Business Profile: Las Iguanas

By Joe Lutrario

- Last updated on GMT

Related tags Las iguanas Mexican cuisine

Eren Ali, founder of Las Iguanas. Photo: Rob Lawson
Eren Ali, founder of Las Iguanas. Photo: Rob Lawson
Back in 1991 Eren Ali bought a failed Italian restaurant on a Bristol back street. Two decades later, Las Iguanas is the biggest player in the South American space. 

Tape measure in hand, Las Iguanas founder Eren Ali is busily checking the distance between the banquette and the table at his group’s Westfield Stratford City branch. “It needs to be 30cm, any deviation and it doesn’t feel right. This is 31cm, unfortunately, so I’m going to get the builders back in.” 

Ali, a successful industrial designer (everything from laptops to kids’ toys) prior to setting up the Latin America-themed casual-dining group in 1991, is affable with an endearingly geezerish demeanour. He now operates 27 sites but clearly remains a hands-on chap, beaming at early-doors guests and joking with staff.

This glossy, high-spec, 242-cover monster of a site is quite a departure from the group’s first branch, a 60-seat off-pitch disaster zone (his words) in central Bristol that had seen off no less than seven restaurants over the preceding decade.

Lowering the odds of success even further, Ali and then business partner Ajith Jaya-Wickrema opened the doors on St Nicholas Street in the trough of the early 1990s recession. So why did the Las Iguanas concept succeed where others failed?

“Firstly it was the frontage. As a designer I knew the importance of grabbing a potential customer’s attention,” says Ali, who remains Bristol-based. “You have no more than three seconds to make an impression. Our exterior was bright and quirky, we stood out from the crowd. The second is the energy we produced inside with a vibrant design, young enthusiastic staff and good drinks – we strive to create a carnival atmosphere.”

The bar question

Las Iguanas is a restaurant with a bar, rather than a bar-restaurant, but it straddles the two sectors in a manner that few others manage. Around 15 per cent of the total trading space is designated as a bar area at most branches, which might sound minor, a bit tokenistic even, but it has a profound effect on the perception of the proposition. Las Iguanas is a place to kick your shoes off and knock back a few drinks. 

Some relative newcomers to the wider casual-dining sector – including MeatLiquor and, interestingly, Mexican concepts Wahaca and La Bodega Negra (all in London) – owe much of their success to the creation of boozy, high-energy environments, but Las Iguanas was certainly one of the first to the party.

A popular happy-hour offer runs from 12 noon to 7.30pm (all day Sundays and Mondays) at most branches, which plays a big role in driving business at lunchtimes and in the shoulder periods, cementing Las Iguanas’ status as a place to drink, as well as eat.

“We absolutely consider ourselves a restaurant company but the bar is a key part of the business,” says Ali. “The drinks offering is strong. Our signature drink is a caipirinha, which is made with loads of fresh lime and high-quality organic cachaça [fermented and distilled sugar cane juice] that we have made especially for us in Brazil.”

The group’s current yearly turnover – around £40m – is split 67:33 in favour of food, a higher drinks spend than most restaurant chains but significantly lower than the major branded pub and bar groups. “When looking at the wet and dry sales in individual locations, I find that a couple of percentage differences can have a seismic effect on the feel of the venue. Obviously the spend in the bar is far lower than that of the restaurant, so when the split rises slightly in favour of the drinks side I know the bar at that location has been flying.”

The Las Iguanas menu is centred on familiar Tex-Mex carb/meat combos – fajitas, chimichangas and burritos – and South America-inspired reworkings of several casual-dining staples including burgers, grilled chicken, steaks, superfood salads and tapas dishes, the latter a nod to the significant influence Portugal and Spain have had on the continent’s cuisine.

Those prepared to stray beyond the obvious will find xinxim – a curry-like dish of chicken and crayfish in a peanut and lime sauce – and feijoada de vaca, a hearty stew of braised beef, chorizo and red wine. It’s an expansive and highly accessible approach – note the savvy encroachment into other brands’ product categories – but a degree of regional identity is retained.

Twenty-one years ago, Mexican (South America barely got a look-in) was a patently downbeat market sector with a pile-it-high, sell-it-cheap mentality. Chi Chi’s (latterly Chiquito) was the only branded player in the space with the market dominated by cheap and (usually) cheerful independents serving uninspiring interpretations of Tex-Mex. By comparison, Las Iguanas was a considerably more upscale and authentic offering.

However, things have changed. Southern  American and Central American cuisine has captured the imagination of the wider restaurant sector to an extent few would have predicted. There are now some serious players in the space, including hugely successfully Argentine steak-led outfit Gaucho, the aforementioned five-strong Mexican street-food chain Wahaca, growing Brazilian restaurant group Cabana, and Peruvian concept Ceviche, which has just announced plans for a second London site. The latter three are London-based and in the formative stages of their development, but have the potential to become national groups.

Rise of the burrito

But the real growth in the Latin American space has been driven by the fast-casual burrito outfits that take their cues from the Mexican food served in California. North-based Barburrito aside, the groups are mainly London-based, but the likes of Tortilla and US interloper Chipotle will soon spread across the country. Is Ali keeping an eye on this new breed of quick-service operators?

“I’m following it with interest but I don’t see them as significant competition,” he says. “It’s a high-quality product, which I enjoy eating myself, but it’s a quick experience, a fuelling stop and a different rhythm of footfall. Plus you sacrifice all those drinks sales.”

Despite an increasingly crowded marketplace, the private-equity world certainly believes Las Iguanas has what it takes to retain its status as the dominant player in the South American sector. Ali is now in his third venture-capital relationship after two successful partnerships with 3I and latterly Piper, which helped the business expand from four to 14 restaurants.

“The Piper deal was in the final stages the day the Twin Towers came down, which was a pretty unforgettable experience,” recalls Ali. “Amazingly, everyone kept cool and the deal went through.”

In 2007, Piper exited the business, pocketing a six times multiple return on its initial investment and  selling its stake to current backer Bowmark Capital. Aside from it delivering consistent like-for-like growth throughout the recession, one of the key reasons Las Iguanas is so attractive to private equity is its track record at operating outside London.

Starting in Bristol, Ali has proved the model works – flourishes even – in difficult trading conditions. The group’s first London site (there are now four) opened in 2006. “We were very nervous about coming to London, in fact we weren't at all confident it would work," he says. "We broke all our rules; it was three times the rent we were happy paying and twice the development costs."

Hall of fame

Despite these initial reservations, the group’s Royal Festival Hall outlet was a hit with Waterloo’s post-work crowd and remains the highest-grossing restaurant in the estate with a turnover north of £3m. A site in Soho’s Dean Street was less successful and closed in 2011. The brand has since steered clear of the West End, favouring other locations with high concentrations of office workers (Spitalfields), attractions and retail-park locations (O2 Arena, Westfield Stratford City).

“We know our core customer well. Pre-family 24 to 35-year-olds with good disposable income. We’re big on occasions,” says Ali.

The chain’s first site in Scotland will open in Aberdeen early this month and is likely to be followed with branches in the country’s other key cities. A site in Plymouth will open early next year and, shortly after that, a huge site at the Wembley City development, a perfect London pitch for the chain combining a major retail offering with an enormous venue.

By 2014, the Las Iguanas and Bowmark Capital’s stated aim is to grow by a third to 40 sites, a milestone that will signal a re-evaluation of options by both parties and some transactional activity. It’s hard to imagine Ali having trouble attracting another private-equity suitor, especially once he’s got those banquettes seen to. 

This article first appeared in the November issue of Restaurant​ magazine. 

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