Pash and executive chef Neil Perry want Rockpool Bar & Grill to open overseas, most likely in a large Asian city where the restaurant can generate $20 million to $25 million revenue a year. “It’s very hard to do the quality of food that we do at that kind of turnover. And that’s what we are best at.”
But it’s The Bavarian, home of the meatball-loaded schnitzel, kids-eat-free-Sundays and litre boots of beer, that is is at the centre of the group’s growth strategy.
‘A little lewd and crude’
Two years ago, the group had seven Bavarians. Now, there are 25. And Pash says they can do at least another 100 in Australia. But the opportunity is really offshore, he believes, particularly in the US where he wants to roll out 400.
“It was a little lewd and crude, and we’ve kind of modernised the look, the design and the menu … we made it more just a great casual dining, a bit like an Aussie pub, and we made it a bit more family friendly. We’re really excited about the brand,” he says.
In terms of profits, Pash says Bavarians are world leaders. Each restaurant costs about $2 million – of which the landlord usually kicks in about $1 million – and they pay for themselves in a year, with a 50-50 food-drink split. Typically, restaurant paybacks are between two and five years, he says
Of the estimated $400 million in revenue the group is targeting for this financial year, about $170 million will be generated by Bavarians, which also includes the Munich and Bavarian Beerhaus brands.
The winning, scalable formula of steins and schnitzels has also catapulted Rockpool Dining to the position of the country’s second or third biggest beer buyer, behind Woolworths’ ALH Group which operates 300 pubs.
And the success of the Bavarian formula will go a long way to countering critics who question how the Rockpool Dining business will scale and deliver growth.
But running the country’s largest restaurant group hasn’t all been big wins. Pash’s bold plan for a $1 billion listing by 2019 looks ambitious, though he’s not backing away from getting to that level.
‘We’re better for it’
The Rockpool chain was among the first of the big restaurant groups to be called out for underpaying employees. Pash says Rockpool has improved its systems, and will soon pay back any employee underpaid while working at any of their restaurants during the past five years.
“There were substantial costs and substantial disruption to the business, but we’re better for it,” Pash says. Perry picks up the theme, noting the whole industry has been out of step with the award.
There were also concepts that didn’t work. One example is Sake Junior, which was aiming to deliver a cheaper take on the upmarket restaurant in food courts. Pash says ultimately, the brand couldn’t deliver the quality it needed at a $15 price point. Apart from Fratelli’s build-your-own pizza in malls, there doesn’t appear to be a lot of brand extension going on, though there are plans to open up more Rockpool bars.
Perry, who is effectively in charge of making sure the food quality doesn’t drop as the business scales up, says in the past six months, the company has finally ironed out the kinks.
The three restaurant groups (Urban Purveyor, Fratelli and Rockpool) have managed to integrate their systems – that’s everything from customer relationship management to waste disposal to payroll and dealing with fruit and vegetable suppliers – and more.
It’s allowed the group to collect some interesting data: 70 per cent of the group’s bookings are done online, up from 15 per cent in 2016; and a typical customer eats at a Rockpool-owned brand anywhere between three and seven times a month, which is in line with industry leaders like Starbucks, Darden Restaurants and Landry’s Hospitality.
Slower spending fears
With new openings, the sales and earnings before interest, tax, depreciation and amortisation run rate at the end of FY18-19 is expected to be in the range of $400 million and $45 million to $50 million respectively. Pash says the group expects sales and EBITDA growth of between 25 per cent to 30 per cent year on year over the next five years fuelled by opening 20 restaurants each year, and growth in the existing ones.
That compares to $150 million in top-line turnover when Pash joined the business, and $16 million EBITDA when it was just the Urban Purveyor Group.
Despite predictions of slowing consumer spending, the group notched up record December sales of $43 million. The company says like-for-like sales across long-standing, core, growth brands (that’s Rockpool Bar & Grill, Sake Restaurant & Bar, The Bavarian, El Camino and Fratelli Fresh) remain positive year to date, up 3.4 per cent for core venues and 2.2 per cent for the group.
This year’s plans to roll out more restaurants are aggressive: another 17 Bavarian restaurants this year, which will include entering the New Zealand market for the first time, and up to four El Camino Cantinas. The group is also promising more premium restaurant concepts in Queensland and Victoria.
But beyond New Zealand, the direction the group’s offshore ambitions take will be largely dependent on the outcome of the strategic review.
And what about the feared downturn in consumer spending? How does Pash believe that will hurt the group?
“If there is a downturn, the economy here is strong and robust,” Pash says. “We believe customers will always fly to value, whether premium or casual. We have to make sure we take our game up – great service, great quality and great value.”