Restaurant magazine, the leading title for the UK's restaurant industry. For more features, comment, interviews and in-depth analysis of the restaurant sector subscribe to Restaurant magazine here