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Create restaurant in Leeds, praised by David Cameron and Jamie Oliver for its food and ethics, falls victim to harsh economic climate
A restaurant hailed by David Cameron as a "proud example" of "big society" in action has been forced to close as a result of the economic squeeze.
For a few heady months, Create restaurant lived out a northern version of Jamie Oliver's social enterprise dream. It hired a star chef and offered great, reasonably priced cuisine that was fêted by critics: thinly sliced venison, partridge breast and sautéed girolles, all cooked and served up by a team partly made up of homeless trainees. The restaurant's idealistic slogan was "Where good food and people matter". The Good Food Guide praised the ethos, and comments from Downing Street were glowing. Last weekend, however, just months after it won Observer Food Monthly's ethical restaurant of the year award, the dream came to an end. Create was forced to close after facing what it called "tough commercial realities".
Its rapid rise and precipitous fall – in five years it grew from a sandwich-making venture in a Leeds night shelter for the homeless to a business with a turnover of more than £1m and branches across the north of England – is seen exemplifying the struggle faced by social enterprises: ethically driven firms that reinvest profits in a "social mission".
Create said that despite winning plaudits for its food and achieving huge success in training disadvantaged youngsters – nearly two thirds of the 500 homeless trainees who passed through its kitchens not only found work elsewhere, but were still in a job six months after "graduation" – it had struggled financially. Attempts to widen its income by tapping into government welfare-to-work business had failed, despite its expertise and record. Chairman Norman Pickavance said its small size meant that it was effectively excluded from competing for contracts in the Work Programme, which is dominated by big firms.
Pickavance, a former director of Morrisons supermarkets, said: "We set out with high ideals. We were going to do this [train disadvantaged youngsters] by making money out of the restaurant. But the maths don't work. In these tough times, selling food is not enough."
Peter Holbrook, the chief executive of Social Enterprise UK, said that Create's difficulties were shared by many smaller social businesses, especially those squeezed out of "toxic" public sector markets such as the Work Programme. He warned: "We are going to lose a lot of innovation, a lot of organisations embedded in communities that achieve outstanding results for local people."
The government has insisted that it wants to support social enterprises by opening public-sector markets. Cameron called Create "a proud example of the 'big society' I want to see across the UK", and made it the second ever winner of the No 10 "big society" award in November 2010. Pickavance said that Create had been filled with optimism after winning the award and meeting ministers. "You think, 'Wow, this has really taken off.' But it is all rhetoric and no money." Create's last set of accounts filed at Companies House show losses of nearly £1m in 2011, partly as a result of opening new branches. Create board member and the millionaire businessman Ged Syddall, who made a fortune from government apprenticeship schemes, wrote off £900,000 in loans to try to keep Create afloat.
Create says the closure is temporary while it carries out a restructuring, led by its chef, the former Harvey Nichols head chef Richard Allen. The new business model is expected to concentrate more on training and less on food. In a statement, Create said: "Throughout this journey our passion has remained the same, helping the hardest-to-reach people in our community, and with your support we have managed to support over 500 people. However we are not a charity. As a social enterprise we pay the same rents as any other restaurant chain but have had higher costs because of the extra support work we do.
"So in today's harsh economy we have had to look really hard at how we can continue helping the maximum number of people while dealing with some tough commercial realities."
A year ago the Observer's food critic, Jay Rayner, gave Create a glowing review, citing "one of the best-cooked hunks of skirt steak I have ever enjoyed". He concluded: "It says much for the success of this place that by the end of lunch even this cynical old dog was ready to clamber on to his hind legs and applaud."
But the first outward signs of trouble surfaced in November, when Create warned that the business was "on a knife edge" after suffering cashflow problems. It closed operations in Manchester and Sunderland, and made 16 staff redundant. Create's difficulties follow the demise of another high-profile social enterprise training restaurant, the Hoxton Apprentice, which went into administration at the end of last year.
Even Fifteen, which benefited from the public exposure of a TV series and the celebrity patronage of Jamie Oliver, has said that the cost of training disadvantaged youngsters – at around £30,000 a head – makes it hard to compete in the cut-throat world of restaurants and catering.