Why Jamie Oliver's restaurant chain ran into trouble

September 05, 2018 08:18
High costs and relatively moderate prices proved a bad mix for Jamie's Italian, the restaurant chain promoted by British celebrity chef Jamie Oliver. Photo: Jamie's Italian

One day three years ago, I went to Jamie's Italian in Causeway Bay to have lunch with friends. We were all highly satisfied with the food, the ambience and the service. Also, the meal only cost us HK$2,000.

At that time, one of my friends, a veteran in the restaurant business, wondered how Jamie's Italian is going to make money, considering the high food-quality and the relatively low price.

My friend was quite right, as the British celebrity chef Jamie Oliver revealed last week that his Jamie’s Italian business empire had been on the brink of bankruptcy in the latter half of 2017.

Things got so bad that Oliver was forced to inject nearly 13 million pounds of his own cash into the business to rescue it, he told the Financial Times in an interview.

Looking at the industry as a whole, there have not been too many cases where medium- to high-end restaurant chains have scored huge successes.

Jamie's Italian was founded in 2008. It soon expanded to over 40 restaurants in Europe, North America, Singapore, Hong Kong and Shanghai.

However, trouble began to surface since 2014. Up to 40 percent of its outlets have been suffering from heavy losses. The situation hardly improved even after a restructuring.

Oliver revealed that he put in 12.7 million pounds of his personal funds to keep the restaurant chain from going belly-up.

Even with a personal fortune estimated at 150 million pounds, the celebrity chef may not be able to keeping propping up such a hemorrhaging business.

The 43-year-old chef said he had concluded that a few factors led the chain into difficulty, including overly aggressive expansion, wrong locations and insufficient talents. Also, he overestimated his ability to manage the chain properly while writing books and doing TV shows at the same time.

Oliver is an advocate for food revolution, bringing healthier eating to communities, schools and homes across the world. He values the original taste of ingredients and uses local fresh food with simple and healthy cooking skills. His food philosophy makes him stand out in the industry.

The majority of his restaurant outlets are self-operated, and all food ingredients have to be organic and properly sourced. For example, all meat used in his restaurants has to be sourced from free range cattle. Such policies naturally lead to higher procurement and administration costs.

Positioning itself as a place for casual dining, the pricing of Jamie's Italian is about mid-range, and far below those of outlets for fine dining. That makes it difficult for the restaurant chain to absorb the high expenses and stay profitable.

This article appeared in the Hong Kong Economic Journal on Sept 4

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist