Loungers is an organisation that has confounded expectations: its modest start as a suburban cafe bar back in 2002 gave no hint of what was to come, but its progress since has been attracting increasing attention, and looks set to attract a lot more.
From a single outlet in 2007, it opened 12 more sites and reached a total of 41 in 2013, and has 15 openings planned for 2014 – with 90 sites expected by 2017. And now there’s also the new Cosy Club concept which is still in the early stages of roll out but targets much higher revenues and larger sites.
Already, Loungers is a considerable hospitality ‘presence’, and one with the stated nationwide potential for 250 of its ‘lounges’ and 70 Cosy Clubs.
H&C News has long been intrigued by the Loungers ‘story’, and therefore welcomed the opportunity to meet Managing Director Alex Reilley and learn more.
It all started in 2007
Spurred on by tales of the cafe bars that flourished in Australia and New Zealand, three friends scraped together enough money to open the first of many ‘Lounges’ in Bedminster, a suburb of Bristol where one of them – Alex Reilley – was living.
Why Bedminster? Because house prices were rising as young, aspirational, professionals were moving into the area – and they presented a market opportunity for the new venture which, like most new enterprises, struggled through the first six months as they worked out what they were doing.
Initially, the aim was to open and run a place that the three owners/operators would enjoy visiting and drinking in themselves: it quickly became apparent that many others shared their view of what was attractive and enjoyable – a hybrid cafe-pub-restaurant.
Just 10 months later – when the first site had barely settled in – the opportunity arose to acquire a larger site in North Bristol. This site was where their food offering evolved and its importance to the business became evident.
At the same time, they also realised that the two sites were attracting all the generations in a community, not just young and affluent professionals – and their all-inclusive community focus was born.
Lounges, in effect, was welcoming and being welcomed by everyone in the surrounding area, from mums with babies to pensioners – a feature which is still very apparent when you visit today.
The Lounges’ style
As can be seen from the illustrations, this is not a sleek, modern look! Rather, it makes a virtue of bumps and knocks by using reclaimed furniture, renovated wood floors, painted walls. There is a sense of heritage, allied to some quirky – even eccentric – touches (look at the pictures on the walls).
But it succeeds: customers are comfortable with the environment. More to the point, they relax and enjoy it as they drink, eat and socialise. It works and, of course, is timeless – the decor and furniture doesn’t go out of fashion and have to be replaced at frequent intervals and considerable cost.
Locations and geography
As indicated above, Loungers has stayed true to the starting concept: sites are located in suburban areas, often in or near a parade of shops, and preferably with the large ‘shop windows’ that enable customers to see in and out. There’s no attraction in premises that are enclosed and inward looking – which is one of the reasons why no use has been made of the old pub premises which, given the decline of pubs in many areas, might seem a ready source of new sites.
Ease of access is also a criterion: mothers with prams and the elderly do not want to have to struggle up steps.
The concept is now also successfully spreading to market town locations, as Loungers expands outwards from Bristol. In time, this means they will arrive in outer London, but there is no rush to do so. For a start, there are many good locations to occupy on the way to London, and then there’s the issue of the higher cost of sites in the London area…
Typically, Loungers take 15 year leases on A1/A2 properties which are converted to A3 with the conversion and fit-out attracting useful attention and publicity whilst it’s in process – helping top attract customers when it opens. But London prices – even in the outer suburbs – can be much higher…And the low cost of rent makes a big difference to the level of revenue at which sites become profitable.
The product offer
The entire menu is available from nine in the morning until closing at eleven at night, seven days a week – which means that chefs have to cover those hours.
And drinks are served by staff, from barista standard coffees (coffee represents ‘only’ about 12.5% of revenue) to cocktails to real ale.
This means that there has to be intensive training for staff, and that there is considerable ‘operational intensity’ in order to deliver the full range of products to the required standards of quality and service. This belies the apparently informal and relaxed style of both venues and staff: there’s a lot of hard work involved in delivering with such success across so many sites.
The competition
There does not appear to be a direct, national competitor, though it seems certain that many operators are taking a close look and perhaps recognising that the concept and its ‘operational intensity’ are not easy to replicate?
At the same time, Lounges obviously are located in areas served by many other hospitality operators – from pubs to wine bars, restaurants and coffee shops. Interestingly, the coffee shop chains can be seen to watch and follow Lounges into suitable locations (and Lounges have been known to follow coffee shops).
Organisation
This is a tightly organised and run operation: there’s no large and over-staffed head office, although there is genuine recognition that with size and scale can come creeping corporatism and centralisation that would undermine both the dynamism and the ethos.
There is therefore a real determination to learn from the mistakes of other organisations that have grown and lost sight of their focus on customers and the ‘proposition’ that built their success. Employing staff who often live in the area helps to keep the operation ‘grounded’. This is reinforced by each site individually using Facebook and Twitter to ‘engage’ with the local community, having real conversations with customers, as well as ensuring that they respond fast and effectively to feedback and comments.
Management
There is a total of 25 headquarters staff: MD, Operations Director, Financial Director (about to become COO), plus a range of support staff.
There is also an Executive Chef with responsibility for procurement, standards, and menu development. Loungers buys British where possible, but recognises that quality and cost do not always permit local sourcing.
And the team of Operations Managers are responsible for supporting 5 to 6 sites each, ensuring that their sites deliver optimum performance.
And the future?
Piper Equity took a minority stake in Loungers in 2012 when two major investors exited the business, and Loungers now expects to have around 90 sites by April 2017 when Piper itself exits.
At that point, a decision on the next step will have to be taken. That decision will, of course, be influenced by the continuing performance of both the Lounges and of the newer, larger Cosy Clubs.
From what H&C News has seen, it is unlikely that the Loungers organisation will be distracted over the next three years either by direct competition or by the present pace of expansion. It’s more likely that its reach will have extended to London and will be starting to ask some interesting questions inside the M25.