The Restaurant Group has entered talks with its landlords over the possibility of shedding uneconomic restaurants and resetting rents by means of a company voluntary arrangement (CVA).
The company, which is refocusing on its Wagamama and Brunning & Price chains, confirmed this morning that it was discussing “potential restructuring options for our leisure estate”.
The potential CVA, an insolvency process typically used by hospitality operators and retailers to dispose of loss-making outlets and reduce rents, follows the revelation last week that the group had decided not to reopen between 100 and 120 restaurants, affecting up to 3,000 employees.
This morning’s announcement is believed to relate to those 100 to 120 restaurants, while a CVA would also give the company the option of seeking to cut the rent on some of the leisure sites it is keeping or moving to a turnover-related formula. Analysts said that although these closures and rent changes could be achieved without the need for a CVA, it would likely make the process easier.
The sites affected, most of them Frankie & Benny’s restaurants, are in the group’s leisure division, which operates restaurants on edge-of-town leisure parks with multiplex cinemas and tenpin bowling centres.
The Restaurant Group (TRG), formerly known as City Centre Restaurants, has about 600 restaurants in the UK, including an airport concessions business. It operates a further six Wagamamas in America under a joint venture, plus more than 50 franchised sites overseas. It has about 22,000 staff, most of them furloughed since the March lockdown.
In today’s statement, issued in response to an article from Propel Info, the trade publication, TRG said that a restructuring would enable the group to “meet both the immediate challenges and to build a post-lockdown business with a sustainable future”.
It said that while the restaurant sector was “facing exceptional challenges in what is an unprecedented operating environment”, the casual dining sector had already been hit by overcapacity and huge cost pressures before the Covid-19 crisis.
It emphasised that the talks with landlords related only to its leisure division, which comprises about 290 outlets, adding: “Our Wagamama, airport concessions and pub operations are not affected by these discussions.”
Last week, it announced the expansion of its Wagamama delivery operation to 100 of its sites and the addition of a click-and-collect option.
Andy Hornby, who became chief executive of TRG in August, appears to be using every weapon at his disposal in a bid to create a viable business when the environment returns to some kind of normality. The mooted leisure division CVA comes on top of TRG’s announcement in March that it was appointing administrators to two businesses: a subsidiary holding 61 of its 80 Chiquito outlets, costing 1,200 jobs, and Food & Fuel, a business with 11 pubs in London.
While the majority of the sites affected by the mooted CVA trade under the Frankie & Benny’s brand, some are run under concepts including Coast to Coast, Firejacks, Garfunkel’s and Joe’s Kitchen. Before the coronavirus crisis, the company had planned to exit from the sites gradually over the coming five to six years.
Several other casual dining chains have appointed advisers to consider strategic options, including Casual Dining Group, the owner of Café Rouge and Las Iguanas; Pizza Express; Byron; Wasabi; and Azzurri Group, the owner of the Ask Italian and Zizzi brands. Meanwhile, the South African owner of Gourmet Burger Kitchen has declared that it will no longer provide the UK brand with financial support.
