Croissant Express, Banksia a close fit

CROISSANT Express chairman Jonathan Huston is no stranger to the wheeling and dealing required to succeed in business.

Mr Huston’s previous experience has included negotiating the expansion and sale of the well-known Tint-a-Car business, and Parkside Towbars, which he bought and sold within 18 months to US-owned automotive products group TriMas.

In 2004, Mr Huston partnered with Glen Evans and private equity firm Foundation Capital to buy Croissant Express from its original owners, Geoff Cross and Maurice O’Connor, who had built it up to be an $8 million a year business by capitalising on the demand for ready to go food in the CBD.

The subsequent wind-down of Foundation’s investment portfolio opened the doors for relatively new private equity player Banksia Capital, which last year took up just more than a 50 per cent shareholding in the business.

Mr Huston said he would have preferred the equity to stay with Foundation but he knew Mark Dutton of Banksia who had previously worked at Foundation Capital.

“We were also fortunate that they dealt with each other,” he said.

He is a firm believer in the value of private equity for funding management buyouts because he said it allows the manager to be a shareholder in the business without necessarily having a lot of money.

“The point is that you have skin in the game. It’s called ‘hurt money’,” he said.

Mr Huston said he never thought that he would own a business in the food services industry, but when the opportunity arose to buy when it was up for sale through a broker, he recognised there was a lot of opportunity to grow the business.

Croissant Express has doubled in size since Mr Huston took over and now has 22 stores, including one in Queensland.

A new franchise recently opened at St Martin’s Square, taking its number of CBD stores to 11, while a Bunbury store will open soon.

Further expansion is also planned at rate of two to three stores a year as Mr Huston believes there is still a lot of growth potential in Western Australia, particularly in the northern suburbs.

Mr Huston said he was considering industrial locations that offered low rent sites compared with food courts and service station add-ons.

Although Mr Huston believed private equity was a good source of capital for MBOs, he said they would not use private equity to finance the growth but instead rely on capital from the franchises.

He said he did not see private equity as a good source of capital for expansion because more money diluted shareholders’ investment.