Gaucho spin-off CAU, after a steady start, is expanding fast. Tom Holman and Peter Martin meet managing director Graham Hall
Steak remains a staple of eating out in the UK despite all the talk of broadened culinary horizons and the vegetarian trend.
And in the snappily named CAU—Carne Argentina Unica in longhand—the Gaucho restaurant group has a brand that can take the great British favourite away from both high-end steakhouses and bottom-end pubs and drive it squarely into the mainstream.
Graham Hall, CAU’s managing director, who is leading the charge, is in appropriately bullish mood when Peach Report meets him at the group’s St Katharine Docks restaurant. Hall, in his mid-30s, is among the sector’s youngest business leaders. He graduated from university with an engineering qualification, but his heart has always been in hospitality. “It was a great degree, but engineering wasn’t something that inspired me,” he remembers. “I’d always worked in leisure—my step-father was a pub landlord and I was a pot washer at the local golf course from the age of 15.”
He worked in bars throughout his time at university and went straight back into the sector after graduating. His big break came with the Living Room, joining as it opened its fourth site in Nottingham in 2002. He grasped all the operational opportunities around the country that came with a fast-growing business, and says he learned an enormous amount from Living Ventures co-founders Tim Bacon and Jeremy Roberts. “Working there was amazing. The level of training, the leadership, the passion for the business—everything rubbed off on me.”
Hall stayed until just after the Living Room’s sale to Premium Bars & Restaurants in 2008. “The culture changed and it wasn’t for me any more,” he recalls. Next came four years at bowling brand All Star Lanes, starting from just after the economic meltdown, after which corporate business—a major component of sales—all but dried up. But new openings followed regardless, and Hall was instrumental in installing new systems into the business.
Living Room and All Star Lanes had an independent, owner-operator mentality in common which gave Hall scope to involve himself across the business, although the lack of financial firepower at All Star Lanes became an issue. “You learn so much from starting from the ground up, but after a while it starts getting frustrating without a big company behind you,” he says.
That, and a desire to enjoy the ride of another growing business, led to CAU. “I wanted to be with a company that was expanding. I love the buzz of openings and setting the style and tone of a business. This is the best of both worlds: a big company with a good covenant and the money to expand but close-knit with a family atmosphere, too.”
Premium and authentic
CAU had just three sites when Hall joined in early 2013. It is one of a crop of casual-dining brands that took a restrained approach to expansion in the early days. The first restaurant opened in Amsterdam in 2010 with Guildford following a year later, but the first few years were spent bedding in the concept. “It wasn’t a case of rushing the openings and making mistakes on the way... they [Gaucho founders Zeev and Patsy Godik] wanted to take their time and be sure they were happy with the brand.”
The Godiks were clear about what they wanted: a slice of the exploding casual-dining market to go alongside Gaucho’s upmarket operations. “Gaucho was doing incredibly well, but they knew that the model was probably a bit too large, and the spend per head a bit too high to really attack the regions. They wanted something that complemented Gaucho and could leverage off it, but that could sit in a provincial town,” Hall says.
The CAU brand has evolved and Hall admits it was “a bit starchy” at first. “We realised it had to be more relaxed and fun”. Hall believes CAU now sits in a relatively new, higher grade segment of the market. “The more aspirational side of casual dining is really coming out now. It’s making that bridge between premium restaurants like Gaucho or Hawksmoor and casual.” It shares the space with other fast-growing brands such as Wahaca, Jamie’s Italian, Cabana and Busaba Eathai. “It’s a great place to be,” Hall says.
Much of that premium appeal depends on authenticity, and Hall thinks his brand has it in spades. CAU is proud of its all-Argentinian beef, and has drawn on Gaucho’s two decades of knowledge of the country and its steak. Hall knows that it is the reputation of Gaucho as well as CAU that is at stake here. “We wouldn’t ever want people to have a lesser experience with the steaks because that reflects badly on everyone. We’ve got to keep our standards up.”
CAU’s authenticity isn’t a rigid one though, and it’s particularly inspired by Buenos Aires, where Spanish, Italian and oriental influences run through the eating-out scene. “It lets us make our menu much broader, which means we appeal to a wider market.” Specifically, it frees the brand up to move into other day-parts, like brunch and lunch, not to mention drinks.
On the march
From three restaurants a couple of years ago CAU is now up to 13, with four more on course to open before the end of the year in Bath, Didsbury, Glasgow and Salford Quays. Hall anticipates opening 8 to 10 a year for the foreseeable future, with some more international sites likely to be part of the mix.
Some industry pundits fear the casual dining sector is reaching saturation. Indeed, the Market Growth Monitor from CGA Peach and AlixPartners reveals 1,770 new restaurants have opened over the past year. But Hall doesn’t think so, pointing to spare capacity in many regions of the country. “There are still a lot of towns that are dramatically underserved—places you can go where you can’t get a decent meal in the casual environment,” he says.
London is challenging and set to become more so with changes to pay levels, but the capital will continue to grow, as will the suburbs and commuter towns as more and more people fan out of the city because of the overheated property market. “London’s not saturated and I don’t think it will be for many, many years,” Hall believes.
CAU has proved flexible on locations, with high streets, shopping centres, residential areas and mixed- use developments all part of the blend so far. It is not afraid to go a little off-piste either. “We can adapt—it makes finding property a lot easier and means the brand has a lot more longevity. We’re not in the constant bunfight with everyone trying to find the prime site and then getting shafted by landlords on rents.”
Another big challenge as CAU grows will be people. Here, it takes learnings from Gaucho’s renowned academy for staff, and invests heavily in recruitment and training. “You have to spend money and get guys in otherwise all you’ll get are transient staff who aren’t engaged,” he says.
The same sort of transience applies to customers, with CGA Peach data consistently showing how fickle they are when it comes to brands. “People go out much more so they’re loyal to more brands. You have to be cleverer about your loyalty and how you get people coming back,” says Hall.
CAU’s approach is to make a fuss of regulars, by way of a loyalty card but also by learning as much as it can about them, like their birthdays, preferred tables and favourite wines. “Loyalty’s changed, and it’s less important for the wider market. But if you do have genuine regulars, the art now is to recognise them and make them feel good.”
CAU is growing to the extent that it will overtake Gaucho in terms of restaurants by the end of this year irrespective of the challenges. Gaucho, too, will start rolling out again next year with a couple of new UK restaurants and more internationally. Hall says it remains much the bigger beast of the two.
The two concepts do not cannibalise one another, believes Hall. Instead, they work in harmony to serve different demographics and occasions. There is clear water between the two, however: Gaucho and CAU share some functions, but have their own distinct operational, training and recruitment teams and managing directors. “We see it as a group of restaurants that just happen to have two names.
We want them to be distinct but to combine that history and the core product.” But while Gaucho remains much the older and bigger sibling in the group, there is no doubt that CAU will grow up fast. “There’s a lot of scope for us,” says Hall. “To say we could get to 100 doesn’t scare us—think it can; maybe more.”
CAU, like many other casual dining brands, is rapidly evolving its drinks offer to make itself a one-stop-shop for nights out among its core 20- and 30-somethings demographic.
It now offers about a dozen cocktails and is testing a range of 25 in Liverpool. Hall says cocktail sales have jumped 20% in the past two years. The list of own-label wines is growing, too, especially those that use the Malbec grape variety. Exclusive wines cut out the middlemen and costs, and engage staff, Hall thinks.
Overall, CAU’s food-to-drink ratio is now about 70:30, but Hall sees that narrowing. “As we evolved the brand it became obvious that the drinks side was getting more and more important. The wine isn’t an afterthought—if we can get known for the drinks side as well as the food side then it’s a much more sustainable product.”
This sort of flexibility will be essential to all brands going forward. “You can’t stand alone as a restaurant without a good drinks offer these days,” says Hall. “The consumer demands more... they’re not prepared to go somewhere and spend money on food without good drinks, too. A warm pint and a cracked glass just aren’t good enough any longer.”
Hall sees two trends behind this shift. One is consumers’ heightened expectations and knowledge, especially since the recession. “They want more bang for their buck now... Enjoying wine and knowing something about it isn’t snobby any more—it’s cool and exciting.”
The other is the evolution of the late-night sector. “The market is changing. People who traditionally went to nightclubs have grown up—they still want to drink and enjoy themselves late at night, but they want to have dinner and socialise too. We need to serve that.”
DOING IT FOR CHARITY
After several years supporting local charities, CAU has adopted industry-wide favourite Action Against Hunger in 2015, running a CAUnival festival of events and promotions across its restaurants. More activity will follow.
“Their [AAH] mentality and ethos matches ours,” says Hall of the tie-up. “Hunger and child malnourishment is a very serious topic, but they and we want to go about doing something about it with a smile. Having fun is the best way to raise money, and their enthusiasm has rubbed off on us.” Fundraising should be part and parcel of running a business in this sector, he thinks. “It’s very important to us—you should give something back, and the staff love it.”
PROPERTY AND PAY
Property and people will be among CAU’s key challenges as it expands, says Hall. And, as he points out, the two are going to become much more closely linked over the next few years.
With property costs soaring in London, CAU is steering clear of the hottest of hotspots. But Hall thinks some operators are overreaching themselves with rents now stretching in some instances to 15% or 20% of turnover. “When you think about what the restaurant must be taking, you wonder how it can possibly all add up.”
Pressure on these businesses’ margins is only going to intensify with the government’s introduction of the National Living Wage. “[High rents] are just not sustainable when you suddenly have to go from paying £6.50 an hour to £7.20 to £8 to £9 over the next few years. Something’s going to change—it has to,” says Hall.
What form that change takes, whether job cuts, consolidation of brands and even, at last, a cooling of rents, will be one of the big themes of the next few years.