Caffè Nero has been forced to launch a restructuring of its business following the second lockdown.
The coffee chain is launching a Company Voluntary Arrangement (CVA) which will allow it to renegotiate terms with its landlords and other creditors.
Caffè Nero, which employs 6,000 workers, said “the pandemic has decimated trading”.
It said it was able to navigate the first shutdown but the subsequent fire break necessitated “further action”.
The company trades across 800 shops in the UK and a further 200 sites overseas. A company facing insolvency can use a CVA to continue to trade while paying creditors such as landlords over a fixed period – if those creditors agree.
Caffè Nero said it had converted many of its shops to takeaway-only services during the first lockdown in March.
But following the second shutdown, it said that, “with many people continuing to work from home, ongoing limits to social interaction and a sustained reduction to footfall in city centres, it is unclear how long this will impact Caffè Nero”.
It add that the CVA would allow the company “to better manage its fixed costs moving forward”.
“Like so many businesses in the hospitality sector, the pandemic has decimated trading, and although we had made significant progress in navigating the financial challenges of the first lockdown, the second lockdown has made it imperative that we take further action.” said Gerry Ford, the chain’s founder and chief executive.
Accountancy firm KPMG has been appointed to oversee the CVA process, and landlords and creditors have until 30 November to vote on the proposal.
It is understood Caffè Nero is proposing to move most sites to turnover-based rent, and that any store closures it is forced to make will be minimal.
The hospitality sector has been one of the worst affected industries by the coronavirus pandemic because of a dearth of office workers and commuters, which are key customers.
In the summer, Pret a Manger announced it was cutting 3,000 jobs, around a third of its workforce while Costa Coffee said it would axe 1,650 roles.
“Like many others across the sector, the impact of measures introduced in response to the Covid-19 pandemic has been devastating,” said Will Wright, head of regional restructuring at KPMG.
“In putting forward this CVA proposal, the directors have worked hard to strike a fair compromise with stakeholders to provide the flexibility the business urgently needs to get it through the pandemic.”