Giraffe stretches its legs

Working in partnership with two of Britain’s leading restaurant entrepreneurs, 3i has invested €15m in Giraffe, a chain of UK family-friendly restaurants. The investment – a combination of a private placement and growth capital – will be used to fund an ambitious roll-out over the next three years.

Founded in 1998, Giraffe operates 11 outlets in and around Central London andone franchise at Heathrow Terminal One. With a brand built around global food, world music and great service, Giraffe is targeting a buoyant market. Higher disposable incomes and longer working hours are changing consumers’ eating habits – almost half of total food spending in the UK is now devoted to dining out, and the sector is projected by research company Mintel to continue growing ahead of inflation over the next few years. Giraffe is perfectly placed to capture a sizeable share of this market because it is run by two highly experienced restaurant entrepreneurs. Founder and CEO Russel Joffe launched and grew Café Flo in the 1990s, while Chairman Luke Johnson was the brains behind Pizza Express, My Kinda Town and Strada.

Keeping in close contact
3i had been tracking the business for five years before an opportunity to invest arose. In 2001, 3i Investment Director Justin Maltz met Joffe to discuss making an investment in the business. The discussion was premature but Maltz kept a close watch on the company’s progress and contacted Joffe again in January 2006. By that stage, Joffe had successfully grown the company from two to 12 outlets. He was looking for an injection of growth capital to fund a nationwide roll-out. At the same time, he wanted to buy out some of the angel investors who had provided initial start-up funding. Maltz explains: “It was perfect timing. Russel had teamed up with Luke Johnson and was looking for another investor who could balance the board. And he wasn’t just looking for capital; he wanted to work with a private equity house that could add real value to his business.”

Expertise in retailing and hospitality
During the discussions, Joffe was approached by a number of other private equity houses and one of the largest trade players, but chose to continue working with 3i. Maltz says: “Russel wanted to work with a partner that could provide significant capital, possessed excellent sector knowledge, and had experience of rolling out restaurant chains. I was able to demonstrate our experience in supporting growth with EAT, the premium sandwich chain and the Spanish coffee house Café y Té. The EAT deal particularly interested Russel, because during the period of our investment we helped the company roll-out from 1 to 50 stores.”

Russel Joffe, CEO, Giraffe, explains: “I decided to partner with 3i because they shared our aspirations and didn’t want to take control of the business. We were also looking for an investor with a strong track record in the industry. 3i has years of experience in the retail sector and can open some important doors for us.” During the negotiations 3i challenged Joffe’s growth plans. Maltz felt that Giraffe was capable of faster growth and was able to convince Joffe and Johnson that there was scope to open more outlets more quickly. Together they established a plan to grow to over 40 units in 3 years. As part of the deal, Maltz introduced Stuart Rose as non-executive director. A former Deputy Chairman of Body Shop and current chairman of Hamleys, Rose will bring invaluable retail and branding experience to the board.

The introduction of Rose was part of a general restructuring of the board – initiated by 3i – which will stand the business in good stead for the challenges ahead. Backing for an ambitious growth plan Maltz is now working closely with Joffe and Johnson on the growth strategy. The team is identifying suitable locations for new outlets and has already opened sites in Milton Keynes and Manchester since completion of the 3i investment. Other expansion routes are also under consideration, including acquisitions and franchise operations in airports and similar locations. Maltz is also working closely with the team on raising an appropriate debt package to support phase two of the roll-out.

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