Patisserie Valerie survived the Blitz. Can it rise from the ashes again?
As a rescue plan is put together, Luke Johnson aims to save the Sohoborn cafe chain he owns from a £20m accounting black hole
It’s not the first time Patisserie Valerie has been hit by a bomb: during the second world war the original cafe in London’s Soho was wrecked by the Luftwaffe. But Madame Valerie, a Belgian who started the cafe in the 1920s, simply picked herself up and opened a new shop nearby.
This time the business has been struck by a bombshell of the financial variety. On Monday, Patisserie Valerie was a stock-market darling worth £450m. By Tuesday night the management team was racing to raise cash after the discovery of a gaping black hole in its accounts. Come Thursday night, finance director Chris Marsh had been arrested and bailed, and on Friday its famous chairman, business guru Luke Johnson, was shaking out his pockets to find £20m and keep the plates spinning.
A rescue plan has been cobbled together, with another £15m raised from City investors – but there is still no guarantee that the full scale of the problems at the 206-branch chain, which employs nearly 3,000 staff, has been uncovered.
“I don’t believe it,” said Marcio, a Portuguese waiter frantically waiting tables in the original home (after the bombing) of Patisserie Valerie on Old Compton Street, when told about the firm’s precarious financial straits. “This store is never going to close.”
With its Belle Époque artworks and bentwood chairs, the cafe in London’s theatreland has the feel of a genuine continental pâtisserie. Marcio’s tables were full of tourists and pensioners filling up on £7 croque-monsieurs and £3 millefeuilles. The Soho store provided the blueprint for a chain that shifted £114m of pastries and coffee last year. But the City’s favourite cake shop was looking like a burnt offering on Friday.
The dramatic fall from grace is shocking enough, but made even more incredible by the dramatis personae, most notably Johnson. Best known for turning Pizza Express into a national chain, Johnson had banked a huge second fortune – on paper at least – when he bought family-run Patisserie Valerie for £6m in 2006, when it had just 10 outlets, and launched it into the stratosphere.
After more than 30 years of building restaurant empire after restaurant empire, Johnson was estimated to be worth £260m (although £165m of that was his holding in Patisserie Valerie). He had always had an appetite for aggressive expansion. He invented the Strada brand and turned it into a chain so ubiquitous that writer Will Self once suggested there was “probably a Strada up your bum”.
“Patisserie Valerie is a Marmite brand,” said consultant Peter Backman. “It’s one of those places a customer can project their own desires on to. For 15 minutes you can pretend you are somewhere else.”
The unravelling of Patisserie Valerie has stunned investors and analysts who had put Johnson on a pedestal, not least because of his punchy business columns in the Financial Times and more recently the Sunday Times.
In 2015 Patisserie Valerie even won IPO of the year, for leading small companies, at the Grant Thornton Quoted Company Awards. In a further irony – if one is needed – Grant Thornton is Patisserie Valerie’s auditor. It approved last year’s accounts, which showed the chain had £22m in the bank, although on Friday the company said that it was instead £10m in debt. Grant Thornton will now face huge scrutiny over its auditing work, given that the hole in Patisserie Valerie’s accounts is the subject of a Serious Fraud Office investigation.
The fact that Johnson, a former chairman of Channel 4 and a prominent Brexiter, has been able to persuade investors in the chain to part with more money is a testament to his standing.
Patisserie Valerie had ridden the crest of the casual dining wave. The market, defined as one in which diners spend £10 to £20 a head, has doubled in size to become a £9bn business in the dozen years since Johnson bought out the Scalzo brothers Enzo, Robert and Victor, secondgeneration Italians who had owned Patisserie Valerie for 20 years.
Robert Scalzo told the Observer that the irony about Patisserie Valerie was that it had “never been owned by anyone French”. He was the only one of the three brothers who didn’t want to sell, and recounted working in the Old Compton Street branch in the 80s and 90s when it attracted regulars such as fashion designer Paul Smith and photographer David Bailey.
As the business grew it inevitably changed. “I feel it lost its soul a bit,” Scalzo said. “It’s easier when it’s small, but when you get bigger it becomes a bit of a beast.”
The casual dining boom has gone spectacularly wrong this year, with a slew of brands, including Carluccio’s, Prezzo, the burger chain Byron and Jamie’s Italian, restructuring and closing restaurants after a slowdown in consumer spending. Until last week Patisserie Valerie appeared immune – but its problems were of a different order and down to “fraudulent activity”, the company said.
Like many of its rivals, the workforce in Patisserie Valerie’s city stores is drawn from all over the world. One employee who contacted the Observer said staff in her store –from Romania and Hungary – were being told there were no problems, but at the same time to pay suppliers with cash out of the tills.
Scalzo said the decision by Johnson to pump more of his money into Patisserie Valerie should now give staff hope that it can once again rise from the ashes. “It will survive,” he reckons. “Luke Johnson is a realist. If he didn’t think it was worth saving he would have let it go.”
‘I feel it lost its soul a bit. It’s easier when it’s small, but when you get bigger it becomes a beast’ Robert Scalzo, former owner
Former owners (from left) Robert, Enzo and Victor Scalzo, pictured in 2005.
Left, a typical selection of Patisserie Valerie treats, and, above, the Soho cafe in the 1950s.