Why has the City become such a vibrant restaurant destination? It’s two things, says Des Gunewardena, chairman and chief executive of D&D London, owner of such Square Mile stalwarts as Coq D’Argent, South Place Hotel, the Paternoster Chop House, and Madison.
“A lot of people have started living in East London rather than West and the nature of the City itself has changed. In the old days, when property agents called me and suggested opening in the City, I thought ‘why would we want to do that?’ Everyone went to work in the City, and then they went home to wherever they lived or they’d go to the West End for dinner. But after we opened Coq D’Argent, we started to see that the City was changing. It’s not like Wall Street. The City’s about play as well as work and is now as busy in the evenings as it is during the day.”
Putting money behind the changing shape of the capital has been good business for D&D, which has a portfolio of restaurants in London, Leeds, and further afield. Revenues grew 13 per cent in the year to March 2015 to £105m, and rose again in the year to March 2016. New restaurant openings have continued, most recently German Gymnasium, which offers mid-European cuisine in a vast converted Victorian building in King’s Cross. It’s what Gunewardena describes as “an absolutely classic D&D venue – wonderful building, very busy, very glamorous. It looks very different from something we would have done 20 years ago, but it’s from the same mould”.
Building on heritage
For D&D has heritage. Originally part of Sir Terence Conran’s Conran Group, then-chief executive Gunewardena and managing director David Loewi spun-out the restaurant business in 2006 with support from Caird Capital (although Sir Terence retained a stake). Gunewardena is keen to point out that D&D is leveraging its Conran legacy (“glamorous dining rooms, beautiful designs”) to create new trends in eating out.
London has definitively shirked its reputation as having “the worst food in Europe apart from the Finns” (Jacques Chirac’s memorable accusation). This has driven a virtuous circle of more people eating out, more restaurants opening to serve them, and rising quality. Even going to higher-end restaurants “has become part of everyday culture. It’s not just something you do a couple of times a year, but once a month or even weekly.”
Eating out has also become a social activity. “When I was a 20 year old and went out to meet friends, we’d generally go to bars and pubs. Now increasingly young people go to restaurants.” In fact, says Gunewardena, D&D can be credited as being one of the originators of this trend when it relaunched Quaglino’s in 1993. “The thing about that restaurant was that you could go there for your birthday or equally just to meet a friend for a quick dinner after work. It was always busy and buzzy. It had that Parisian populist feel – you could go in a T-shirt if you wished. Before then, you ate in restaurants and it was all terribly formal. What we’ve seen is the democratisation of the restaurant.”
With the market buoyed by resilient consumer spending and helpful secular trends, D&D continued investing through the downturn and, in April 2013, LDC backed a £50m management buy-out of Sir Terence and Caird. The strategy now, says Gunewardena, is to build a platform for longer-term growth. “In the period up to 2013, we refocused the business on London, our heartland and where we were most comfortable investing post the 2008 recession. But we’ve had a different approach over the last few years. While our main business will continue to be creating landmark restaurants in London, I don’t know if you can be a £500m turnover business just by opening restaurants in London.”
Hotels is one area he’s targeting. South Place near Liverpool Street station is a five-star luxury hotel, with two restaurants (3 South Place Restaurant and the Michelin-starred Angler) and a bar, which D&D opened in 2012. “We originally got into hotels when we were Conran. In fact, the single most successful investment we made was the Great Eastern – we turned £25m equity into £100m out of that single asset... Having gone back into hotels with South Place, seeing that we’ve been able to create a product that people like has given us another avenue for growth.”
Another is to expand regionally. D&D already has Crafthouse and Angelica in the Trinity Centre in Leeds, after Land Securities approached Gunewardena and his team about opening up there. “We weren’t thinking about opening in Leeds, but the opportunity came to us. We managed to collaborate with Land Securities in constructing a deal such that the economics made sense to us, even if the restaurant wasn’t going to be as high grossing as similar venues in London. There’s more spending power in London, you see, and London is more of a seven days a week eating out market than regional cities.”
But the Leeds operations were more successful than Gunewardena anticipated. “On the back of that, we thought if we’ve been successful in Leeds, where there are lots of bankers and lawyers and accountants, customers that we know, why not Manchester, Glasgow, Birmingham?”
D&D has four restaurants outside the UK, and has plans to expand into the Middle East in the near future. But Gunewardena is clear that London will remain the core of the business, with a new eaterie set to open in Victoria later this year in the Nova restaurant quarter. The business has also completed a significant refurbishment programme for some of its venues.
Perhaps unsurprisingly for someone who has been at the helm of the company for over 20 years, future growth will not be driven by a radical departure from what has worked for D&D in the past. “What I’d like is to really use the momentum that we’ve now got... a continuation of the success of the past five years, to become a bigger, more diversified business.”