EXCLUSIVE: Top Restaurant Entrepreneur Creates New Venture To Take Over Dead Department Stores
The founder of one of the world’s largest chains of Mexican restaurants has set up a new venture to take over defunct UK department stores and repurpose them as thriving mixed-use spaces styled as a public version of Soho House.
Tortilla founder Brandon Stephens is leading the new venture and is in advanced discussions with landlords about signing leases on its first sites.
The venture will not be short of potential sites: Operators like Debenhams and House of Fraser have been closing dozens of stores in recent years and even the sector’s most successful operator, John Lewis, is planning to convert some of its retail space to offices and residential.
Stephens founded Tortilla, which has 41 sites in the UK, in 2007 after moving to London from California to study for an MBA. Unimpressed with the quality of the Mexican food so common in California, he wrote his business school thesis about the possibility of setting up a fast-casual Mexican restaurant chain in the UK, then found backing to turn his thesis into a successful reality.
“Anthem is also born out of a personal need,” he told Bisnow. “It will be a department store of experiences. Like so many people today, I spend my time wandering around, having meetings, trying to find places to get set up and work, like coffee shops or hotel lobbies or members clubs. There is a huge increase in mobile workers, and that will only be accelerated by COVID-19. And there is a huge demand for the kind of experiences we will offer.
“If you think about what people want to do in a day, they want to work, they want to eat and drink, and maybe want to take a fitness class or a wellbeing treatment. So we thought, what would it look like if we created something from scratch with everything people need under one roof?”
Stephens said members clubs and coworking operators provide some of the elements that Anthem would look to offer, but the membership-based business model precludes clubs and coworking companies from offering all of them. Anthem will charge membership fees for some parts of the workspace, fitness and wellness elements, but being open to all is a key part of the business model.
“These uses all benefit from cross-pollination,” Stephens said. “The closest thing to what we’re creating is a Soho House that’s not exclusive. Because of the membership element, in a Soho House or a WeWork you don’t have enough people in the building to be able to offer a food hall or a wellness centre and make it viable. We give up the membership fee but we make up for it by having more people in the venue, and getting that critical mass.”
Project and cost management consultancy Gardiner & Theobald is advising on the creation of the venture.
Stephens has assembled a supergroup of operating partners and advisers to oversee the different elements Anthem will offer. Among a team of around 50 this includes Wonderland Restaurants CEO James Bulmer, former CEO of The Fat Duck Group; Street Feast founder Dominic Cools-Lartigue; Shedid & Parrish founder and former Time Out Markets Commercial Director Jessica Parrish; Epicurean Holdings Managing Director and former Harrods Director of Restaurants Paul Goodale; Techspace chief executive and former Ministry of Sound chief executive Jonathan Bevan; former UKActive chief executive David Stalker; Thurstan Director and former Soho House European Design & Development Director James Thurstan Waterworth; and Purpose Driven Solutions Director and former WeWork Europe Director of Development Andrew Phillips.
Stephens said he will work with this core team to curate the mix of experiences at each site and run the café and bar element of schemes, with expert operating partners running the other elements and the parties sharing the capital expenditure and the profits.
He said department stores are the ideal location for the concept from both a physical and economic standpoint.
“The current operators are not as lucrative as they were, shall we say,” he said. “Landlords were very receptive to us before COVID, and they are even more receptive now. They know they can’t fill this space with retail, and the range of uses and experiences is perfect from a landlord standpoint.
“The size of these spaces is perfect, they are not too tall, so there isn’t too much vertical travel — you have three or four floors with escalators and big open atriums that allow you to look up and down and see the next stage of your journey in the day. If you’re in the lounge, you can see the food hall where you want to go and eat, and when you’re in the food hall, you can see the bar where you might meet someone for a drink after work.”
Stephens said that the long-term goal is to form joint venture management agreements with landlords to take on the management of former department stores.
“But you have to earn the right to do that,” he said. “The first few locations we will sign traditional leases at advantageous terms. We have been offered a few joint venture agreements, but they weren’t in locations where we thought this could work.”
London, Manchester and Birmingham are the targets for the first sites, and if the model is successful there, towns and cities like Bristol, Glasgow and Reading could follow.
Stephens said he is in talks with around a dozen potential investors to back the venture, including wealthy individuals and private equity firms.
“It’s like any new venture, people want to see the first site,” he said. “When we have heads of terms signed on the first site we will go back to people, but there has been a lot of interest.
“There are three parts that all have to work: You need to provide a great experience to the customer, you need to make a return on your capital, and the landlord needs to make a return on their capital.”
He said that different sites would have a different mix of facilities and operating partners, to reflect as much as possible their locations.
“If we have a site in a shopping centre, it might be more tailored to leisure and entertainment, or something in Shoreditch might be more focused on work,” he said.
“Department stores used to be the place where you went to get everything you needed, but as retail evolved, people didn’t need that anymore. The journey to where we are today, where a department store can have 150 identical outlets across the country, is a fascinating one, but it is not what people want. In Manchester, a Mancunian doesn’t want a bunch of London operators coming up and setting up shop, they want local operators and a recognition of what people there want and need.”