Better than renting: Steakhouse king to build property empire

“While everyone else has been sleeping and hiding, we have been looking for opportunities to grow,” Mr Michael told The Australian Financial Review.

“Good operators have survived [the pandemic] and there are great opportunities to grow.”

This year it plans to open three new Five Guys venues, including one in the heritage-listed Spiden House at 383 George Street in the Sydney CBD and another in Melbourne’s Southbank, as well as ISKs in Parramatta and Perth and an H&B restaurant in Parramatta.

A 6 Head steakhouse will open at Perth’s Elizabeth Quay next year, while Mr Michael said there were plans to bring the Five Guys brand to Brisbane, Perth and Adelaide.

In the upmarket inner London suburb of Mayfair, Seagrass recently opened Jeru, a Middle Eastern-themed restaurant, while a Meat & Wine Co steakhouse will open in the same suburb in August.

In Dubai, Seagrass opened its third Hunter & Barrel restaurant last month.

While much of this growth will come through partnerships with landlords, Mr Michael said Seagrass, which is backed by Sydney-based Crescent Capital Partners, was also looking to buy properties in Australia where they could install their own brands.

“We’re looking at areas outside the major metro regions, where we can either find land [to build], or [existing] properties that are a good fit with our brands,” Mr Michael said.

“If we can write back the rentals and see a return on investment, we’ll consider buying the property.”

He added that Seagrass was looking to bring on board a new partner to co-invest in property acquisitions.

Seagrass has already piloted this expansion approach, acquiring a waterfront property in Baulkam Hills next door to the Hillsong Church campus where it has opened Meat & Wine Co and Ribs & Burgers restaurants, and also brought in ice-cream chain Messina Gelato.

Filling up again

Mr Michael said Seagrass was happy to walk away from leasing deals if asking rents were too high.

“We’re a long-term player looking to occupy sites for 10 years. If rents are high at the start, then they will end up being exorbitant.”

Since the start of the pandemic, Mr Michael said rents had come back in certain areas around Sydney, but in local shopping centres and strip malls where demand was high, landlords were trying to get 50 per cent higher rents.

“We put in a rental offer of $120,000 a year for a site in Sydney, but the landlord got offers between $200,000 and $300,000.”

At an operational level, Mr Michael said his restaurants were filling up again despite rising meat and other food and delivery costs translating into higher menu prices.

Mr Michael said people were willing to pay up to $10 more for a steak than they were pre-pandemic.

“People are spending huge amounts on good meat and good wine. They’re looking for value and quality. If they find those, they don’t mind paying whatever price,” he said.

“It’s been a strange ride. We are finding people have the money and will spend it on good-quality food.”

The biggest issue, he said, was finding front-of-house staff, a challenge Seagrass is trying to tackle with generous incentives such as 50 per cent staff discounts at its restaurants.

The group employs about 2100 staff – both full time and casual – a pool of workers that will need to grow as it opens new venues.

Mr Michael said a shortage of staff made it harder to open some of its restaurants seven days a week.