The fast-service restaurant chain Wagamama opened in Australia only five years ago, but now boasts 13 outlets and a turnover close to $20 million. Founder Luke Fryer talks to Jacqui Walker.
Luke Fryer brought the British Japanese food concept Wagamama to Australia in May 2002, and built a chain of 13 fast-service restaurants in five years, to now turn over just under $20 million. He talks to Jacqui Walker.
Jacqui Walker: Luke, tell us how you got the licence to open Wagamama stores in Australia, because it’s a UK concept isn’t it?
Luke Fryer: I was over in the UK in 2001, saw the concept and approached the owners of the business. Essentially myself and another gentleman, who I was in partnership with, applied for the license and were small enough to actually focus on getting the business open and small enough for it to be a meaningful part of what we did, but we were also big enough that we were able to get the funding together and actually make it happen.
And where did you open your first restaurant and tell me can you describe that restaurant and the concept behind it for us?
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Well the first location we took was King Street Wharf in Sydney, which is just north of Darling Harbour. It was a new precinct and our logic was that it was a beautiful location on the waterfront. A little bit out of the day-to-day foot traffic of the CBD and we thought that if we could make the concept work there then we could “make it work anywhere”.
How much did you invest in opening that first store and where did you raise the funds from?
It cost us probably $2 million to get going and that was all raised from savings and a small network of investors who I’d worked with previously.
And so were they of the family-friends-fools variety? How did you manage to convince these people that you had something that was really going to make money?
I think people knew the concept from London and saw it as being a good concept. I also think I’d worked with this group of investors, it was three or four individuals before on my first business, which was a Burger King franchise, and that had gone well so I think it was a relatively easy decision for them.
And then how long before you opened the next restaurant?
It took us about a year and three months from opening the first one to open the second.
And why so long?
Probably a matter of finding the real estate. Bedding down the concept and just generally wanting to get it right before we expanded.
So what were some of those things that you learnt before you moved on to the next store? Did you need to get the systems perfect or was that something that’s evolved over the past five years?
I don’t think it was system evolution. I think it was probably more about getting the team trained and comfortable. Working out what adaptations we needed to make to the menu because we started with the full UK menu and we needed to work out what adaptations we needed to make to the menu to make it more relevant to the Sydney audience.
And what kind of things did you have to do? Is the Sydney audience very different to UK?
Look we probably changed in the first year probably 20% of the recipes. Deleted some things. Probably added a few more salad type dishes and things like that. Nothing overly unusual. Nothing you wouldn’t expect.
So the second store was opened a year and three months later. Can you give us a brief outline of what happened after that?
Well the second store traded at a level we thought it would and therefore it emboldened us to go and open some more stores. I think in February 2004 we opened a third location, which was Crown Street in Sydney, then in June 2004 we opened the Sydney airport location. And then in October 2004 we opened a restaurant in St Kilda in Melbourne.
And did that create big challenges? Opening something in a different state?
It did, yeah. That probably stretched us a little bit, but we sort of took it in our stride. Looking back going to St Kilda in Melbourne was probably our biggest strategic mistake. We did end up closing that store because we… “if you build it they will come” mentality does not always work, especially in Australia where you don’t have such a huge population that secondary sites can work with potentially the ease that they can in the UK.
Right. So why was St Kilda a mistake? Where should you have opened up?
We should have opened… we basically should have opened closer to the city where we got both lunch and dinner traffic. The biggest issue we had in St Kilda was the complete absence of lunch traffic and that hurt us. It’s very expensive to build a Wagamama restaurant.
It takes quite a few people just to open the doors every morning in terms of number of chefs you’ve got to have in the kitchen and the waiters you’ve got to have on the floor and those type of things, and if you don’t have the ability to trade both day parts then it becomes very difficult.
And so how long did you let the store operate before you made that decision, which must have been a very difficult one?
It was, because it was.. we’d never faced that decision before. It’s probably about 20 months.
And have you opened somewhere else in Melbourne now?
Yeah, we’ve got a store in the QV complex and we’ve got a store in Flinders Lane. In fact we’re just about to double the size of the store in Flinders Lane.
And so how do you decide where to put your stores?
Well when we first started it was very much as I’ve said, if you build it they will come, so if we liked the look of a location we’d generally go for it. And we ended up with some fantastic locations and also some problematic ones.
Luckily we ended up with many superior locations rather than difficult locations, but now we have a more corporatised business, a CEO and a CFO and an operations director, and with those people sitting around the table it’s a more disciplined approach.
We assess local… the demographics of the local population. What are the natural traffic drivers in the area. Things like cinemas and pubs and retail and office and all that type of things and we now put together a bit of a matrix and actually give a weighted score to each of the things we know help our business. That helps us decide in a more scientific fashion.
Making fewer mistakes now?
Well yeah. Yeah. Certainly the last that we’ve opened have been quite successful, so yeah.
And the restaurant trade, staff would be a big cost in your business and a big part of your success or failure I imagine. How have you built the sort of teams that you’ve needed?
I think we’ve been very lucky in that Wagamama has a fantastic culture and it’s the kind of culture that a lot of people are attracted to.
It’s always been a young team and we… youthful enthusiasm has helped build the team. We’re now in a position where we’re not opening any new stores for six months so that we can train and further develop our staff.
We’ve got lots of people being sent over to the UK so they can get deeper and more extensive training. They’ve got a network of probably 50 stores in the UK and well over 2000 staff so they’ve got highly advanced training and development techniques and it’s a great opportunity for us over the next six months to really increase the development skills of our senior chefs and managers and then work down through the ranks to all levels of the company.
And Luke, you’re in the United States as we speak, what are you doing over there? What are your new ventures?
I’ve set up a new business in New York that initially had been called Itsu which is actually another UK-based business, but moving forward. We’re actually going to re-brand that to our own brand and it will be called Yushi and it’s a contemporary grab-and-go sushi concept. We’ve opened our first location at the World Financial Centre here a few months ago.
And how’s it going?
Fantastic. Very good business. We’re just in the process of building a second location at the moment.
And are you doing that with the same business partners from Australia or others?
No. No. I’ve actually got a group of predominantly UK-based investors for the business over here.
Does that mean you want to sell out of Wagamama or are you still as committed to that as you were?
No definitely not. My main role with Wagamama in Australia now is to work on the strategy and the development for the business. We have a plan to open five new sites a year for the next three years and my role basically involves making sure we find the right sites for that.
Luke as an entrepreneur, what have been the greatest lessons you’ve learnt through building the Wagamama restaurant business?
I think the first thing is that if you’re rolling out a retail business you must very carefully focus on what makes your business work from a location point of view and hold very true to that.
I think the second thing is that while it’s always good to give people a go and have a belief that you can train and develop people, if you’re growing a business quickly you need to attract the best talent possible and you want to end up with a critical mass of experienced people around you. I think that’s quite important as well.
And how have you done that?
I have done that by a process I guess of evolution. A lot of the people we’ve employed over time have been fantastic for where the business was at a particular stage but as the business gets bigger and matures you need people with different skill sets.
And it’s probably been my greatest area of opportunity, so to speak, to have probably focused earlier on getting more senior people with more relevant skills to what we were actually needing to do.
Getting those people into those roles earlier on would have possibly saved, well not saved, but I guess allowed us to roll out faster and with a greater degree of success.
So what’s your turnover now for Wagamama in Australia?
This financial year we’ll turn over just under $20 million.
And what do you think that will be in another two years time?
If we talked two financial years out from now you’d probably see that figure going closer to $30 million I would hope.