The focus to grow26 July 2019
Hakkasan Group has weathered the many recent storms in the global restaurant market. Operations vice-president Michael Neuner tells Tina Nielsen about his plans for developing the company and the importance of finding the right partners in order to deliver this vision.
Last year was a tough one for the restaurant trade, with closures and bankruptcies more prevalent than anybody would be comfortable with. In the UK alone, restaurant insolvencies were up by 24%, topping 1,000 for the first time, according to accountancy network Moore Stephens.
“We’re certainly facing challenges we never faced before,” says Michael Neuner, vice-president of operations for Hakkasan Group since the summer of 2017. Meaning Brexit, presumably? “Well, I have decided to ban the word Brexit because it is too often being used as an excuse for not achieving anything – if we fail to perform we’ll just blame it on Brexit, but the moment you take that word out of the conversation, you think about it differently,” he says.
Aside from Brexit, Neuner points to two specific problems in the sector that have caused so many operators to hit trouble: oversaturation and over-promotion.
“There was such a saturation of the market with too many mediocre restaurants where venture capitalists felt they had a licence to print money and then didn’t necessarily put in the right level of management and training,” he explains. “Our sector is phenomenal in making one mistake and that is lack of investment in training, which in turn leads to over-promotion. You put people in a position they are not qualified for and they face big problems.”
Neuner came to Hakkasan Group after a 30-year career in hospitality that saw him go from hotel school in Switzerland to joining Paul Bocuse in Lyon. He then set off on a truly international adventure – from Walt Disney World in Florida and Mandarin Oriental in San Francisco, to heading up the food division of Harrods and spearheading the expansion of fast-casual operator Bagel Factory.
He started his own consultancy in 2007 and worked on projects including Circle Bath Hospital, where he collaborated with renowned architect Sir Norman Foster. That he ended up joining Hakkasan was by chance – he met Gert Kopera, the executive vice-president, and after discussing the possibility he decided to give it a go.
Neuner says it has been a “phenomenal educational process”. One of the first things that happened after he joined was the division of the group into Hakkasan operations and Hakkasan brand. For an organisation that has run as one since it started, this has been challenging. “We are having constant conversations about where does a brand start and stop? What is operational and what is a brand decision?” he says. “We are in no way perfect, but we are a lot clearer today than we were when we set off.”
In addition to its four high-end brands – Cantonese restaurant group Hakkasan, Japanese teahouse Yauatcha, nightspot Ling Ling and Japanese restaurant Sake no Hana – the company is made up of a host (too many, according to Neuner) of single-brand restaurants; globally, the group boasts a total of 75. London sits at the core, as the centre for culinary excellence, and is also the centre for the four main brands. The nightlife division, meanwhile, is headquartered in Las Vegas. The group also has offices in Shanghai and Dubai.
A sprawling business indeed, and until recently, it was lacking the required focus to seriously grow. “We have been working to create more focus and alignment, as we think we can do things better and progress quicker,” he says.
To trace the origins of the group, let’s go back to 2001 when restaurateur Alan Yau opened the doors to the first Hakkasan. It was different from anything else on the market at the time; take the location: in a backstreet in central London, it was set inside a former underground car park. The atmosphere was also different – loud music and dimmed lighting giving it more of a clubby atmosphere. Neuner, at the time, was living and working in London; he visited on the second day after opening. “I walked in and I said, ‘how will this ever work?’. But how wrong was I,” he says.
A large part of the conversations Neuner has had since coming into the role have been about becoming clearer on the various brand propositions. While the other brands may have some flexibility, Hakkasan does not.
“Hakkasan is a black box, it has these brand components that are inflexible. It has a strict menu, almost the same across the world, and we don’t really adapt to the local market,” he says. “It is almost always located in the basement, and we have a lounge-type atmosphere. We never have open dining rooms, but equally we never have closed private dining rooms; it is at best a semi-private dining area.”
Today, there are Hakkasans in London, Shanghai, Miami, San Francisco and India. There’s a limit to the scale, says Neuner. “I see, at most, another three or four globally – the back of house is a huge operation and if you can’t guarantee 500 covers a day you won’t make money,” he says. “It depends on the purchasing power of the city.”
A hospitality genius Yau may be, but, says Neuner, his focus on innovation meant he “never finished a project. He had this mixture of vision and desire to achieve something. When you have people with so much drive and so much inspiration there is a need for the innovation process to stop at one point. If you constantly go through change it doesn’t work.”
Single-brand restaurants worldwide fall under the Hakkasan Group.
Neuner says there are huge plans for the Yauatcha brand, currently present in three cities in India and in Houston, US, as well as in London, UK. “I don’t want to say the sky is the limit, but as dim sum remains popular anything above a million or two million citizens in a city would support a Yauatcha,” says Neuner. “We are working on Yauatcha 2.0 – a new model with several components, and we are then trying to take parts of these components into various footprints, whether this is a high-end shopping centre or an airport – somewhere we can cover more than two meal periods. We are hopefully looking to open our first next year.”
A specific set of skills
There are several factors that restrict growth – one of them is the cost of a skilled workforce. The skill set required to make dim sum is among the most expensive you will find on the culinary market, according to Neuner. “With the influx of additional players into the London market these skill sets are just more in demand. They are among the most expensive chefs you find in London at the moment.”
The focus on the broader experience was a popular formula for the successful operators at the time in the early-to-mid 2000s. “Hakkasan and Yauatcha were different, but don’t forget there were also places like Nobu, Zuma and Roka. At the time there was a huge appetite for ploughing large amounts of money into restaurants, and what these all did was create an experience,” explains Neuner.
Ling Ling, the group’s fourth brand, started out as a more drinks-led concept, but today food is equally important. It has an element of what Neuner calls latenight. “It is not a night club,” he points out. It is also very successful. The transaction value in Ling Ling is higher than in Hakkasan, due to the simple fact that dwell time is longer and alcohol adds up on a bill in a way food doesn’t.
Given that after the opening of Yauatcha in 2004 the group didn’t open another site until 2011, when they launched Japanese restaurant Sake no Hana, this does feel like a group that has taken its time building up. Somehow, 17 years after launching the first site it feels like early days.
With Sake no Hana came a slew of other openings – Hakkasan Mayfair opened in London, and in the years after, Ling Ling bars in Mykonos, Marrakesh and Oslo. Neuner links the rate of growth to a lack of clear focus within the group.
“Sometimes in the past we have had this arrogance within Hakkasan Group – we have said, ‘We will open and they will come,’” he says. “In my mind, we have made too many mistakes, and as a result, we have closed too many restaurants. I think we have learned from it. We have changed management, and we have a more sales-focused approach.”
Key to a successful opening in a new market is finding the right partner to work with. “We believe in a simple fact that locals know best; we know the experience we can bring to the table, but we also know our limitations,” he says. “The location doesn’t matter – if you don’t take the time to understand the local market you have very little chance of being successful. There are characteristics it takes time to discover.”
So what’s right for London might not be right for Berlin, he says, and what’s right for Rome is definitely not right for Milan. He points to Nobu as an example – the Japanese restaurant and hotel group is phenomenally successful in its first two locations in London, but the latest site in the trendy Shoreditch area not so much.
“You think London is a huge city, but essentially it’s a collection of small villages, and they all have their own drivers and consumer behaviours. There is no space for arrogance or carelessness. If you are investing the kind of money we are, getting it wrong really hurts,” he says. “Our choice is to find the right partner – we would never have achieved what we have in India without a partner.”
For 2018 the big exercise for the group was to follow the spirit that less is more. “We had to reduce to our core competencies, figure out what we are really good at and what our signature items are,” he says.
What needed changing? Keen to observe and learn when he first joined, Neuner didn’t make many changes to start off, but he did start picking up on the things that stood out to him. Take Hakkasan, where the set menu offers were always at the back of the book. Upon questioning this, he was told, ‘That’s how we have always done it.’
“I took the bullish approach and moved the set menus from the back to the front of the menu, and we are looking at a 10% improvement in revenue across the board. Those who have never been with us before now feel more comfortable that there is formula to follow, and once you understand this you can move on to the à la carte,” he says. “You need to put yourself at the level of the customer, drop the arrogance and make yourself accessible.”
In the future he foresees a sharp focus on people and an openness to pursue new avenues for the core brands. Even with the considerable challenges on the horizon he looks to more sites opening. “I foresee anywhere between two and, optimistically speaking, four or five restaurants next year in Europe. But I am mostly excited about the huge learning and development plan we have put in place for our managers and to attract new ones,” he says. “I have joined an exciting project here. This is good fun.”
This article first appeared in FCSI’s Foodservice Consultant, www.fcsi.org