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

The Observer - - News - Zoe Wood

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

Pho­to­graph by Frank Baron for the Ob­server

For­mer own­ers (from left) Robert, Enzo and Vic­tor Scalzo, pic­tured in 2005.

Rex, Henry Grant Col­lec­tion

Left, a typ­i­cal se­lec­tion of Patis­serie Va­lerie treats, and, above, the Soho cafe in the 1950s.

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