Driven to diversity - meet Britain's busiest entrepreneur

Source: Exec March

Date :10/03/2008 12:10:00

Luke Johnson has made a fortune from pizzas, bars and dental surgeries, sits on numerous boards and still finds time to be chairman of Channel 4. Exec uncovers the restlessness behind the ice cool exterior of an unrepentant capitalist.

By James Hurley

“I’m restless, which isn’t always a good thing,” admits Luke Johnson, chairman of both mid-market VC firm Risk Capital Partners (RCP), and since January 2004, Channel 4. “It may have been that I would have been richer if I had stuck to one particular sector for my entire career – but then again you could do that and choose the wrong one. I suspect part of the secret of entrepreneurism is flexibility and adaptability.”

Most famous for his success at restaurant chains PizzaExpress and Strada, Johnson has made several fortunes with apparent ease. He set up and sold Signature Restaurants, owner of The Ivy and Le Caprice, and with Integrated Dental Holdings, built up a chain of dental surgeries which were sold in 2006 for over £100 million.

He currently sits on the boards of Interquest, Superbrands, Giraffe, GRA, Seafood Holdings, Patisserie Valerie and APT Controls, and even has time to construct incisive and wide-ranging weekly polemics in an FT column that puts the drab and predictable musings of most business columnists to shame.

Then again, as the son of journalist, historian and former New Statesman editor Paul Johnson, one might expect some sort of literary pedigree, so it will be intriguing to see what his turnaround plan is for Borders - RCP acquired the UK’s third largest high street bookseller in September last year for a bargain £20 million, and plans to spend £2 million on reviving the business.

Adrenaline rush

Johnson began his entrepreneurial journey during his student days at Oxford, where he studied medicine. Alongside fellow student Hugh Osmond, he put on a weekly event called Era Club and by the time they graduated, the pair were running various fledgling enterprises.

“I felt that running a business was going to be much more satisfying than medicine, which is a very structured career, with the necessity to do exams right into your thirties. There’s a lot of satisfaction to be taken from starting something from scratch, building it up or turning it around. It was the first taste of an adrenaline rush that has been with me ever since,” he says.

On graduating in 1983, Johnson ‘put off the inevitable’ for a few more years, working as an analyst in the city for investment bank Kleinwort Benson. “It was useful training. I met lots of interesting people. I also learnt about company life and how to be successful. But working in a large investment bank in the City is frankly my idea of hell. Even if you’re very well rewarded and don’t have to take much risk, I would still much rather have the independence and fulfilment that you get from doing something yourself.”

During this ‘apprenticeship’ period, as Johnson calls it, he met Christopher Bland, Michael Green, and various other ‘media land’ entrepreneurs. “I find that industry fascinating. It has more than its fair share of interesting innovators and larger than life characters.”

One of these characters happened to be Robert Maxwell. “He was a bully and a monster; clever and charismatic, but evil. I think he probably sold his soul to the devil – then the devil’s hand reached up from the murky depths, dragged him from his boat and drowned him,” he jokes.

Johnson has a reputation of his own; for efficiency, brusqueness and a slight ruthless streak that’s well hidden beneath a polite if slightly icy exterior. He makes no secret of his admiration for that other controversial media titan, Rupert Murdoch, whom he also encountered during this period. “He’s a tough character. But he’s an extraordinary success over many decades. It’s very difficult to think of someone who has enjoyed such a career as him in almost any sector when it comes to sustained success and power – and he’s still at it.”

London is not the world

Johnson wouldn’t have to wait long before he could begin building his own empire. He began by investing in several small companies with money borrowed from a bank. After a best forgotten deal with a theatre scenery firm, he discovered that PizzaExpress’ David Page was looking for a buyer for the franchise and began a two-year negotiation that would end with a £25 million reverse takeover of the entire business in 1993. He went on to grow it from twelve restaurants to more than 250, watching the share price soar from 40p to almost 900p by the time he exited in 1999.

It was the genesis of Johnson’s reputation as a turnaround specialist. His name has become synonymous with scaling up operations and reviving potentially strong brands. “In hindsight of course, it appears easy,” he says of his PizzaExpress experience. “It didn’t feel easy at the time. But the timing was good.”

Johnson’s team took control in January 1993, when the economy was recovering from a recession. People had started spending again, sites were available and demand was rising.

“We inherited a fantastic brand with enormous goodwill. The founder’s principal objective wasn’t profit. He didn’t focus on the bottom line, and they’d been through a depression. There was very little choice at the time and we were the best.” The climate is very different now, of course. “It’s a very crowded marketplace with much more choice available for the punter who wants to dine out,” Johnson says.

It’s a modest analysis. His success stories are characterised by the clinical execution of a sound turnaround strategy. He got rid of the franchises, so he could consolidate all of the profits. He renegotiated with suppliers, closed a handful of unsuccessful units and opened a lot of good new ones, shut head office buildings and cleared out unnecessary staff.

“Really it was a magnificent secret that was waiting to be taken national and hadn’t been to date. We exploited this gem which had all of this untapped potential.”

While the middle brow restaurant was invented in the 1960s, it was Johnson and his colleagues who took it national and it’s a model that has been replicated and refined numerous times since. As Peter Harden, the legendary restaurant reviewer and publisher of Harden’s guides commented, “there are very few people who have had more impact than Luke Johnson (on the history of London’s restaurants).”

Ironically, Johnson attributes his knack for the restaurant trade to an ability to look beyond London life to the tastes of the everyman.

“A number of restaurateurs - among others - make the mistake of thinking that London is Britain. It’s not. Central London is a different planet to the rest of the country, and greater London is vastly different from, say, Coventry in spending habits and tastes,” he explains. “I think that I remember that most people enjoy mainstream food and you can be over ambitious in trying to make something too exotic.”

Murphy’s Law

When Johnson attempted to take Signature’s beer and oysters chain Belgo national, he acknowledges that he fell into this trap himself. “It didn’t work – it was too esoteric, too exotic.”

By the time he came to build his Italian restaurant chain Strada up from scratch – an isolated feature of the Johnson CV – he’d learnt from the mistake. “Strada is all about accessible food, a sort of next generation of Pizza Express with better ingredients, risottos, and meat and fish dishes rather than just pizza.”

For someone used to the rewards of scaling up others’ entrepreneurial ventures, making a success of Strada offered Johnson something different. “The risks were much higher. For the first couple of years we weren’t sure if it was going to work, but we persisted and it has been very successful. It was tremendously fulfilling, but it was very hard work and, to be honest, I don’t know if I would have the energy to do that again. It takes a long time and it’s easy to make mistakes and get it wrong.”

For now, RCP and, for roughly one day a week, Channel 4, provide Johnson’s professional fulfilment. He enjoys the idea of being involved in the diversity of business, where you can learn from new experiences and apply examples learnt elsewhere.

“There are many common features between businesses. If you step outside a particular sphere and say ‘actually we came across this situation in a different trade and this is what happened’, it can benefit you,” he explains.

RCP currently owns Giraffe restaurants, GRA (a group of greyhound racing stadiums) and fashion chain East. With all this diversity, doesn’t he occasionally feel that he’s spread too thinly?

“I enjoy the stimulus of working with new people and not becoming tired because you’re recycling the same thing year in, year out, but it’s a mixed blessing,” he concedes. “But you can’t change your personality and force yourself to be something you’re not. Those in private equity tend to have a diversity of interests and that’s what I’ve got,” he says.

“Sometimes you feel that you have spread yourself too thinly and it can have consequences. But there are other times when the cross fertilisation can be very constructive.”

Investing in growing businesses in the form of VC is an inherently risky occupation and one that Johnson is clearly very good at, yet he’s the first to admit to his fair share of setbacks. The simple lesson for any budding entrepreneur is: ‘don’t give up, life goes on’. “Even people who are huge successes and apparently haven’t had a single setback in their lives or careers will have had plenty,” he says.

“It’s the very nature of risk taking and entrepreneurism that some projects won’t work and others will take longer than you expect – in business life, Murphy’s Law can apply.

There will always be difficulties.” In this context, people should take comfort from the sub-prime crisis, he says. Investment banks, with their incredibly complex risk management systems and highly paid personnel are looking at a total write off on the sub-prime debacle of around $140 billion dollars.

“That gives me a degree of comfort - whatever cock ups I’ve made, they don’t come close to that. The mess is extraordinary, affecting the availability of credit for all sorts of different investments.”

Incisive

He’s not laughing at others’ misfortune, merely pointing out that the nature of capitalist economies is cyclical. “There will be good times and bad times. If you’re good enough, you may be in a position to take advantage of a slow down. There can be upsides but I feel we’re all going to have to get used to rolling our sleeves up for the next couple of years.”

For his part, Johnson will have his work cut out at Borders. The book-trade press is encouraged by plans to inject significant capital into the business via a revamped online operation and a fresh programme of live events. In a typically incisive move, chief executive David Roche – who reputedly clashed with Johnson over his plans for the chain - was dispatched, with more power and responsibility placed in the hands of individual shops and their managers.

Given his pedigree for reviving brands with untapped potential, Borders seems to be the perfect fit for Johnson’s investment profile; despite his personal wealth, he eschews ‘bling’, and says his greatest indulgence is book buying.

His appointment as non-executive chairman at Channel 4 was a less intuitive fit – his selection four years ago came as a shock to the media world, who had expected a seasoned schmoozer, not a brusque private sector turnaround specialist. In hindsight, as broadcasters face a host of challenges from a range of sources, it was an inspired choice, and Johnson is widely acknowledged to have done a fine job.

The channel may be owned by the taxpayer, but Johnson says most of the principles of sound private company practice apply. “If you go out every day to sell you wares, as Channel 4 does, it makes you part of the private sector.”

That it chooses to use its surplus to fund public service programming makes it a fairly unusual proposition, albeit one that Johnson is proud of. “I think it makes a lot of outstanding programming and is a remarkable and unique organisation.

When it comes to putting on air an individual voice that has an opinion that wouldn’t otherwise get access to the airwaves, we are better than almost anyone else,” he says.

While he concedes that “mistakes were made” during last year’s Big Brother race row and phone-in scandal, the channel has “learnt from them, moved on, and will do better next time.”

It was a wake up call for Channel 4, but the nature of what it does means it needs to be provocative. “It’s the essence of Channel 4,” he says. “There will always be some viewers who are not happy with what we say. If you’re bland, you can’t be assertive and interesting.”