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YO! Sushi: A modern day rescue story

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13th Jul 2005
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YO! Sushi in Paddington Station is a model of efficiency. As you sit at the bar, endless dishes of raw fish, noodles and other delicacies pass before your eyes. All you do is pick a dish, eat and pay. Simple. What customers do not see is the financial mountain the company has had to climb to keep food on the table.

YO! Sushi was formed by entrepreneur Simon Woodroffe in 1997 and was an instant hit. But although the first four restaurants were phenomenally successful, there was little financial rigour. By 2001, the chain was heavily in debt and some of its newer restaurants were failing to perform.

By the time Zoe Tyndall arrived at YO! Sushi as FD in 2001, the company was approaching financial meltdown. 'It was a true entrepreneurial company,' says Tyndall. 'It was all about brand and customers, but there was very little emphasis on financial reporting. They had gone for a rapid rollout of restaurants on a very small infrastructure ' but it was all backed by debt. The share capital was £200 - it was really bonkers.'

The first thing Tyndall did was to ask for the management accounts, but found little to look at. The company was operating off a crude P&L account ' but had no balance sheet, cash-flow projections or KPIs. 'The CEO had come from a big corporate so he wasn't aware of cash flow. He had never had to deal at that level before,' says Tyndall. 'The information was all there but they never did any month end procedures ' it was all run off a P&L. It was also really simple things; such as the way they were filing their invoices.' Meanwhile the financial situation was gradually deteriorating month on month., she says. 'They were drawing on borrowed capital and using their creditors as an overdraft,' says Tyndall.

Thankfully, Tyndall was experienced in rescue situations. Trained at Arthur Andersen and the youngest head of finance in the history of BNP Paribas in the Channel Islands, prior to joining YO! Sushi she had worked at award-winning internet start-up Moonfruit where she had set up and managed the company's financial operations and worked with the senior team to secure VC funding and strategic business partnerships.

'I came from an internet background where it was all about managing the cash,' says Tyndall. She says the situation at YO! Sushi is not unusual for small businesses, particularly where they have grown rapidly. 'I think a lot of companies go through this - what I call, the dark ages - especially if they have had incredible success in the first few years. Because things are going great, they carry on doing the same thing without stopping to think about who is the customer, why are they coming, and what is the company's USP.'

To answer some of those questions, Tyndall carried out a complete strategic and operational review of YO! Sushi, which looked at why some of the restaurants were not working and what could be done to alter course.

'Coming from the internet business, it was a bit like jumping out of the frying pan into the fire,' says Tyndall. 'But I knew the business had great underlying strength and that was why I stayed. When I joined we were building the Paddington Station restaurant. We built the restaurant in five days for £180,000 and it delivers EBITDA of £200,000 a year. There are not many restaurants that do that. It's all about keeping it small.' She also put together a weekly operational cash-flow which gave details of which supplier was to be paid when and how much. 'That really gives you a sense of knowing the business,' she says.

Once Tyndall had the cash flow under control, her next job was to win over the bank. The company owed the bank some £2.5 million and was breaching bank covenants. The team put together a business plan to raise private equity money - on the strength of which the bank agreed to go along. 'We borrowed more to dig ourselves out the hole, which sounds crazy, but was the only way we could do it. We went to them with two fantastic sites that were bang in the middle of the strategy and said this what we want to do. We gave them total transparency ' they knew everything that we were doing,' says Tyndall.

'They were fantastic 'they could have pulled the rug on us and they didn't ' they believed as much as we believed. Now we have 19 restaurants, every one of which is profitable, plus an overseas franchise network - so it really is a turnaround.'

It wasn't only the bank that Tyndall had to bring along. 'It was the end of 2002, so it was a very hard time to be raising money. But it was also difficult because of the way the company was structured. You had an entrepreneur who didn't really want to give up his baby, but wanted the company to grow. He was saying: 'Can you go out and get more bank debt, and I'm talking to banks knowing the answer is going to be no, but that's what the 95% shareholder wants me to do. You have to be incredibly patient. These people are out of their comfort zone. They look to an FD to guide them through'

The final piece of the jigsaw fell into place with the recent MBO, says Tyndall. 'The closing of the MBO was a big relief to everybody. I know the cash flow is great and my management reporting is robust, so I don't have to see every last penny, and that gives me the freedom to get involved in more operational and strategic parts of the business. At the moment I am doing a strategic and operational review of our distribution business-, which is the only part of our business that isn't showing like for like growth. We are also looking at going into the US.'
'Last night myself and the head of marketing had customer tasting, so the role is almost turning into a commercial director. However, I can imagine that when we come to the next round of fundraising I will be firmly putting on my FD hat again.'

And what next for Tyndall. 'You never know what is going to happen' it's been a real roller coaster ' to get that kind of passion it has to be something very special.'

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Dennis Howlett
By dahowlett
13th Jul 2005 11:12

Great story
How I wish we could see more of this kind of story in the media. Too often accountants are parodied as grey-haired, grey-suited miserly bean counters.

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By aliduthie
14th Jul 2005 10:08

Small Service Based Business Financial Management Book Recomenda
I read the article on Zoe Tyndall with interest. There are so many books which cover these sort of stories - does anyone have a recommendtion for a good book which shows how to put her type of experience into practice? I am looking for a pratical guide to cash flow management, financial statements analysis and KPIs.

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