Willingham, a former Dragons’ Den investor for two series from 2015 to 2017, says the best business ideas have always come to her when she is on holiday – and Nightcap was no exception.
While in Switzerland in August 2020, Willingham's husband, Michael Toxvaerd, asked her what she was going to do with London Cocktail Club, of which she was a co-founder and investor 12 years prior.
“This was very early on during Covid,” begins Willingham. “There was no vaccine but what we had had was the ability to go out that summer, albeit in a constrained way.
“What we saw was that people really wanted to go out – we are naturally pack animals, we’re social and we’ve been locked up but everybody wanted to go out and have some fun.”
Having been involved in the hospitality trade since she was 13, Willingham explains the scenario as she saw it: “I have never seen anything like what we are about to see. And there’s going to be a couple of things. There is going to be unprecedented demand and we could enter a boom period for hospitality because people want and need it more than they’ve ever needed it.
“And the second thing is, and I've noticed it from my communications with landlords on behalf of London Cocktail Club, is a shift in the balance of power. You could feel it in the conversations we were having with landlords, for the first time the balance of power was switching to the tenants.”
Willingham had spotted a change in the macro environment but also in the way younger generations interacted with the hospitality sector.
“In my day, we used to go to the pub or go to a bar with normal opening hours,” she says. “And from there, we would then go and queue outside a nightclub – this has really changed.
“We were seeing a real shift in people just wanting to go to a bar, have a drink with their work colleagues or their mates, be able to hear themselves think but be in a place that would turn into a party bar later on at night.
“There was also a move away from wine and beer towards the popularity of cocktails where the trends of that market were going much faster than any other drinks category.”
However, there would be an issue down the line other businesses are now facing and that was financing.
The debt conundrum
Stoke-on-Trent-born Willingham says: “All of the help the Government offered such as CBILS (coronavirus business interruption loan Scheme), is going to mean, in order to survive, people in hospitality had to take on considerably more debt.
“Anybody that is financed by private equity or already had quite considerable senior debt are basically going to be run and owned by very risk-averse people. So that means banks or private-equity businesses will say ‘you're not opening anything else’, which leaves a situation where you’d have loads of entrepreneurs, like me, feeling very positive, very bullish about the future, but really constrained by our ability to be able to do anything because of our financial structuring.
“We thought awful balance sheets would come out of this but really solid p&l (profit and loss) because the demand will be there. You’d get businesses that would be trading really well do doing great in terms of the p&l, but their financial structuring would mean it would be very difficult for them to expand and therefore take advantage to pretty market that we saw.
“When we put all of that together, I said to Michael, the only thing I would consider doing is doing what we did 20 years ago, and floating on AIM (London Stock Exchange’s market for small and medium-sized growth companies) and getting equity funded.”
A phone call to the couple’s brokers followed with a pledge to float on AIM and offer a number of “brilliant cocktail bar businesses” was set.
Willingham says: “Everybody thought we were completely bonkers because there was no vaccine but we were very lucky and we got our timing right. It was just it was perfect. I mean, it was really tough to get it over the line but it’s been an incredible success story and I’m really proud of what we've created.
“And everything we thought would happen in terms of the property market, the demand, all of it is has been as good as we’d expected.”
Nightcap was formed and set about purchasing brands. It acquired London Cocktail Club in January 2021 (which is now The Cocktail Club) then in May, the Adventure Bar Group came into the fold, predominantly for the purpose of rolling out further Tonight Josephine and Blame Gloria sites but has other businesses such as Luna Springs, Bar Elba, The Escapologist and Nikki’s. Then, in November, Barrio Familia was added to the group.
All brands are very similar in terms of underlying business, Willingham says. “They all produce the same 75%-plus ROI, with very high EBITDA margins. They all benefit from late-night licences and have a very similar demographic.
“Tonight Josephine and Blame Gloria are slightly more female-led while Barrio is a more diverse group, and The Cocktail Club, I would say, is more equally balanced with slightly more female customers but you could easily find a group of lads in there after work, for example, so but still Millennial/late Gen Z.
“Adventure Bar Group and Barrio Familia brought brunches that we do during quieter times like 12pm to 5pm on a Saturday, sometimes a Sunday. They brought the magic of that, which we’ve now then applied to The Cocktail Club, which has been fantastic.
“The Cocktail Club had very good relationships with some big brands because we put world champion mixologists through that business and it is known very much for its quality and the cocktails, and it’s exceptional training.
“All the brands have different superpowers and we share those across across the group. And that works really well.”
Training is a key factor
Training is huge for Nightcap, Willingham goes so far as to say that is arguably the ‘thing’ across the entire business. She says there will soon be 1,000 members of staff and they must be trained to the “highest quality” to ensure “they've got good career opportunities”.
“What we’ve realised, as we started to open rapidly, is we could do more on our management training. We’ve been very focused in the past on looking at the bartender quality and are now making sure that same focus is applied across the entire group. But it’s huge. I mean, it’s all training and it’s so important.”
With employee numbers swelling, one would be forgiven for thinking recruitment was a cakewalk, particularly with how well its inaugural Nightfest party in east London went when staff from across the country met and let their hair down.
But Willingham explains: “To say staff shortages hadn’t affected us would not be true. We have definitely suffered just like everybody else has from, in particular, Brexit, we’ve lost a lot of people because the pool of people you can recruit from [has shrunk]. It makes it much harder. You won’t find a decent hospitality business out there that hasn't invested a lot more in people retention than they did before.
“You just can’t afford to lose people like you used to. Hospitality is known for quite high staff turnover.
“One of the things that’s great for us is the career opportunities that are on offer. There’s an ability to be able to progress very quickly when you're working for a business that is high growth because the opportunities for new roles and more senior roles come up much quicker than they would in a normal business.”
Despite careers in the on-trade being shunned in the past, the Nightcap chief executive shows her passion about how anyone can make a great living from the sector.
She says: “I’ve talked about it at a number of conferences. I went to one recently about ‘levelling up’ in the north of England and I asked the room, ‘how many people had worked in hospitality in their life?’. Easily 90%-plus put their hand up but when I asked how many people were still in the business, it was probably less than 5%.
“A lot of people look at hospitality and think, ‘Oh, this is a very transient job. There’s no future in it. I’ll be a waitress then get a proper job’.
“I’m very passionate about trying to open people’s eyes to the fact it’s an extremely rewarding career if you want it to be, and I'm proof of that.
“I’ve spent my whole life in hospitality. I love it more than any other industry and I’m part of lots of other industries and have lots of other investments. But my soul will always be in this industry.
“It’s because it’s actually the most fun. You meet the most amazing people warm, hospitable, friendly, fun, keen to learn. If you understand the business of hospitality, there can be an exceptional career in it. Or you can become world class in your field. I mean, somebody like JJ Goodman, who’s the founder of The Cocktail Club
“It’s really important to me that young people today see that as an opportunity and see if that is a world they enjoy when they're younger, why can't they still be in enjoy enjoying it when they're older? It doesn't mean they still do the same job because there’s lots of opportunities for really fun and interesting careers.”
Site numbers climbing
By the end of October, Nightcap will have a total of 36 sites open and has more in its pipeline. For Latin America-inspired Barrio Familia, there are new sites opening in Watford and in Covent Garden. With Disrepute bar in Kingly Court, Carnaby, the total will be seven.
A Birmingham bar for The Cocktail Club is set to open its doors, which will be a “beast of a site”.
Two Tonight Josephine sites are set to open in Bristol and Liverpool for the Adventure Bar Group, with Willingham saying “Tonight Josephine was made for Liverpool”.
Willingham says: “We’re not about to start taking any risks and we’re always looking at our pipeline, always looking at our return on investment, always looking at any trend in the underlying conversion rates and the underlying sales.
“If, at any point, we feel we are getting more opportunity and property and, therefore, want to expand quicker or the macro environment actually is starting to have an impact, we will expand slower. At the end of the day, we we will run this business the way that it needs to be run, based on the environment that we are in.”
She continues: “Nightcap is that it was set up as a group structure, where nightcap itself doesn't want to impose on the individuality of these bars. I've done rollout my whole life and one of the things that's really important is that they have that local, independent feel to them – the individuality and magic is still there.
“Back in the day, it was much more formulaic but we now encourage that magic to flourish. What we will do is put a structure underneath those businesses that will allow them to have processes and systems in place that allow them to grow sustainably, so the business model remains protected.
“We can do group purchasing that doesn’t impact the businesses or the customers or the quality, but we benefit from the fact we're part of a group.
“The finance team can work together to put some synergies into place and efficiencies across to begin providing better numbers and data, but it doesn't impact the culture of the business and the customer experience or the staff experience. A lot of the things we can put in in the background as a group is really important and that makes us more efficient, better-run, with better information, while not messing with magic that exists within those businesses.”
A place for women to thrive
Having brands that welcome women and can be seen as a safe destination is key to Willingham. That counts for both customers and staff.
“Two things are really important to me,” she states. “One is a place where women thrive in the workplace, where we see more women behind the bar, more women in senior management positions and where women feel that this is a safe place.
“And two, I want to open bars where female customers feel safeguarded. You know, there's always more work to do and more processes you can put into place but it is something that becomes more and more important.
“We’re not perfect and we do still have a lot more guys behind the bar than we have women but we're working on it. And it's important to me I have a very strong senior management females, a lot of amazing women. I've hired some incredible women into very senior positions into the business who are really moving the needle. I want more and more women to see us as a place where they can come be seen, be heard and thrive.”
The learning curve continues for Willingham who says she is lucky to have four children of an age where she can learn from them and the same applies in the workplace.
Nightcap has a lot of very good people who can make decisions about the customer needs because Willingham refuses to impose what she thinks is a great night out on Generation Z. She admits she would be likely to get decisions wrong in doing so and is more than happy to listen to people who are part of that demographic.
Rising costs
In terms of rising prices throughout the industry, Willingham explains what she sees.
“We’re definitely seeing that from everything from capex to drinks to everything. So we are mitigating that. Rather than having three small businesses that used to purchase, we're now one much bigger group with a big expansion plan so we're able to offset the rise in prices by buying as a group, which is really important.
“For energy costs, we're lucky because two of the businesses are fixed at a good rate well into 2023, and 2024 in some cases. And for the businesses not fixed, we really welcome the help the Government has offered.
“Business rates, obviously, are always really high but I would say the property market is the best I've ever seen it. So that's definitely helping in terms of capital expenditure. We're not paying crazy premiums like we used to and it's not the person with the biggest cheque that's winning the site anymore, it's the person with the best covenant. I've never seen that before.”
What does the future hold for bars and pubs? Willingham explains: “The pub market will always be there. It's an essential part of British culture. And I don't think the late licences (that Nightcap uses for all of its sites) will start to extend so much to them, they won't become suddenly all become party bars.
“I think there's a place for both and we need the pubs to remain like they are. I think licensing laws would restrict [easy late licensing applications] anyway.
“But one of the things as we head into recession, certainly, in any recession I've been part of before, is that there's just no place for mediocrity. You have to be the best in your category. You have to be really excellent. You can't be average, because average will fail in a recession. So it's essential that we remain the best of the best.”
