Business rates nightmare: Interview
Restaurant chief in health crisis warns of a growing threat:
MARK Selby is the business brains behind Wahaca, one of the UK’s most successful restaurant chains. But he had to bring the Mexicanthemed brand back from the brink last year after norovirus struck.
In comparison, even soaring business rates seemed small beer, as during November’s outbreak the 39year-old feared the business he had given birth to could go bust. ‘Our world was falling apart,’ he says.
‘We got a call on the Thursday night saying we’d closed Manchester because ten members of staff got sick. I thought it weird, but we got a team to do a deep clean.
‘The next day, in Covent Garden, ten team members called in sick, and we had to close that too. Over the next 48 hours site after site kept falling. Then, on Sunday morning, customers started emailing in. That’s when all hell broke loose.’
Selby had to call in Public Health England and it seems likely that the outbreak originated with a supplier, though the agency’s report will be released only later this summer.
‘At one stage we thought we were going to have to close every restaurant for four weeks,’ says Selby. ‘During that time sales plummeted 45 per cent, but if I’d had to close all sites, I don’t see how we would have survived.’
In all 18 of the 25 restaurants were hit and he had to close 11. The experience changed the way he does business.
He says: ‘We’ve had to make some tough calls with our suppliers. We’ve had to say, we have to have absolute visibility or we can’t work with you.’
At 18, Selby knew he wanted to own and run a theatre or restaurant. Lovers of Mexican food will be grateful he chose the latter.
He got together with Thomasina Miers, the 2005 winner of the BBC’s MasterChef series, and together they opened the first Wahaca in Covent Garden in 2007. But where did he get the name from?
‘I’d been travelling in Mexico when I was 18, and got my A-level results standing in the main square of Oaxaca,’ he explains. No one in the UK would know how to pronounce that, so it became Wahaca.
Though many openings followed the launch, he has never experienced inflationary pressures like now. And not just from Brexit and sterling’s weakness. It’s largely down to Government policies. ‘Business rates on our Covent Garden site have gone from £85,000 a year to about £260,000,’ he says, and it’s not just London.
‘We are in Cardiff, Manchester, Chichester, Edinburgh, Liverpool, Dartford, Southampton and Brighton, and not one of them has seen rates decrease.
‘Across all our sites, we reckon business rates will have gone up 40 per cent by 2020, and some are jumping 25 to 30 per cent straight away. In Central London it’s crazy.’
In total, Wahaca will pay an extra £700,000 in rates this year alone.
‘The Government doesn’t realise how many businesses it’s killing around the UK. It’s hideous. We will get through it, but it’s made us look at our expansion plans and it makes some sites less viable.’
The new National Living Wage is driving up costs too. The wage bill will rise 4 to 5 per cent this year.
Selby also faces big rent rises. He says: ‘We’ve had two rent reviews recently, one raising the rent in Covent Garden from £140,000 to £400,000 a year, the other in Soho, raising it from £400,000 to £1 million a year, which we are still disputing. ‘There is huge cost pressure. It’s unprecedented. We are looking at a cost increase this year of £1million to £1.5million on turnover of £45 million. That is a big hit.’
The question is whether he will pass it on to consumers.
‘We are going to have to put prices up a couple of a per cent,’ he says. But prices would have to rise 10 per cent to offset the cost increases, which Selby thinks too high for the consumer. So Wahaca ‘will take a hit on profit’.
Another worry is immigration post-Brexit. Only a quarter of his 1,200 staff are British. He says: ‘We recently opened in Chichester and found it really hard to find staff to work there, even in management.’
So where is he going to find staff once the UK leaves the European Union? He says: ‘I have no idea. The entire industry will be hit.’
At least Selby is used to crises, having launched Wahaca at the start of the financial crisis when consumers faced their worst squeeze in income since the Great Depression. Yet Wahaca has thrived as well as some of the 7million chilli seeds it has given to customers to plant after each meal. Another three or four restaurants will open this year.
Selby spent the first two years of his career at US investment bank Merrill Lynch, learning to model how businesses works. He went on to work for easyJet founder Stelios Haji-Ioannou on business development and projects such as easyGym and easyHotel.
He learnt the restaurant trade from the founders of Nando’s, Robert Brozin and Fernando Duarte. They must have liked him because when he set up Wahaca, they took a stake and funded his plan, as did Adam and Sam Kaye, the brothers who set up Ask and Zizzi.
Selby thinks the market for Mexican food is just getting going. He says: ‘When we started ten years ago there was no good Mexican food. People went to Mexican restaurants to slam Tequila, drink Margaritas and get drunk.
‘But Mexico has an immense history and culture of food – cocoa, chillies, tomatoes, vanilla, squash and avocados are all indigenous to Mexico. It is the third most biodiverse country in the world when it comes to food. The Mexicans were cooking with tomatoes before the Italians. Yet no one knew about it. ‘In ten years, we want tacos to be as popular as pizza or burgers.’
Selby’s favourite dish is the pork pibil taco, Wahaca’s best-selling dish with 1million sold last year. As the business brains, he couldn’t explain how to cook it, though he eats at Wahaca ‘pretty much every day’. Though the father-of-three spurns Tex-Mex drinking holes, he says he is ‘very evangelical about tequila’, adding: ‘If people come for dinner, I get them to try my 40 tequilas at home. Good tequila is amazing.’
If you go to the opening of a Wahaca you are likely to see Selby handing out glasses of the drink. Perhaps it is the shot he and the restaurant need in troubled times.
The Government doesn’t realise how many businesses it’s killing around the UK. It’s hideous