Entrepreneurship Case Study
David Levin and The Capital Group
The First Steps: Up to 1969
The initial desire
David Levin was born and grew up in the close
Jewish community of Pollokshields, a leafy suburb
of Glasgow, Scotland, the son of an electrical
wholesaler. Home life was comfortable but
constraining and the young boy longed to escape
its confines. He resented school and admits to
being a difficult student, thinking that it was a
complete waste of time; few of the subjects
taught seemed to have any relevance. Family
holidays in the resort hotels of Britain after the
war provided the young David Levin with his first
glimpse of hotel life and the possibilities that it
offered. He was fascinated by the Hotel Patron;
master of all he surveyed, never accepting
anything less than perfection in order to deliver a
memorable experience for customers.
His father and the friends of his father were in
business and David grew up understanding the
values of working hard to achieve personal goals.
This led to him seeking work, whilst in his mid-
teens and still at school, at the local Central
Hotel’s Malmaison restaurant, which very quickly
reinforced his view that this was not only a
world he wanted to be part of, but also
something at which he could excel. It became his
ambition to not only get into the hotel business,
but also to one day own his own luxury hotel.
In those days, although there were four-year
apprenticeships for chefs, a career in hotel
management could only be initiated by a spell at a
Hotel School. Therefore, against the wishes of
his family, in particular his father who went ‘mad’
Hospitality, Leisure, Sport and Tourism Network, May 2005
at the news, having harboured ideas that his son
would study for a more professional career;
David attended the Glasgow Hotel School (now
the Scottish Hotel School, University of
Strathclyde). The Hotel School proved to be a
reprise of David’s experience of school, boring
and irrelevant. From his brief time working at the
Central Hotel, he was only too aware that
learning how to unblock a vacuum cleaner and
120 ways to prepare potatoes was going to be of
little practical assistance to him in future years!
Hopeful that things would look up when it came
to the study of wine, he was disappointed to
discover that it involved identifying and learning
35 soil temperatures from the wine growing
areas around the world.
A career in hotels
The learning really began for David Levin when
he joined British Transport Hotels (BTH). The
company were quick to acknowledge his talent,
enthusiasm and his knack of knowing what
customers wanted and delivering it. As part of a
large hotel group, opportunities to be
entrepreneurial in these early years did not
present themselves too readily. However,
experiences were reflected on and analysed, and
the lessons implemented wherever possible.
At the age of 27, David rose to be BTH’s
youngest general manager - of the humble
Lochalsh Hotel in the north of Scotland. This
promotion had all the indications that it was a
poisoned chalice. Before his arrival, the Lochalsh
Hotel was notorious within the company as
having the worst food and was indeed the worst
performing hotel in the company. However, it
-1-
 was to prove the pinnacle of his career with
them. His turnaround of this location, in a single
season, remains something of which he is still
tremendously proud.
During his time with BTH David learned key
lessons, the benefits of which have stayed with
him throughout his career and which were
distilled into his philosophy of providing high
standards of service with a very personal
management style. It was at Lochalsh that David
Levin developed a passion for food. Since his
early days of part-time employment at the
Malmaison he had always been interested in
foods from around the world, but in Scotland
this interest grew into a passion. In addition, the
confidence gained from his personal success at
the Lochalsh was to prove a strong influence on
the decision to finally realise his ambition to run
his own operation.
In common with many learning opportunities,
lessons included what not to do, as well as what
worked. David’s ideas about what worked
included a realisation that small could be
beautiful. Being able to know the names of the
customers and the staff made a significant impact
on the quality of service that a hotel was able to
offer. This was at a time when the really
successful hotels were big, often called on to
subsidise the smaller properties within the
Group.
Inevitably, Lochalsh being one hotel among many
in the Group, the priorities of senior
management focused on the collective
performance of the properties as a whole, over
and above the success of any one location; there
were also concerns regarding whether David’s
successor at Lochalsh would be able to maintain
the level of performance he had achieved. Such
short-sighted objectives convinced him that he
could not continue to work for anyone else and
that the time had come to go it alone; to put all
In the village community, David set out to form
strong bonds with his neighbours, going out of his
way to minimise the inconvenience to them from
Hospitality, Leisure, Sport and Tourism Network, May 2005
that he had learned into practice and prove that
he could make money for himself.
The term ‘entrepreneur’ at that time had a very
different connotation. Today, it is associated with
such role models as James Dyson, Richard
Branson and Anita Roddick. In the 1960s and
early 1970s, it was a derogatory term with
entrepreneurs such as John Bentley, Jimmy
Goldsmith and Jim Slater having very negative
press in the UK. They were thought of more as
asset strippers, people ready and eager to profit
out of other people’s misfortunes. This misery
was precipitated by the business environment at
the time, which saw inflation levels of 4.7% in
1965, rising to a staggering 19.5% in 1975. With
so many companies going into receivership, there
were rich pickings for businessmen with vision
and courage, but this did nothing to endear them
to the public at large. This notwithstanding, these
were turbulent, risky times and David Levin was
regularly being advised by friends and
professional advisers, not to take such risks, but
there was a drive to succeed that burned in him.
Start-up: the first business
The long term strategy for David Levin’s first
business venture was to make money in order to
fund his real ambition, to own a small luxury
hotel in London. He was looking for a suitable
location in, or within striking distance of, London
and so it was that in 1964 he bought a run-down
country pub, The Royal Oak, in Yattendon,
Berkshire and became his own boss for the first
time. He was struck by the village of Yattendon,
although many would not have considered it a
great place to start their first business. David saw
real potential and opportunity. Yattendon was a
pretty, traditional English village, with a cricket
pitch and church. At that time it was still able to
maintain a baker, a butcher’s shop and traditional
craftsmen. As a result, many people had reasons
to travel to the village. He felt it had all the
ingredients to support a successful country pub
with a restaurant and eight letting rooms above.
what he was confident would be a successful
business. He knew that success would depend on
looking after the people round about; providing a
-2-
car park for patrons was seen as a priority in
order to keep cars off the narrow village roads. In
return, the village enjoyed a hospitable venue for
coffee or something stronger, and a chat, cashing
cheques, buying milk. This was in addition to a
quality eatery and the added prosperity that
guests to the hotel brought to the village.
It is important at this stage to understand the
business environment in which David set about
developing The Royal Oak into the success story
that it was to become. This was a time when,
generally, the only food sold in pubs was crisps,
pickled eggs and peanuts; long before the advent
of ‘pub grub’ or ‘gastro pubs’ that we take for
granted today. Even drinking a cup of freshly
brewed coffee in a pub was unheard of!
David Levin’s concept of providing good food
available from innovative menus in a pub
environment was totally new. In those days if you
wanted to eat you went to a restaurant and if you
wanted to drink you went to the pub. Far from
consciously going against the prevailing trends,
David saw opportunities where others saw none;
he did his own thing; introduced new ideas; new
ways of doing things; driven always by the
determination to deliver, continually improving
customers’ satisfaction.
just a country pub, it was at this time that David
Levin was to be grateful that he had taken such
care to woo his neighbours in Yattendon and the
surrounding villages; they were to be his salvation
in the months following the introduction of the
breathalyser.
David put up just over 20% of the investment
required for the pub, with the balance provided
by a loan from Barclays Bank, and everything that
the Levin family owned had to be used as security.
By the end of the first year of trading, there was a
mention in the Good Food Guide and a net profit
of £14,000. He had also repaid all the money he
had borrowed and recouped his personal
investment. Failure never crossed his mind; David
Levin prefers to think of business ‘risk’ more as
business ‘opportunity’.
The success of The Royal Oak was not only
financial. For David, success could also be
measured by the wholehearted acceptance of his
radical ideas and by maintaining his philosophy of
combining the highest standards and attention to
detail, with personal service to an ever increasing
army of loyal customers.

The economic situation in the UK was unsettled.

Inflation was running at 4% and rising fast and the
new labour government under Harold Wilson
was in power, passing legislation that was
perceived as attacking the business community.
One example was a change in the way that
corporate client entertaining was taxed. Another
of the government’s initiatives that was to have
serious implications for The Royal Oak was the
introduction in the breathalyser in 1967. This
legislation was to change the way that people in
the countryside spent their leisure time. A night
out further away than walking distance, took
more planning now that it involved car sharing or
getting a taxi home. This legislation obviously had
far-reaching effects on country pubs that had
relied on visiting trade as well as the locals.
Although more of a destination restaurant than

Hospitality, Leisure, Sport and Tourism Network, May 2005 -3-

Moving On: 1969 – 1995
The operating environment
It became obvious towards the end of the 1960s
that hotel capacity in London could not keep up
with demand. Such was the urgency to increase
the number of hotel rooms that a £1,000 per
room non-repayable grant (equivalent to
approximately £10,100 in 2005) was made
available to developers by central government.
Following the Development of Tourism Act;
developers could not build large hotels fast
enough. This urgency was precipitated by the
introduction of the jumbo jet to commercial
service; leading to the arrival in the capital, of
visitors in larger numbers than had ever been
possible before.
This goes some way to explain why, during the
twelve-month period that The Capital was being
built, twenty-seven other hotels also opened. The
Capital was by far the smallest; the other 4 and 5
star hotels included the Tara, the Intercontinental,
the Forum and the Inn on the Park. These large
hotels offered minimal levels of service. Ice was
now available from machines on the landings.
There were shoe-cleaning machines and coffee
shops replaced hotel restaurants.
The Capital
It was against this backdrop that, in 1969, David
Levin came across a development site on Basil
Street, a small wedge of land on a quiet residential
street in the heart of London’s Knightsbridge. His
business idea was to create a luxury hotel with 60
rooms offering a very personal service with great
attention to detail. It would operate according to
his longstanding philosophy of providing the
highest standards of customer care, second to
none. As well as the obvious target market of
business and leisure high-net-worth travellers, the
solo lady guest was a sector of the market which
he had noticed was not catered for in hotels at
that time. In fact, these guests were looked on
with great suspicion. The location in Basil Street
would be perfect for this market he surmised,
being between Harrods and Harvey Nichols.
Hospitality, Leisure, Sport and Tourism Network, May 2005
David was realising his dream of owning a small
luxury hotel, offering a highly personalised service.
True to form, he stuck to his belief in the
traditional concept of hospitality; excellence at
the luxury end of the market with ideas for new
ways of delivering satisfaction for his guests. He
was totally focused on his plans. There is no
doubt that the development of this type of hotel
went against the prevailing trend at the time, of
opening large scale ‘bed factories’.
David had always intended that there should be a
restaurant within the hotel, although not a ‘hotel
restaurant’, rather a destination in its own right.
In fact he has often referred to The Capital as a
restaurant with rooms above. At a time when
French cuisine, with its roots in Escoffier’s
Repertoire de Cuisine, was the only food worth
eating in London, David Levin designed the hotel
‘around a chimney’ so that a charcoal grill would
become an intrinsic part of the cooking process.
He wanted to provide a limited menu offer to be
based on simple grills using the finest ingredients;
“I did not want to serve 15 different versions of
Dover sole – I could not bear any of that”
(Caterer & Hotelkeeper, 2000).
The building of the Capital Hotel started in 1969,
the Royal Oak was sold in 1970, and the hotel
opened for business in May 1971. Leaving
Yattendon meant not only that he had to buy a
home in London for his growing family, but also
that he had no income for 18 months until the
hotel opened. To purchase the lease and cover
development costs he borrowed £500,000 from
Barclays Bank. Together with the government
grant and the proceeds from the sale of the Royal
Oak, The Capital was born. Building costs were in
the region of £1,600 per room and room rates on
opening were £15 for a double room and £10 for
a single room; this when the average income per
household in the UK was in the region of £50 per
week.
The hotel was and remains very profitable,
because, David believes, everyone who works
with him cares about the service provided, which
is after all, what hospitality is all about.
-4-
Background and prevailing environmental
factors
In the time since the hotel opened it has traded
through an increasingly turbulent operating
environment. It has coped with rampant inflation
in the mid-seventies; the three-day week and IRA
terrorism in the late seventies; strikes by power
workers and the recessions of the early eighties
and nineties and, more recently, the impact on
international travel and tourism of 9/11 and
subsequent conflicts.
All organisations are affected by the same factors,
but what defines competitive advantage is the way
that organisations respond to these
environmental factors. The response of David
Levin has always been to take the opportunity to
reinvest in the hotel by updating and refurbishing,
maintaining service levels (and prices) so that they
are ready for when the cycle kicks off again, as it
always does. True to form, in the autumn of
2004, The Capital restaurant and bar were
relaunched following an extensive redesign.
In 1981 David had turned his attention next door
in Basil St and bought out the lease of a
neighbouring tenant. He opened L’Hotel, an
original 12 bedroom ‘boutique’ hotel, followed in
1983 by the Metro wine bar next door. In the
fullness of time, this expansion provided a market
for wine, produced from The Levin Winery in
France, following the purchase of a vineyard in
1990. The first wines were produced in 1992,
using the region’s co-operative winery. In time,
David opened his own winery, importing
production equipment from Australia. Since 2003,
his range has included his own Le Vin.
Growth realisation
In the mid 1970s, six years after the opening of
The Capital, David Levin was looking for
additional storage for the hotel and came across
some ground floor space in an eight-story block
of flats in Hays Mews, around the corner from an
all night taxi garage. It slowly dawned on him that
the space would actually make a wonderful
restaurant, although the access to the space was
less than auspicious, squeezed in as it was
Hospitality, Leisure, Sport and Tourism Network, May 2005
between the towering flats in a mews that few
people other than taxi drivers had ever heard of.
He had been looking for another business
opportunity; having made a success of the Royal
Oak and The Capital, but the big question was
whether he could run two establishments. This
was an enormous step; his advisers were warning
him not to put his reputation on the line, believing
that it was destined to fail. He also had a battle
with the local residents, who successfully had his
initial planning and licence applications turned
down. This dispute was only resolved when David
Levin lodged an appeal in the High Court.
David Levin assembled the cash for the
development of the 100-cover Greenhouse
restaurant from personal investment with the
help of an £80,000 loan from Barclays Bank. The
restaurant opened in the heart of Mayfair in 1977,
with a focus on good traditional British fare,
majoring on such British staples as roast beef and
Yorkshire pudding; braised oxtail and bread and
butter pudding - people used to cross London for
the ‘fish-shop’ chips.
David was also planning something slightly
different for the ambience. All of the chairs were
different and he had an upright piano converted
into a dumb waiter. This was all to create a more
comfortable, less ‘starchy’ atmosphere. The
narrow entrance was developed into a garden;
this helps to keep the eyes down rather than
being drawn up by the towering flats. This has
worked so well that the majority of the diners
never notice the ugly buildings on either side.
The first head chef was PJ Ryan (with assistance
from Brian Turner who was still Head Chef at
The Capital). PJ Ryan remained as head chef, until
he left to open his own restaurant in 1991, to be
succeeded by Gary Rhodes. The Greenhouse was
first of its kind in so many ways: although
relatively common-place now, a 100 cover
restaurant in 1977 was unheard of, as was the
focus on English food and also the out-of-the-way
location with absolutely no passing trade. It was
the original ‘destination restaurant’.
-5-
In the late 1980s the offer was developed further.
The Greenhouse had been a location for business
entertaining, available Monday to Friday, but now
the weekend was emphasised as well. Saturday
dinner opening was extended to Sunday lunch,
and then to Sunday dinner as well. This made the
Greenhouse more attractive to the local
residents, with a menu described by Joe Levin
(son of David Levin and heir apparent) as ‘Gary
Rhodes meets Brasserie’, not constrained by the
normal three-course dictates; diners could have
two starters or just a main course…whatever
worked for them.
The restaurant enjoyed wide acclaim and the
accolades rolled in, including a Michelin star and
Restaurant of the Year. It was also spectacularly
successful financially; each successive year brought
increased profits and by 1996 it was making
£500,000 per year, clear profit.
Letting The Greenhouse go
It may be surprising therefore, that in the wake of
an offer which was too good to refuse, the
Greenhouse was sold in January 2002 to Marlon
Abella, who has totally changed the ambience of
the space and the menu. But significantly, The
Greenhouse name remains. The key to
understanding this decision comes when hearing
how David measures success.
David Levin’s response was “peace of mind and
success allows me to go on to the next project”!
More specifically, a simple rule of thumb he
employs is that in each successive year the Group
should be worth £1million more than it was
worth the previous year. However, like all
entrepreneurs, he has a strong need for
gratification, some recognition of achievement.
His appetite has been sated in that respect with
the many industry accolades with which he has
been feted; Restaurateur of the Year 1991;
Hotelier of the Year 1994. In the citation for both
these awards the judges praised him for his
leadership, inspiration, development and handling
of staff, particularly chefs.
Hospitality, Leisure, Sport and Tourism Network, May 2005
He also shares in the reflected glory of the
accolades enjoyed by the members of his team –
Michelin stars for The Greenhouse and The
Capital; Le Metro Café won the Café Crème
Award for the best café in Britain (2000) and The
Capital restaurant won the Hotel Restaurant of
the Year (2004). This last award brings particular
pleasure, as it is voted for by the restaurant
industry. Also in 2004 The Capital restaurant was
award by Wine Spectator, the ‘Best Of’ Award of
Excellence (2004) for its wine list.
Less heralded perhaps is the major part that
David has played as ‘midwife or impresario’,
nurturing culinary talent over the years. Richard
Shepherd (now Langan’s) was brought from The
Dorchester where he was Larder Chef, to open
The Capital Hotel; he was followed by Brian
Turner (ex Turner’s and TV Chef) who was Head
Chef at The Capital Hotel for 16 years before
moving on to open his own restaurant. His
successor, Philip Britten stayed as Head Chef for
11 years. Therefore, just three chefs have been at
the helm over a 34-year period, during which time
The Capital restaurant has shown sustained
excellence. In 1973 the Michelin Guide was
launched in the UK and The Capital, together
with the Connaught and the Inter-Continental
were the first to be awarded a Michelin star in
1973, with a second in 2000. Gary Rhodes (City
Rhodes and TV Chef) was Head Chef at The
Greenhouse for 5 years before, with the backing
of Gardner Merchant (now Sodexho), he set up
City Rhodes.
David takes great pride in the fact that he is ‘still
there’. All except one of the 27 hotels which
opened at the same time as The Capital in 1971,
have changed hands since he created the discrete
hotel in a residential back street of Knightsbridge.
Building on what he has achieved, David has
embarked on many business ventures but never
the same concept twice. His fervent belief that
there was more money to be made per room out
of a small efficiently run hotel extends to his
restaurants where he has never fallen into the
trap of packing in the tables to increase patronage
-6-
at the expense of comfort, service and ambiance.
“Better to have fewer tables in a restaurant, even
if that means turning custom away”.
Money, according to David Levin, has never been
his sole motivation. He never set out to be a
millionaire; eighteen months after The Capital
hotel opened, he refused an offer of £2.5m for
the hotel and ‘the idea’, and there have been
many offers made since. The Capital is the brand,
its name and its image.
David believes that success has come as a result
of identifying markets and seeing opportunities
that others did not, and going for it with an
unswerving belief in the fact that he would
succeed; never letting any obstacle stand between
him and his vision. Failure was never an option.
Creating something new and staying focused;
“feeling, rather than knowing”, or entrepreneurial
‘radar’ as David describes it.
Hospitality, Leisure, Sport and Tourism Network, May 2005
Joe Levin: The Heir Apparent
Early home environment
When Joseph Levin was born, the family were
developing the Royal Oak at Yattendon and the
story is that Joe’s name was put down for the
Lausanne Hotel School in Switzerland very soon
afterwards. From a very early age, there was a
desire by David Levin that his son should join him
in the business. During Joe’s formative years, he
spent much of his leisure time working in the
business. At the Royal Oak in Yattendon he
would sort out the bottles, putting them into the
right crates. Later on he was often to be seen
behind reception at The Capital in the school
holidays.
This exposure at first hand to the entrepreneurial
activity of his father, may have rubbed off on him,
although both are keen to point out that
entrepreneurs, in their opinion, “are not born,
they are inspired”. Joe would have observed at
first hand the importance of thinking of new ways
of doing things and an attention to detail in the
delivery of a personal service, which has been the
hallmark of his father’s success.
While at school, Joe took great comfort in the
fact that he knew, with some certainty, what he
was going to do when he grew up. While it may
seem to the outsider that Joe’s progression in the
business was a foregone conclusion, both he and
David are keen to point out that he could have
gone off and done his own thing at any point.
The master plan
On leaving school at 18, before ‘gap’ years were
heard of, Joe went to Australia to work on a
vineyard and learn about wine first hand. Then
followed the only experience Joe has had of
working outside the family business with a spell
‘back of house’ in the Ritz in Paris, and the Vier
Jahreszeiten hotel in Hamburg, Germany,
ostensibly to learn French and German before
going on to the Lausanne Hotel School, where
fluency in European languages was essential. This
extended on-the-job training concluded with a
nine-month stint at The Stamford Court Hotel in
-7-
San Francisco. There was nothing haphazard
about the selection of these properties by David
Levin to develop and inform his son. Indeed, it
was not so much the properties but key people
within them, who were identified as being
examples of excellence in their respective fields.
These were key mentors chosen to inspire Joe in
specific areas of the business.
In many ways, Lausanne Hotel School was for Joe,
as the Glasgow Hotel School had been for his
father. Such was his experience of the industry
he knew that learning such things as 400 soup
varietals was going to have little real practical
application in his ongoing career. Graduating from
the Hotel School did, however, open other doors
for him, in terms of providing a network of
contacts throughout the world.
Having graduated from Lausanne in 1989, Joe
returned home to be given the job of running
L’Hotel and Le Metro Brasserie and Wine Bar
next door to The Capital in Basil Street,
Knightsbridge. The diversity of the Capital Group
was such that by the time Joe graduated, every
aspect of the industry that he needed experience
of, was right on his doorstep. His carefully
planned development continued with two years at
the Greenhouse and a similar period of time at
the People’s Palace, which he conceived and
mobilised from scratch.
Totally au fait with front of house operations, the
final stage of his on-the-job training was to involve
working closely with his father in the ‘head office’
of this increasingly complex organisation. An MBA
at Ashridge in 1997/8 was the final piece in the
jigsaw and Joe returned from his sabbatical to
assume the title of Managing Director of the
Capital Group in 1999.
Hospitality, Leisure, Sport and Tourism Network, May 2005
New Challenges – The People’s
Palace: 1995 - 2005
The challenge
Within the Festival Hall on the South Bank in
London, the People’s Palace presented a different
challenge. It occupies a wonderful, albeit hard to
find space and has an unrivalled view of the
Thames. It had operated as a restaurant under a
variety of proprietors since the building was built
in 1951 for the Festival of Britain. Surprisingly, it
had never been a commercial success.
The lease on the restaurant in 1995 was primarily
taken up as a commercial decision. It presented a
viable opportunity, because they had the
resources at the Greenhouse in the form of Gary
Rhodes and other members of the management
team ready and waiting for the next step in their
development. It also presented a wonderful
challenge. Could Joe Levin succeed where others
had failed?
The management of the Royal Festival Hall (RFH)
were looking for a stand-alone restaurateur who
had an understanding of the London restaurant
scene, as opposed to an understanding of the
RFH. They were looking for the development of a
destination restaurant that would attract patrons
to the venue and provide added value for the
existing regulars at the Hall. At that time, the
South Bank was very underdeveloped both in
terms of commercial infrastructure and draws for
tourists; the London Eye and the Aquarium were
still five years off. The RFH management were
therefore not overly optimistic of the area’s
potential and resigned to the poor performance
of the restaurant. So much so, that when David
Levin took over the ten year lease, the first two
years were rent free and thereafter relatively
small for the opportunity presented.
This new enterprise was too good an opportunity
to miss for David Levin. He could see the
opportunity to create something unique, despite
the previous failures of the great and the good in
the restaurant world before him. Funded, as usual,
by a combination of personal investment and a
-8-
loan from Barclays Bank, the move to operate
The People’s Palace was part of a carefully
conceived plan by David to develop Joe, then aged
29, within the business and to expand the Capital
Group. Having already been responsible for the
running of The Greenhouse, by his late 20s, it was
planned that Joe should be involved in the ‘birth’
of a new business. The development of the
restaurant from scratch therefore became his
responsibility. It was Joe who came up with the
name, managed the in-excess-of £750,000
investment by the Capital Group and got the
restaurant up and running, continuing in an
operations role for the two year bedding in
period.
The People’s Palace opened in 1995. The public
space is large and airy and although capacity is 240
covers, the size of the kitchen is such that it can
only really effectively cope with 200 covers in a
sitting. Where the Greenhouse had been the first
large restaurant of its type in London with 100
covers, by 1995 the Conran Gastroempire had
already started, with the opening of ‘mega’
restaurants such as Quaglino’s and Mezzo.
The dynamics of running such a high volume
restaurant are totally different from those that
impact on a smaller restaurant. The emphasis at
The People’s Palace is on volume at a price that is
sensitive to the people who go there. Originally,
there was a need to provide for the needs of an
audience who are not necessarily primarily
coming to eat.
The offer
The menu concept was very simple and low key
with a ‘value’ offer; The People’s Palace set out to
exceed expectations in an environment where
expectations were traditionally low; the concert-
going audience were pleasantly surprised from day
one, word spread and a fiercely loyal customer
base has developed as a result. Gary Rhodes,
already a household name, oversaw the opening
of the restaurant while maintaining his
responsibilities at the Greenhouse. He developed
the menu as well as the recruitment and
development of the kitchen team. The menu
Hospitality, Leisure, Sport and Tourism Network, May 2005
concept had its roots in the Greenhouse’s ethos
of passion and quality, and was loosely based on
the weekend ‘Gary Rhodes meets Brasserie’
dishes, which had been introduced so successfully
at the Greenhouse for weekend diners.
It was perfect for the RFH clientele who
represented a real cross section of society; this
menu, available throughout the week, ensured
that there was something in it for everyone. The
detail was driven very much by the operational
constraints of the facilities of the RFH; everything
has to come up three floors in a lift, limited
storage, production space and equipment,
capacity etc. Quick production methods
maximised customer throughput and therefore
capacity, using the best possible ingredients and a
fast service ensured customer satisfaction and
loyalty.
Financial success
The restaurant was an immediate success
returning profits after nine months with
consistently increasing profits year on year
thereafter. While the initial objective of the RFH
may have been to create a destination restaurant,
for the first few years 80-90% of the covers in any
given night would have been members of the
audience. This results in the ‘captive audience’
being contingent on the programming in the Hall
and inevitably business is affected when the more
obscure events are scheduled. In order to
minimise the negative aspects of this, a strong
marketing initiative was launched to extend
patronage based on their loyal customer base,
beyond the audience. This proved such a success
that currently the audience represents only 60%
of evening diners.
As the clientele generally has become more food-
focused, the menu has developed and even
expanded! There are now quite distinct dining
experiences throughout the day - business
lunches, pre-theatre diners and destination diners
are each offered a different menu style and speed
of service and overall experience, each designed
to meet the particular priorities of each market
sector.
-9-
The management team at The People’s Palace see
their ability to make quick decisions as a key
competitive advantage and the operations
processes are driven from the customer’s
perspective. They can respond quickly to
feedback from customers, collected by talking to
people, formally and informally. The facilities are
also audited by the RFH with mystery diners and
questionnaires. For example, for the first six years
of trading The People’s Palace restaurant did not
have tablecloths, but they were introduced after
discussions with patrons. Apart from the
additional cost, the logistics of managing cloths for
a 200 cover restaurant open for lunch and dinner
7 days a week, with limited back of house facilities
and three floors up is not a simple issue, but
because it was important to their customers, it
was important to them.
Evolution
The contractual arrangements with the RFH have
evolved over the years, with the recent addition
of the bars contract which is operated on a
management contract (as opposed to a lease
arrangement). This has been phenomenally
successful for both parties; financially and in terms
of service to the audiences and visitors alike.
Although initially there were economies of scale
for Joe and his team in the operation of these
bars throughout the RFH, they are now operated
independently and as such, can form the basis of a
stand-alone contract and still be financially and
operationally successful. There is also revenue
potential from the two pavilions available for hire
to the general public for events, where they can
be asked to provide a catering service.
The ten-year lease at the RFH has now run its
course, and as you would expect, Joe has many
ideas about how to respond to the challenge.
Proposed Timetable:
• January 2005 – Tender published
• June 2005 – Building closes for 18
months
• 2007 – Contract awarded
Hospitality, Leisure, Sport and Tourism Network, May 2005
There is no doubt that, in many ways but
particularly financially, the results have far
outweighed even David’s expectations, and the
modest contribution paid to the RFH is obviously
not going to extend to the new deal. Neither will
the ten year lease arrangement, which will be
replaced with a 5-7 year management contract,
with far more control coming from RFH
management. New spaces are also being put over
to foodservice, targeted as much to the passing
pedestrian on the South Bank, as to audiences and
visitors to the RFH. These will significantly
change the dynamics of the competitive market
and the concept potential for the space currently
taken up by The People’s Palace; enhanced, lower
priced, wider ranged fare with lower overheads
and a wider potential market not so tied in with
the scheduling of the Hall. The kitchen, installed
by Joe as part of their initial investment has
reached the end of its useful life and therefore, on
all sorts of fronts, the scene is set for major new
opportunities.
One thing is clear however, The Capital Group
will not be basing their bid on preserving the
status quo, believing that The People’s Palace
format is due for a change.
- 10 -
What does the future hold? 2003
onwards
Continued growth, diversification and change
For the Capital Group, continued growth does
not necessarily just mean financial growth,
although loss makers are not seen as at all
satisfactory either. Growth realisation within the
Capital Group is thought of more in the context
of ambition. There is a five year plan but it lives in
Joe’s head as opposed to gathering dust on a shelf.
It is clear that in recent years, Joe has driven
diversification within the Group; moving away
from the core business of hotelier and
restaurateur. The Group now includes semi-
related enterprises including:
• The London Bakery: Set up in 2003, in
partnership with a master baker to
provide a quality product not only for the
hotels and restaurants within the Group,
but now operated on a commercial basis
and available to other quality restaurants.
• Liquid Assets: Offering the existing in-
house sommeliers as a resource to wine-
loving individuals for the appraisal and
management of private cellars. This was
started in 2003.
• The Levin Winery: Developed in
partnership with a master winemaker,
located in the Loire valley, France, with
the first harvest in 2003.
• Munch: An in-store café concept
developed exclusively for Habitat. The
Kings Road branch was the first one to
open in September 2004, with two more
to follow in London.
• Management Consultancy: started in 2003,
making available the skills, experience and
expertise of the key members of the
Capital Group’s management team, to
clients. As a spin off from this, an
operating management company has been
set up which offers more long term
resources and support to clients; not just
advising on what can be done, but putting
it into practice on their premises over
Hospitality, Leisure, Sport and Tourism Network, May 2005
the long term. They currently run an
outlet in Kensington Gardens as a joint
venture. Since January 2004, the
management company has had a contract
to provide food, beverage and bar
services for all members and visitors at
the British Academy of Film and Theatre
Arts (BAFTA), including their many
hospitality events. This location has
historically been operated by a succession
of ‘contract caterers’ at excessive costs
and with poor standards of product and
service. BAFTA now enjoys the benefits
of all the expertise and skills evident
within the Capital Group; they are
provided with ‘hotel-style’ services in
return for a consideration based on profit
and turnover. This type of service
presents real synergies with the core
business of the Group and there are
many opportunities to poach similar ‘blue
chip’ clients currently operated by the
‘big 5’ contract caterers.
With all their ventures over the years, the Levins
have never done anything the same twice and
they have always maintained an ability to deliver
and change. They passionately believe that they
are much more efficient because they make
decisions quickly. This deft touch keeps their
concepts contemporary with certainly no shame
perceived in their changing minds in the quest for
continuous improvement.
Joe’s long-term strategy is based on a real belief in
long-term goals rather than short-term gains;
“increasing margins is easy”. The focus may
therefore be more about continuing to do what
they do, but do it better, as much as about getting
bigger merely for the sake of getting bigger.
See also:
• Capital Hotels (Thames) Ltd Profit and
Loss Accounts 1995-2003
• The Capital Hotel Trading History 1994-
2004, and 2005 Budget
- 11 -