In London,” says David Babani, “fringe theatre is a dirty word.” And not without justification. It's meant to connote dissidence, dash and daring experiment. It's meant to breed the talents of tomorrow. But somehow, “fringe” has come to mean vanity projects, tatty revivals of tired classics, and sitting almost alone in rooms above pubs, while everyone downstairs has a lot more fun. So, when a fringe success story comes along, we should take notice.

That's where Babani comes in. This rumpled impresario, aged only 30, is artistic director of the Menier Chocolate Factory in southeast London, which celebrates its fourth birthday this week. “And when we do so,” he says, “we will have shows running simultaneously on the West End, on Broadway, and one at the Chocolate Factory that's sold out.”

Those shows are, respectively, Patrick Marber's Dealer's Choice, Sondheim's Sunday in the Park with George and the revived musical La Cage aux Folles - which also looks likely to have a life beyond the Menier. “I would not have predicted this level of success ever being possible,” Babani says, “let alone within four years.”

So is this man the saviour of fringe theatre? Not necessarily: after all, “I prefer to be categorised as off-West End,” Babani says. But he's happy to divulge the lessons learnt in four years running the Menier. So, budding artistic directors, get out your pen and paper now.

FIND A GOOD BUILDING

“The real star here is the building,” Babani says. At the turn of the 20th century, the Menier did what it says on the tin: make chocolate. When Babani and his former business partner, Danielle Tarento, stumbled upon it in 2003, it was operating as an art gallery with a seldom-used performance space. “And I fell in love with it,” Babani says. The Menier has tapped into the vogue for theatre in former industrial spaces. “It has an element of history, and mystery,” its director says. “There's an atmosphere that does so much of the work for us.”

It's also flexible and accommodating. In a programming coup, the Menier's first season featured the new writing heavyweights Paines Plough, who were seduced, Babani says, because “the rule here is that there are no rules. Unlike other theatres, where it's all stuffy, rigid and unionised, if we need to work 24/7 to achieve something, or need to rip seats out and bring the audience in through a loading dock, we can do it. And we do so, regularly.”

IT'S A TOTAL EXPERIENCE

The restaurant is key to the Menier's success. It helps to fund the theatre and offers meals themed according to what's on stage. But that's just the half of it. “Everybody does everything here, from waiters to box-office staff to stage management to management.” Babani wants the theatre to feel like a family. “Once the show's over, the actors come out and mingle with the public. Everybody's on the same level in this building.”

GET TALENT

“But it's not quite egalitarian,” says Babani - by which he means, he values talent highly. “I'm proud of the breadth of talent we've had here - and that includes those who are proven in the industry and those who are not.” Among the former are the star of La Cage aux Folles, Douglas Hodge, and its director, the playwright Terry Johnson. The latter include Sam Buntrock (who directed Sunday in the Park with George) and Matthew White, whose Little Shop of Horrors has been nominated for three Olivier Awards. Next up, as Babani reports excitedly, is the musical theatre actress Maria Friedman, who brings her new cabaret show, plus an 11-piece band, to the Menier next month.

RAISE YOUR OWN MONEY

But if you're running a fringe theatre, how on earth can you afford Douglas Hodge and Maria Friedman? Easily, says Babani. “We started this building with just ten grand. And we have been parlaying that money ever since, first into small productions and one-man shows, then into mega-musicals that go on to the West End, and so on.”

And it's all happened without any Arts Council funding - on which Babani has positively Thatcherite opinions. “I have seen friends and colleagues being crippled by red tape in order to fulfil their funding criteria.” He prefers the American way, “where there's no direct funding, but the Government issues tax breaks to people who contribute to the arts. That leads to a survival of the fittest. If you're doing good work or getting column inches, or you are innovative in how you fundraise, then you survive.” That's “slightly fairer,” he argues, “than being beholden to 22 old codgers in charge of giving out every penny, and who judge you by criteria that you barely understand.”

TRUST YOUR OWN TASTE

But you'll never raise money unless the work is good - and to ensure that, Babani says, you have to trust your own taste. “I know I'll have to sit through every show here ten times. So it has to be good enough for me to want to do that. Theatre is normally so insular and difficult,” he says. “I don't mind learning, I don't mind engaging in an argument. But if I'm not being entertained, then somebody's not doing their job properly.”

DEVELOP YOUR AUDIENCE

Most fringe theatres are receiving, not producing, houses, and are at the mercy of whoever can afford to hire their space. By producing its own work, the Menier has ensured “a basic consistency in terms of the standard of what you're delivering to an audience.” If you can guarantee that essential quality, says Babani, you woo an audience that doesn't tend to come to fringe theatre: that's “the North London middle-class audience who see shows at the National and on the West End, and who are interested in seeing things elsewhere, but not in slumming it.”

Babani discusses his whole first year of shows in terms of the audience they attracted, and how each show “added another niche audience without upsetting those we'd already attracted. So you get people who would go and see a quite nasty Philip Ridley play [ie, Mercury Fur in 2005] coming to a musical like [Jonathan Larsen's] Tick Tick Boom. And people who would go and see a Sondheim musical coming to see a British rugby farce. That's how you build an audience.”

HAVE AN IDENTITY - BUT DON'T BE BOUND BY IT

The Menier, which seats 200 people, more closely resembles an off-Broadway venue than any other in London. “Off-Broadway used to be a thriving community in New York, where millions were spent developing plays and musicals for 200-seat theatres. So we have 50 years worth of material to draw on” - including the first-season hit, Fully Committed, and the 2006 Jason Robert Brown musical The Last Five Years. So American plays and musicals “became the spine of the programming at the Chocolate Factory”. But they don't dominate - because “there is no form of entertainment that I won't consider putting in the building, as long as I can sell tickets for it,” Babani says.

WIDEN YOUR HORIZONS

“For me,” says Babani, “the barometer of success is work leaving the building.” The Menier has a first-refusal deal with a commercial producer in New York, Bob Boyett. “That money means we can do very ambitious shows that can't make money in this building alone,” Babani says - La Cage aux Folles being the most recent example. Boyett and the Menier hope to replicate the success of Sunday in the Park with George, whose New York opening last week will benefit the theatre in “many but unquantifiable ways”, Babani says. But “we also want our shows to go to Singapore and Hong Kong and Australia.”

BE LUCKY

Of course, Babani knows that, even if other fringe theatres followed these rules to the letter, their shows could still open to three punters and a mangy dog. “Luck counts for a lot,” he says. “My particular experience has counted for a lot. And circumstances count for everything. We happen to be in this building, at this time, with these ideas. And that seems to have sparked the public and the media's interest.” Rules can't harness that kind of magic. Which is why Babani's last, fabulously theatrical advice to aspiring fringe impresarios is: “Don't do it! If there's something else you're interested in, do that instead. Only if there's no other alternative, if this is the only thing you're capable of doing with yourself, then come into this business and give it your all.”

La Cage aux Folles, Menier Chocolate Factory, London SE1 (www.menierchocolatefactory.com 020-7907 7060), until Mar 8, returns only; Dealer's Choice, Trafalgar Studios, London SW1 (0870 0606632), until Mar 29; Sunday in the Park with George, Studio 54, New York (001 212-719 1300)

Click here to find tickets for The Chocolate Factory with Tickex

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