It's always good to read about businesses pushing the boundaries of their operation and finding innovative ways to reach new customers and expand. And Leon is definitely an example of a business that is getting this right. The dining chain is planning to open ten new restaurants within three years by raising capital from a bond issue to its customers.
The 'Leon Bond' will aim to bring in about £1.5 million and the anticipated rates of return are very attractive. For customers making a £1500 investment the gross return will be 10% and for those investing £5000 the anticipated rate of return will be 15%, with incremental rises in between on an ascending scale. However, the returns on investment won't be paid in cash – they will be provided in 'Leon Pounds', which will be added on to electronic cards and used to pay for food and drinks at Leon restaurants.
The Chief Executive of the restaurant chain and its co-founder, Henry Dimbleby, explained that the brand's vision was to achieve international-level fast-food status, growing through both franchised and directly owned outlets. Their ultimate aspiration was to see one of their restaurants on every UK high street. However, they are also committed to expanding carefully and ensuring that they retain the quality of service and product which the Leon brand has become known for.
His co-founder, John Vincent, also explained the attractiveness of the bond proposition, explaining that savers were currently struggling to get rates attractive enough to beat inflation on their savings and investments. Additionally, banks were continuing to tighten their lending book for businesses, despite the government increasing their ability to do so with direct funding. So Leon will cut out the middle man by directly engaging with their customers for finance. In fact, Vincent explained that the Leon customers already email regularly with requests for new branches closer to their homes or work places, so the bond will offer them the chance to have this and enjoy financial benefits at the same time.
Leon is a brand with a stellar history of success. After being founded back in 2004 by Dimbleby and Vincent, the first outlet opened in Carnaby Street in London with the aim of making it easy for everyone to enjoy good food. Since then, the company has rapidly grown and now has eleven London-based restaurants along with one in Kent's famous Bluewater shopping centre and another in Terminal 3 at Heathrow Airport.
The money raised through the bond scheme will be used both to pay off an existing bank loan and also to see up the charitable Leon Foundation, which will spread the brand's ethos to a wider audience and launch a cookery school aimed at children dealing with renal illnesses. So far, customers have responded to news of the bond issue with great enthusiasm and Leon's owners put this down to the modern power of the brand –with customers increasingly favouring the brands they trust and identify with rather than banks.
Interestingly, it's not the first time finance has been raised from customers in this way. Both Hotel Chocolate and the hotel provider Mr & Mrs Smith used retail bonds to help fund their businesses. With the reputation of the banks being rapidly eroded and their willingness to lend diminishing, is this something we'll be seeing more of in the future?
At FranchiseExpo we're certainly impressed by the creativity and innovation demonstrated by this brand's approach to raising finance and their commitment to building on their franchise and direct-ownership model to expand their number of locations. We wish Leon every success with their bond issue and look forward to watching their progress!