A tale of two sorts of capitalism…

“Capitalism: good or bad?” is a big question for a small blog.

The man asking the question is  a bad capitalist, due to lack of capital. But while sitting on an almost empty wallet just now, I started to read about a couple unknown to me until a couple of weeks ago.

Here, I’d like to run their story alongside that of a pizza restaurant that is known to me, although I’ve not been in a while.

John and Irene Hays own Hays Travel, a Sunderland-based company set up by John 40 years ago. According to a report in last Sunday’s Observer, John returned to his hometown of Seaham from Oxford, uncertain of what to do next. His father suggested a business making coffins, but instead he set up a one-man travel agent at the back of his mother’s shop. Four decades on, that company has just rescued 500 Thomas Cook stores and saved 2,500 jobs.

Not bad for a man who dodged a future in coffins.

John and Irene believe in ethical capitalism, a noble tradition but one hard-pressed in the smash-and-grab world of modern heartless capitalism.

The former CEO of Thomas Cook, Peter Frankauser, was hauled before a parliamentary committee earlier this week, where MPs suggested he might like to pay back some of the hugely generous bonuses he received during his well-padded stint at the company which sank with him at the tiller. Spoiler alert: he wasn’t keen.

John and Irene have remained loyal to their region and, according to that Observer report by Tom White, they “keep a very thin corporate layer between themselves and their thousands of staff”. Last year, the company hit a milestone turnover of £1bn and the couple shared a £1m pot between their employees.

John sees a “pretty stark” contrast between themselves and the whole Thomas Cook business – “Capitalism is under pressure at the moment and I think a lot of what Thomas Cook represented unfortunately was not the best side of capitalism.”

He adds that Thomas Cook was too corporate and top heavy. “Irene and I own 100% of the business and we live a lovely lifestyle so don’t need to take lots of money out of the business.”

Good luck to John and Irene – and the next time I can afford a holiday, I’ll know where to go.

In 1965, the late Peter Boizot opened the first Pizza Express restaurant in London’s Soho. He brought a pizza oven from Napoli and a chef from Sicily, for the birth of what would become a high-street chain.

Boizot spent almost 30 years building his empire, before selling it in 1992 for £15m. The buyers were Hugh Osmond and Luke Johnson, the latter being the former chairman of Patisserie Valerie, another small business gone gouty with bad capitalism.

Osmond and Johnson floated Pizza Express on the stock market a year later. By the unreadable rules of capricious capitalism, the company was then worth £150m.

Assorted private equity deals later, Pizza Express was bought in 2014 for £900m by Chinese private equity house Hony Capital.

When rumours swirled recently that Pizza Express was about to be dragged under by a £1.1bn pile of debt, it was tempting to see that as a perfect story arc of good capitalism undone by bad.

How could simple dough make so much money for private equity companies, only then to be saddled with such an unfathomable debt? As the author Chris McCrudden explains in a series of tweets about Pizza Express’s corporate history, “it’s a fascinating story of how solid businesses get crippled by debt to make a few people rich”. (It’s worth reading his thread on @cmccrudden).

Pizza Express is still around for now. Following public sadness as its possible demise, the company’s PR-heads traded tweets about how “it’s good to be kneaded” and “we’re still making dough”. Hopefully that is true – but all those pizzas have made an awful lot of dough for rich people who live a long way from the heat of those kitchens.

Peter Boizot must be turning in his pizza oven.

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