What Bernard Loiseau Left Behind

[robert brown]

An extreme example of the need to have what is called “key man insurance” is vividly brought to the fore with the suicide of Bernard Loiseau. Because he was the only name chef to ever have floated his enterprises on a stock exchange (The “Second Marché” of the Paris Bourse), his death put the price of the stock into question and left a three-star restaurant without its three-star chef.

Before Loiseau's death, shares in Groupe Loiseau “Art de Vivre”, http://bourse.bernard-loiseau.com, traded at €5.10. Trading is now suspended, with the last bid at €0.50. It is anyone's guess what the shares will be worth when trading resumes.

As the above website shows, the Loiseau family and the shareholders are left with a relatively small but interesting array of assets. To reach their maximum profitability, however, requires the presence of Loiseau himself with the possible exception of the three “Tante” restaurants in Paris.

If you were called in to salvage, if not try to restore to fiscal strength, the interests of the family and the shareholders, what would you advise? In typical French fashion, the above website makes no mention about the profitability of the company or any outstanding debt. Nonetheless, the mission is to propose a way to extract maximum value and future profitability.

Let’s make this a collaborative effort. No one person needs to post an overall plan to put the company back on its feet. You should address the area you know most about or suggest a useful idea. Keep in mind that the major asset is the restaurant in Saulieu, which Loiseau slowly built up as a kind of culinary resort with hotel rooms, a health spa, and a boutique, and that one fundamental problem is that Saulieu is not close to a major city, is not served by railway and not a general tourist destination. Also, Loiseau had only young children, so there is no heir-apparent to take over.

Edited February 27, 2003 by robert brown (log)

[Basildog]

Jesus H christ on a bike,,the guys not cold in the ground.Any chance of holding back on this subject for a little time? I fully expect this not to make it to the thread.

[d.hawksworth]

Agree, that's alittle HARSH !!! I suspect you need a vacation !! maybe chill out a minute ! not that I want you do start hugging everyone you meet but was that first thing you thought when you heard he died?

I found that when I worked in Europe ( 9 years ) every day - service - basically moment is directed towards achieving perfection which is an experience to say the least. Other Chef's that I worked with lost touch of reality and basic human qualitys in big way. I have never met the man but he was obviously gifted and focused, I just feel that it was such a waste and I know that he won't be the last master chef to take such a path......just my thoughts

DH

[Lady T]

I can see where such an analysis might seem a bit ghoulish this soon, but I do admit to a fascination about how a restaurant's business plan might be set up (at incorporation, I should think) to handle such a sad, awful contingency.

Might I suggest we observe what old-fashioned types would call "a decent interval" -- a few days, a week, whatever, and then start considering/discussing how a business survives when its founder doesn't, in a field as volatile as food service?

[Jonathan Day]

This kind of discussion, even this close to a tragic death, is not uncommon in business circles.

However, it has clearly offended several members. So we're going to follow Lady T's suggestion and put this in the Fridge for a few days. Then, we'll bring it back for further discussion.

[Jonathan Day]

Now that Chef Loiseau's funeral has taken place and a respectful period of time elapsed since his death, we are bringing back the thread.

There is a legitimate distinction between Loiseau the man and Groupe Loiseau, which despite Bernard Loiseau's demise. A group of investors put up their money after no doubt being told that the famous chef would put forth his best efforts in the service of the company.

Our hope is that eGullet members may come up with thoughtful ways to enhance the value of the Group. This could only be useful for the public shareholders and for Mme Loiseau, who will surely inherit his majority interest in his public company.

[Nick]

I'm not really sure a "respectful period of time" has elapsed. And I agree with Basildog's comment above. It's an interesting question that you've brought up Robert, but it does seem a bit like vultures settling in on the carrion.

However, I did go to the website you linked to above .bernard-loiseau and while I cannot read, write, nor speak French, I found moving my cursor around the opening page with all the "e"s following like so many birds a happy distraction to the sad event. Try it.

[Jonathan Day]

I would suggest we move beyond the issue of Chef Loiseau's death and also end the debate as to whether it is appropriate to discuss the future of his establishment. Those who feel the need for continued silence, please feel free to abstain.

The print press clearly have no such sensibilities -- here is a brief excerpt from yesterday's Sunday Times:

Fear and loathing are dish of the day

The rasp of kitchen knives being sharpened has added a chilling note to the recriminations in France over the suicide last week of Bernard Loiseau, one of the country's top chefs, after he was demoted by a restaurant guide.

Loiseau's demise has revealed an unappetising melange of petty jealousies, a capricious rating system, malicious critics, inflated egos and the low cunning of haute cuisine. ...

Our goal here is different: it is to explore the possible future of an establishment that, as with so many restaurants, has been closely linked to the name of its founding chef. What is interesting about Groupe Loiseau is that outside investors paid for a share in the fortunes of an establishment that, by most accounts, was almost entirely driven by one man. In general, investing in someone else's human capital has proven a bad idea for investors. It is no accident that law firms are owned by the lawyers who practice in them; the enormous problems encountered by medical groups with outside shareholders are not surprising.

We would also like to explore, on this thread, the options that might be available to the shareholders of this group to re-establish the group as a going concern or otherwise to recover their investment. Again, the goal is not to gossip about on Chef Loiseau's suicide, but to ask about how a restaurant can become an institution independent of its founder. This is not about "vultures settling on the carrion" -- quite the opposite. Indeed, if actions are not taken, liquidation will be the only option. It's Monday morning. What should the management and shareholders of Groupe Loiseau do?

[Lady T]

I can't imagine any process that wouldn't begin with a thorough audit, by an outside source, to assess exactly what resources and obligations are actually there. The speculation about Groupe Loiseau's debt load is loud but not reliable; the facts as of the date of the late chef's passing would seem to be necessary.

[Nick]

If we're going push along on this issue maybe one of the first things to find out is whether the shareholders had taken out substantial life insurance policies on Loiseau. It would have seemed a reasonable precaution in view of his importance to the continuing operation and it's my understanding that this is a common practice in corporations when the CEO is unusally valuable.

[robert brown]

Nick, in a PM to me that Varmint wrote several days ago, he raised the point that suicide nullifies a life insurance policy on executives' lives. As we did not know if this applies to such situations in France, we decided not to post it. But now that you raise it, perhaps someone can tell us if it is possible that the company will be able to be compensated for Loiseau's death by his own hand.

[Jonathan Day]

Here are a few facts on Groupe Loiseau. Unfortunately their last filing was at the end of 2001, so this data is as of 31 December 2001.

Market capitalisation €7 303 000

P/E ratio 7.4

Price/book value 0.95

Price/tangible book 1.35

Debt/equity 0.55

Gross margin 20.7%

Pretax margin 12.3%

Post-tax margin 8.8%

Revenue/employee €85 832

Net income/employee €7 565

Operating revenue €11 244 000

Cost of goods sold €8 915 000

Gross profit €2 329 000

Interest expense €304 000

Pre-tax income €1 383 000

Net income €991 000

Looking backward:

For the year ended 31/12/98, sales were 37 254 000, net income 4 413 000

For the year ended 31/12/99, sales were 52 619 000, net income 5 006 000

For the year ended 31/12/00, sales were 68,308,000, net income 5 965 000

The balance sheet has been reduced as well. Long term debt fell from EUR 28 208 000 (FYE 31/12/98) to EUR 4 250 000 (FYE 31/12/01).

In light of the unstable economy, these numbers don't mean a lot. Things could have become a lot worse in the course of 2002.

It's likely that a bank would require life insurance in a situation like this. Most life policies have exclusions for suicide.

But I suggest we focus instead on how one would revive a business of this sort, where the guy with his name on the door had passed away.

The Group had four restaurants, 3 in Paris, 1 in Saulieu; a hotel in Saulieu; food, wine and gift shops and, more recently, a web site for online shopping.

In a different way, something similar has taken place in Mougins, where Roger Vergé's Moulin de Mougins went from 3 Michelin stars to 1, and his L'Amandier from 1 to 0. In 2002, Gault-Millau didn't even list the Moulin as a restaurant, only as a hotel! He has recovered 1 of the two lost stars, and Gault-Millau again recognises him as a restaurant. He has sold L'Amandier, but retains his wine shop, gift shop and cookery school. But it is clear that Roger and Denise Vergé will need to create an institution that no longer depends on the great chef's personal involvement.

Question: what examples are there of famous restaurants, ones with a chef's name over the door, being taken over by another chef and restored to glory? The "name over the door" is important here: the Grand Vefour and Taillevent have had many chefs. But could we imagine Restaurant Guy Savoy without Guy Savoy?

[robert brown]

What makes this set of circumstances unique is the need to enhance shareholder value. French three-star restaurants are generational; no chef lives forever. Loiseau has no progeny in a position to take over the kitchen, unlike Pierre Troisgros (remember he lost his brother, but because there were two running the operation the restaurant barely skipped a beat) who has a son, Michel, in firm control; or Georges Blanc who has two sons working in the kitchen. The closest to the Loiseau situation has been the man he tried to emulate in certain ways, Alain Chapel. Since Chapel's sudden but natural death at about the same age of Loiseau, Suzanne Chapel has managed to keep the doors open because of Philippe Jousse, who was Chapel's chef de cuisine for eight years. The restaurant is surviving with its diminished two-star rating while waiting for Chapel's 19-year-old son to finish his culinary studies and apprenticeships. Loiseau, however, has, I believe an 11-year old son (and 12-year-old daughter).

The widow Dominique and the shareholders are in a tough spot. Veritable temples of gastronomy such as Grand Vefour and Restaurant de la Pyramide were restaurants only and could be sold on the basis of their history to Champagne houses who then hired accomplished young chefs to run their kitchens. With Groupe Loiseau, you have a much different situation. Unfortunately the die was cast when Bernard Loiseau acquired the restaurant in Saulieu, which had a bad location in terms of both transportation and touristic resources. He compounded the error by ambitiously upgrading the property. Instead, he should have kept it small or, as Jean Bardet did, sell the restaurant early in his career and moved to a small city like Tours (which Bardet did) or to Paris a la Pierre Gagnaire.

The current assets fall into three categories. One is assets relatively unaffected by Loiseau's death. There are the three Paris restaurants which may lose a bit of business by no longer being able to capitalize on the fact that they are somehow subject to the three-star touch of Bernard Loiseau. Second are those assets that are no longer productive; i.e. the consulting and branding. Third are the assets whose value is physical in nature, but need to be made desireable once more. These would be the major asset of the physical plant in Saulieu: the restaurant, bar, public rooms, hotel rooms, kitchen, spa, gift shop, and wine cellar. It is hard to imagine selling these assets, given their location and economic climate, for much money. Thus, the burden falls on Dominique Loiseau, unless she wants to walk away and leave her and the corporation "destitute", to engage a potentially great chef; raise some more money, no doubt; and hope that the economy and scary geopolitical situation improve. My guess is that Groupe Loiseau will sell the three restaurants in Paris, take on more debt if it can be done (taking advantage of the low interest rates in Europe), and hope to find a very talented chef. History has shown the three-star restaurateurs such as Jean-Claude Vrinat (Taillevent) and Claude Terrail (La Tour d'Argent) can remain three-star restaurants with ever-changing chefs de cuisine. I believe, however, that she will have to find a chef who creates some buzz. She may have to forsake Loiseau's "Nouvelle-Cuisine" influenced cooking for an avant-gardist, as she needs someone who can attract attention. It wl be interested to see what her bankers decide to do.

Edited March 5, 2003 by robert brown (log)