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The collapse of Jamie Oliver’s restaurant empire reveals the naked truth about over-expansion

The collapse of Jamie Oliver’s restaurant empire reveals the naked truth about over-expansion

You have to feel for Jamie Oliver.

The British celebrity chef has endeared himself to audiences the world over with his innovative twists on everything from traditional English fare to Italian staples. He’s advocated tirelessly for improvements to school cafeterias and nutrition for children. His restaurant Fifteen was designed to teach cooking skills to troubled youth. He built a business empire of dozens of eateries globally—from fine dining to mid-market casual—penned a best-selling cookbook series, managed a plethora of product endorsements, multiple television shows and a wildly successful YouTube channel. Simply listing his commercial achievements is exhausting.

And now the foundation of that multimillion-dollar business empire, the Naked Chef’s once-thriving restaurant business, is in ruins. As reported in a recent New York Times profile of the beleaguered culinary entrepreneur and his troubles:

“In May, the Jamie Oliver Restaurant Group went into administration, a form of bankruptcy protection. The company, according to some accounts, owed creditors nearly 83 million pounds, or about [USD] $100 million. Mr. Oliver said he tried his hardest to keep the business alive. But after closing some restaurants, injecting the equivalent of more than $15 million of his own money into the company and searching for a new investor, he gave up. In all, he shuttered or sold 25 restaurants, putting more than 1,000 people out of work.”

Oliver once had 42 Jamie’s Italian restaurants in the U.K. alone. So, how does one of this generation’s most recognizable foodie heroes go from superstar to cautionary tale?

Before delving into the answer, we should add a bit of perspective: Oliver is far from poor. He’s still incredibly wealthy and other parts of his empire, namely his cookbook business and product endorsements, continue to drive significant revenue. The son of Essex pub owners will be just fine, thanks.

But as with any story of business collapse, there are important lessons that entrepreneurs can embrace as they (hopefully) avoid making similar mistakes—and a few the humble Oliver would likely be the first to concede. And who knows? Perhaps a book on strategic management will be part of his comeback. Until then, Oliver reminds us all of the dangers that rapid overexpansion without adequate financial management can pose in a challenging market.

Ambition should always be bound by prudence

From the mid-2000s until a few months ago, Oliver’s company expanded to multiple continents, opened a remarkable number of outlets (many of them franchised) and all the while managed to maintain his carefully-crafted brand image. That’s a feat to be applauded. At least when it all worked.

He reminds us that although rapid growth is most entrepreneurs’ dream, expansion needs to be tempered by sound financial management. As Oliver recently told British media, “I tried everything. We ran out of money. It’s as simple as that.” But barring unforeseeable circumstances such as a sudden major recession or, say, the emergence of a dominant new competitor who comes out of the blue with a revolutionary product or service, thriving businesses don’t usually just run out of cash. Maintaining an empire is very expensive and comes with a great number of surprise expenses. More so when doing business in foreign countries with varying laws and business practices.

Take a lesson from Oliver and remember that while growth is desirable, taking a slow-but-steady approach is typically favourable to expansion so rapid it can often be difficult to manage, afford and control.

Pay close attention to market conditions

One of Oliver’s main gripes was that turning a profit in the mid-tier dining market, particularly in the U.K., became nearly impossible over time. An overabundance of competitors, Brexit, a weakened pound, reduced consumer spending, poor reviews from critics, competition from apps such as Uber Eats that encouraged diners to eat in rather than venturing to one of his well-appointed restaurants for a meal out—it all became too much to bear.

CEOs should always keep their ear to the ground and an eye open to changing market conditions. Perhaps Oliver’s greatest sin as a leader—or that of his management team—was a belief that the party would never end; that maybe the Naked Chef’s brand was so strong that it made his restaurants virtually impervious to the marketplace storm clouds that swirled above. If that was the case, it was a gross miscalculation.

Almost no business is immune to macroeconomic headwinds, be they recessionary shocks or a systemic jolt such as Brexit. That’s especially so in the hospitality business, where everything from the weather to fickle consumer tastes can make or break a business. It’s up to a CEO to take everything into account and to use comprehensive financial analytics to understand when a dip in business can be reliably forecasted. Clearly Oliver either didn’t pay close enough attention, or did and didn’t take action soon enough—specifically, contracting the business sooner to sure up his finances and keep the rest of his chain afloat.

Unless he’s highly experienced, don’t hire your brother-in-law

Now, we’re not saying that Oliver’s decision to hire his brother-in-law, a former stock trader, as CEO was a bad one. But we’ve seen many leaders who have turned to friends and family for leadership help, only to sorely regret the decision years later, and usually after they’ve lost copious amounts of money along the way.

Hiring a friend or family member can sometimes be an effective way to fill a key management position with someone you trust. But that person needs to be amply qualified and prepared to speak truth to power when hard decisions need to be made. Stock trading is very different from running a lifestyle brand and restaurant chain. A more rational approach in most situations is to hire a chief executive with extensive experience in your industry, then empower him or her to take the business in the direction they see fit, all while taking into account factors such as the organization’s growth objectives and current market conditions.

Do one (or two) things really well

CEOs who are spread too thin, or who over-diversify, often fail. It’s simply too hard to do many things very well. Positioning as an uber-chef/activist/TV personality/global brand ambassador/product pitch man/social media leader (and while also serving as a father/husband) is about six jobs too many. Great leaders focus on their core business, perfect their product or service offering, then continue tweaking as circumstances warrant. Oliver’s approach may or may not have been sustainable—that’s for him to figure out.

But with the exception of those business titans who run multi-billion-dollar companies and can dabble in multiple industries at once because they have the budget to hire the very best C-suite staff to run their various businesses, it’s best to stick to your knitting. Diversification is fine, but it should be done with a close eye on the books. It also requires an understanding that different business lines each come with their own opportunities and challenges, and that it takes experienced people—and time and budget—to make it all work.

Oliver’s fans can rest assured that in a few years, the hard-grinding chef will likely be back stronger than ever. In fact, he may well rebuild his restaurant empire at some point. Only this time he’ll likely heed the difficult lessons that have felled so many CEOs and take a more conservative approach when expanding, putting the right people in the right places to make it all happen.

Marshall Egelnick, Managing Partner

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