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Basil O’Hagan fights back from sequestration to rebuild his Irish restaurant-cum-pub conceptIn his high-flying heyday as the founder of the O’Hagan’s chain of Irish pubs, Basil O’Hagan was worth an estimated R100 million. Then, like a modern-day Icarus, he fell suddenly and spectacularly to earth. Unlike the character in Greek mythology, though, he defied death – but instead suffered financial ruin and public humiliation.
Now, reminiscent of another cornerstone of Greek legend, he is rising Phoenix-like from the ashes to hopefully rebuild his reputation and create yet another franchise chain based on Irish food, fun and conviviality.
His Brazen Head casual restaurant-cum-pub concept already boasts 12 outlets in various parts of South Africa and he is aiming for at least 38 more over the next decade.
South African-born but of Irish extraction (he says the O’Hagan name features prominently in the Galway phone directory in southern Ireland), he exudes some of the cavalier, “up and at ‘em” and “let the devil take tomorrow” attitude that characterises many of those bred in the Emerald Isle land of his forefathers.
Endearingly honest, the 61-year-old who says he is “going on 30” admits that he still has a long and uncertain path back to where he was in 1998, when his world crumbled on the back of 24% interest rates and banks that, he says, were unwilling to advance further credit to a franchise business which already had high levels of debt.
“The road to success is always under construction,” declares O’Hagan, exuding a homespun philosophy that is peppered with down-to-earth quotes on business life in general, as well as his own riches-to-rags-and-hopefully-back-again experiences.
“You’ve gotta go down for the mandatory count of eight like a boxer, then get up and dust yourself off,” he says of his determination to fight back from his own personal Ground Zero of sequestration.
“It’s the school of hard knocks – the university of life,” he pronounces, when asked about the lessons learned during that dismal period.
“Stick all your eggs in one basket and watch that basket grow,” is another ‘Basil-ism’, this time on the topic of whether to stick to your core business or diversify.
Marketing background
Eastern Cape-born and a marketer by profession (he obtained his Marketing degree in 1970), O’Hagan began his working life in the motor industry, then became a brand manager for Brooke Bond Oxo and advanced through the management ranks before becoming marketing director of Royal Beech-Nut in South Africa.
But he always harboured an entrepreneurial streak and, in 1982, founded a successful sales promotion company before starting the O’Hagan’s Irish Pub & Grill chain in the early 1990s.
Perhaps it was masterful insight, or merely the proverbial Irish “rub o’ the green”, but the dawning democracy seemed to encourage a new exuberance and bonhomie among the citizenry of South Africa.
The chain flourished and within six years had grown to around 60 outlets nationally and was floated successfully on the stock exchange. Its founder, it seemed, could do no wrong and accumulated personal wealth, on paper at least, in excess of R100m.
But fate was waiting in the wings to give him a kick in the backside infinitely more painful than a head-butt from the fabled Paddy McGinty’s goat.
While O’Hagan insists his basic concept, operating procedures and marketing strategy were sound – the inescapable truth is that the stratospheric growth was achieved on the back of high levels of debt.
In 1998, as interest rates soared, the banks pulled the plug. O’Hagan was sequestrated and the chain sold to a new group of investors. It continues to operate to this day, albeit with fewer outlets and a lower profile than in its heyday.
A bitter pill
More than a decade on, much of the resentment seems to have passed, but the manner of his demise obviously still rankles. O’Hagan believes the financing bank had no need to force him into sequestration. “The business was sound, it just had debt in it. All the bank should have done, was convert that debt into equity, taken the debt out – and we could have held on.”
For a highflier who garnered accolades such as Brand Builder of the Year, Franchisor of the Year and who was a finalist in the SA Entrepreneur of the Year competition, it was obviously a bitter pill to swallow. The experience has spawned more down-to-earth philosophies – among them “learn who to trust and follow your own instincts”.
O’Hagan says he will never forget when corporate finance executives from his bank and the turnaround division of a prominent business consultancy came in and said: “Basil, you carry on and run the business and we’ll find the capital to save the situation”.
As history shows, this never worked out as hoped. “They made one appointment in three months and I could just see the cash flow going down. These guys didn’t see anybody,” asserts O’Hagan.
Based on this experience, are there lessons for other entrepreneurs to learn? The Umtata High School matriculant and University of Cape Town graduate believes there are many, apart from the obvious one of not building up too much debt.
“Don’t lose control of the business – you can’t expect other people to have the same passion as you do”, is one of his key pieces of advice.
“Watch your ROE (return on ego),” is another Basil-ism that emerges. “It’s easy when you’re riding high to think that things won’t go wrong; there’s no return on ego – only on investment.”
O’Hagan believes it is also vital to stick to your strengths where possible. He is a hands-on, roll-up-your-sleeves kind of person who enjoys working with his franchisees on day-to-day marketing and operational issues.
But, once the O’Hagan’s chain became a listed company, his focus moved to corporate, boardroom issues and away from the key strengths that had built the business.
So, was he then the innocent and aggrieved party in a business failure that was down to bad luck and unexpected circumstances? “No,” says O’Hagan, “At the end of the day, I was accountable. I was the founder and CEO and I was responsible. You can’t blame other people.”
The aftermath
Personally, the consequences of his sequestration were catastrophic. Overnight, he went from being a highflier to having to check his wallet before buying the smallest of items.
“Suddenly you don’t have a car and you don’t have a house; it’s a humbling experience,” he recalls. “When you’re sequestrated, you can’t have a bank account, you can’t sign a legal document, you’re basically persona non grata. It was a huge emotional and financial knock,” he says.
“Even certain family members weren’t as supportive as they could have been during that time, so it was very lonely. But that’s when you realise who your friends are. I thought I had 500 friends, but I really had 500 acquaintances.
“Now I have fewer, but loyal friends.”
In the aftermath, O’Hagan used his international contacts to find work in the booming Irish pub business in the United States. But, while learning lessons he would later put to use in developing the Brazen Head concept, he always intended to return to South Africa. “Home is home,” he says. “There’s a support base here.
“Eighty percent of people living abroad say they’re happy, but they’re not. This is where our roots are, this is our culture, this is the land
of opportunity.”
His US experience helped define in his own mind what an Irish pub should be: “an old and authentic look that never dies”.
He believes emphatically that Irish pubs are not a fad and have longevity, whether in South Africa or abroad. “It’s a genre that is growing.
“There are over 2 000 successful Irish pubs around the world – in places like Singapore, Malaysia and China. Paris, alone, has 35. In America, the world’s most competitive restaurant market, there are over 200.”
Why are Irish pubs so popular? O’Hagan believes it is because they are fun places to be and the friendliness and hospitality of Ireland’s inhabitants is well known throughout the world.
This has been boosted in recent years by the growing international demand for Irish food, whiskey and beers such as Guinness, Kilkenny, Bass and Harp.
The Brazen Head
South Africa may not quite be awash with Irish pubs, but there is certainly no shortage.
Apart from the reconstituted O’Hagan’s Irish Pub & Grill chain of 20-plus outlets, there are the Firkin and McGinty’s franchises, as well as a number of independents scattered around the country.
O’Hagan considers his Brazen Head chain (the name comes from a Dublin pub founded in 1198) to have several points of difference that set it apart from the competition.
Authenticity is one, with an emphasis on traditional ‘like-mom-made-it’ meals such as stews, casseroles and pies. This is blended with Irish bric-a-brac and homely decor to create a laid-back and welcoming atmosphere.
The second key difference, he claims, is a greater emphasis on food than his rivals. “We’re not fine dining, but we’re not pub grub either – we are between the two,” he explains. “There’s no loyalty in beer; only operating a pub in the current economic environment is not viable and you need a restaurant side to the business.
“You can go to a Brazen Head and have a very good meal for two people for under R200. I think we have our own niche in the market, in that we are really two businesses – a pub and a restaurant – under one roof. There’s always a glass partition between the pub and the restaurant, so if you are dining, you can see the atmosphere of the bar, but you’re not interfered with,” he says.
Calling on his decades of marketing nous, O’Hagan is also wooing potential franchisees (who typically pay around R2.7m in setup cost, plus 5% of monthly turnover and a 2% monthly marketing levy) with a marketing strategy he says is unique in its approach and scope.
“Marketing is a huge factor. You have to market to get people in your front door and then look after them once they’re in. We call it our ‘fetch them and please them’ strategy”.
Bearing in mind his past difficulties, do some potential franchisees hesitate to become involved with Basil O’ Hagan?
He considers the question for moment. “You can either go into business with somebody who has made a mistake… or somebody who is going to make a mistake. The chances of the former making the same mistake again are pretty small.”
And does he have advice for others who have found themselves insolvent and sequestrated?
“I say to them: stand up, fight back, play to your strengths, try to eliminate the same mistakes, enjoy what you do, take the knocks and don’t go down for the count of 10 – get up at eight.
“You also need persistence. Think of the stonecutter: it’s not the 101st blow that breaks the rock… it’s the 100 that went before it.” ?
Mike Simpson is a freelance journalist writing mainly on marketing, business, motoring and travel topics.
