Overhaul: George Calombaris has sold some of the buildings housing his restaurants. Photo: Simon Schluter
The hospitality empire of MasterChef star George Calombaris faces a major financial overhaul amid mounting debts and the closure of a string of high-profile eateries that have failed to keep pace with Melbourne’s fickle foodie culture.
In an apparent bid to raise cash, Mr Calombaris and his partners in restaurant group Made Establishment have been selling off the buildings that house some of their signature restaurants, including the premises of East Brunswick institution Hellenic Republic.
But Calombaris told The Sunday Age the company was certainly not in trouble, saying the group was revamping its business plan in a bid to go back to its roots. "There's not one hospitality operator out there doing cartwheels right now. We've made a few mistakes but we've have some real successes too."
Melbourne's Hellenic Republic. Photo: Peter Schofield
The closures and sales come as the group has been hit by a slump in luxury spending and patronage at its fine-dining venues, as well as fallout from the so-called ‘‘MasterChef effect’’ that has inspired a new generation of home cooks.
The downturn contributed to the sudden closure last week of South Yarra restaurant Le Grand Cirque, a joint venture with celebrity chef and My Kitchen Rules host Manu Feildel.
The upmarket French bistro opened just four months ago but received some poor reviews and bookings. The Daly Street venue had previously been home to Calombaris’ Italian-Greek eatery Mama Baba, which closed after less than two years.
It’s the latest in a series of costly setbacks for the group, which has been forced to close or rebrand a number of premium and fine-dining restaurants as Melbourne’s foodie scene experiences a ‘‘casualisation’’ trend towards simpler and cheaper fare.
Made Establishment, which is jointly owned by Calombaris, restaurant entrepreneur George Sykiotis, and steel industry barons Joe Calleja and Tony Lachimea, has notched up a string of successes including the Press Club, Maha and Hellenic Republic.
Calombaris, whose fame has soared along with hit TV series MasterChef, is the public face and culinary expert for the group, while Mr Sykiotis is recognised as the business strategist responsible for the company’s unconventional property-based business model.
The strategy has focused on borrowing heavily to buy the properties many of the restaurants occupy, with the group spending $8.9 million alone to buy the buildings for its first five restaurants.
In 2009, when business was booming, Mr Sykiotis told the Australian Financial Review Magazine: ‘‘The freehold is critical because that way you have some insurance. You get the upside when the place works; you get the chance to tweak it if doesn’t."
But Made Establishment is now being forced to dramatically rejig its heavily-leveraged property portfolio after spending millions of dollars on acquisitions and lavish refurbishments.
The sprawling East Brunswick premises of Helenic Republic will go under the hammer later this month with an asking price of around $1.9 million, although the popular eatery will continue to trade after a new 10-year lease was recently signed.
In July, Made Establishment sold the CBD home of Maha to head chef Shane Delia, who had already bought the lease to the restaurant last year and ended his joint venture in another Made Establishment venue.
The sales come despite the group already off-loading the Kew premises of St Katherine’s for $4.31 million in late 2012. That restaurant closed its doors last year and reopened as an eastern suburbs version of Hellenic Republic in 2014. The eatery was shut down for several days in May so the Department of Health could investigate a food poisoning outbreak that left more than 50 patrons seriously ill.
Other projects have been abandoned after failing to gain traction with patrons. The closure of fine-dining French bistro PM 24 was accompanied by plans for the CBD venue to be reincarnated by the group as Asian fusion restaurant Lucy Liu. But while chef Michael Lambie came on to replace Philippe Mouchel, George Sykiotis was the only member of Made Establishment to back the new venture.
The Sunday Age understands the future of Calombaris’ CBD flagship restaurant the Press Club is also under question amid claims that disappointing turnover is straining the relationship between the celebrity chef and his financial backers.
The Press Club has already seen a major reinvention and several minor overhauls since it opened in 2006, including transforming much of its original haute dining space into a contemporary Greek taverna, Gazi.
The trend towards ‘‘casualisation’’ in dining has also been behind Calombaris’ launch of three souvlaki outlets in the CBD and Fitzroy under the Jimmy Grants brand.
Sources say some of the financial pressure has come from the way Made Establishment structured its property portfolio in a bid to increase borrowing power. This involved the group charging its own restaurants high rents, which increased the value of the buildings and subsequently allowed the company to secure more debt. Selling off properties while retaining the high rents has the potential to further pressure the empire's operating costs.
Calombaris said the closure of restaurants like Le Grand Cirque and the sale of the assets was about being fiscally responsible. ‘‘There's only so much debt a business can afford to carry. But we've also bought three locations for new restaurants too,’’ Calombaris said.
"Press Club is 100 per cent a serious expense but it's my dream. Without the Press Club, there wouldn't be a Maha, Hellenic Republic or anywhere else. The boys are totally committed behind me in that."
Mr Sykiotis said the days when restaurants catered to couples spending $300 on dinner had passed and businesses needed to adjust. He points to the success of Hellenic Republic and Jimmy Grants, which is expected to see at least four more outlets open over the next year. Hellenic Republic will also expand into Williamstown after the group bought the Hobsons Bay Hotel for $3 million last year.
"The market is changing and for once chefs are beginning to realise that we need to give customers what they want. People want great value food that's accessible,’’ he said.