Building a fresh new business
Healthy fast-food chain Vital Ingredient were given room to expand thanks to Santander and its Breakthrough programme
- Company turnover: £9 million
- Sector: Food/QSR
- Vital Ingredient are an ambitious fast-food chain specialising in providing healthy alternatives to the lunchtime sandwich
- The business wanted to grow quickly, but funding from their incumbent bank failed to enable their growth plans. The company also had few assets and were unwilling to surrender equity or take on new board members. The company’s funding criteria severely narrowed their available options.
- Santander provided a £2.75 million finance package that combined a senior loan and funding from the Breakthrough Growth Capital fund. The bank also provided day-to-day banking and a revolving credit facility.
- Santander’s solution came about through several weeks of hands-on investigation into the business and provided a flexible source of funding that allowed the company to draw down as and when required.
- With Santander funding in place, Vital Ingredient can now move forward with plans to more than double their number of outlets within a year, establish a central distribution unit and diversify their menu options, creating more jobs and attracting more revenue.
A chain of healthy fast-food takeaways, Vital Ingredient is centred in London's Soho and serves the needs of busy office workers who are bored of sandwiches and crave a healthy lunchtime option. Customers can build their own meals from a selection of fresh ingredients and the food is made to order in the store, in line with the company’s “Eat Your Way” concept.
Vital Ingredient has always had a healthy appetite for growth. Founded in 2001 by now-Managing Director Alex Heynes, the company’s first unit multiplied organically into five locations across London over the next ten years. In 2011 financier and property entrepreneur Paul Oberschneider enabled the company to build another four sites by the end of 2012 and another two in January 2013. “Paul was impressed with the food, so one lunchtime asked if he could meet the owner,” says Vital Ingredient CFO Tim Hobbs. “Paul invested and the chain grew. He became CEO and by 2012 it was decided to grow the chain faster.”
However, the company’s incumbent bank could not offer sufficient funding to enable Vital Ingredient’s ambitious growth plans, which included doubling the company’s size by the end of 2013. So the company began searching for the right source of finance. “We ruled out venture capital as we didn't want to dilute the equity in the business,” says Tim. “Nor did we want new people, as we already have a strong board.” Asset finance was another non-starter since the company rented their shops and had no real assets other than their brand.
Tim already had a positive experience working with Santander and had since heard about Breakthrough, Santander’s funding and support programme aimed at the UK’s fast-growth small and medium-sized enterprises. Tim got in touch with Santander Relationship Director Justin Hayward, who created a £2.75 million funding package comprising a conventional senior term loan and £1.25 million from the Breakthrough Growth Capital fund. “Vital Ingredient had some competitive growth plans and it was our challenge as a funder to come up with something that could enable the company to move forward,” says Justin. “Their previous bank had funded the group’s expansion, enabling them to achieve some growth, but Breakthrough Growth Capital allowed them to achieve far higher growth.”
Tim was particularly impressed by the depth of Santander’s due diligence process. “The team at Santander spent 8-9 weeks with us getting to know the business and visiting the stores,” says Tim. “Santander spent time with me to understand what we were doing, and to understand how they could create a solution to suit our needs, and no other bank would do that.”
“I think the Growth Capital investment is a really well thought-out product,” adds Tim. “It allows us to draw down funds as the company grows without having to keep going back to the bank.” As well as helping the company overcome their greatest obstacles to growth, Santander’s Justin Hayward and his team provided day-to-day banking solutions to complex cash-handling issues. They also provided a revolving credit facility that allows Vital Ingredient to meet their quarterly rental payments without worrying about their cashflow.
Funding from Santander has allowed Vital Ingredient to press ahead with their plans to increase their number of stores from 11 to more than 20 within a year, a move that will create 12-15 jobs per unit and boost revenue from £5 million to a projected £12 million. The company is now looking into establishing a new central distribution unit in order to reduce purchase costs and free up storage space in the retail units.
Funding has also given Vital Ingredient the stability required to experiment and grow into other market niches, as Tim explains. “We are starting to grow the business with additional organic growth at a store level,” he says. “We’re opening the stores longer, from 7.30am-5pm instead of 10.30am-3pm. We’re also offering breakfasts, and grab-and-go food for customers on their way home. We’re also looking at catering for the businesses surrounding our stores.” The company has achieved a feat of rapid growth in which Santander itself has clearly proved a vital ingredient.
What is Breakthrough?
Breakthrough is a programme of funding, business support, events and consultancy to help high-performing small and medium-sized enterprises (SMEs) leap to the next level of sustainable growth. To find out more, register your interest, and to see if your business is eligible, visit the Breakthrough website: www.santanderbreakthrough.co.uk
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Relationship Director Comments
By having a good knowledge of the company’s business strategy, their financial models and budgets we were able to deploy a solution that enabled them to accelerate their store roll-out