Gourmet Burger Kitchen earmarks 17 restaurants for closure as it enters company voluntary agreement
Famous Brands, the South Africa-based owner of Gourmet Burger Kitchen, has announced the restaurant chain will initiate a company voluntary arrangement (CVA) amid financial woes.
The company said it has 17 restaurants earmarked for potential closure, affecting 250 jobs. The company would not comment on which locations may be closed. It will hold a meeting with creditors on 9 November.
CVAs, which buy companies time to renegotiate rent, are seen as a controversial measure, allowing firms to seek rent reductions and to close stores once they find they are insolvent.
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They have been prominently used recently by several companies struggle to shore up their finances, including House of Fraser. Grant Thornton will advise it on the CVA process.
Gourmet Burger Kitchen, known as GBK, has more than 100 locations. Last month, it called in restructuring advisers from professional services firm Deloitte in a bid to secure rent reductions and cut deals with landlords.
“The CVA process has the objective to ensure financial viability and the sustainability of the business into the future,” Famous Brands said in a statement.
“Whilst this process evolves, shareholders will be updated when appropriate and are requested to continue to exercise caution in the trading of Famous Brands shares,” it added.
Derrian Nadauld, the burger chain’s managing director, said: “Given the challenging UK casual dining environment and over-rented UK restaurant estate, we are having to take tough but necessary actions to reduce our fixed cost base and restore long-term profitability.”
“We have held constructive discussions with our key landlords and strategic partners and will now seek creditor approval on our CVA proposal. This will provide greater security for our staff, suppliers, landlords and customers. GBK is a fantastic brand and with the strength of our core estate, we are confident the Company will emerge stronger from this process”.
The decision comes amid high street pressures that have led several restaurant chains to scale back or close stores. Byron Burger, Jamie’s Italian and Prezzo have all undertaken CVAs since the start of the year, helping them close loss-making stores and acquire rent discounts.
Gaucho, the Argentine restaurant known for its steak, exited administration on Tuesday following a successful CVA process.
Stephanie Pollitt, assistant director of real estate policy for the British Property Federation (BPF) said: “These situations are never easy as property owners need to take into consideration the impact on their investors, including those protecting pensioners’ savings, as they vote on the CVA proposal. Gourmet Burger Kitchen have, however, demonstrated best practice, engaging with the BPF early in the process, but ultimately, it will be for individual property owners to decide how they will vote on the CVA.”
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Last week, Famous Brands said in a trading update that “adverse trading conditions and sustained underperformance” had pushed Gourmet Burger Kitchen to R874m (£676.56m) pre-tax loss at group level.
Famous Brands could not immediately be reached for comment. Its share price climbed almost five per cent as investors welcomed its latest measure. Deloitte declined to comment.
The company bought GBK for £120m two years ago, after the chain was launched in south London by three New Zealanders in 2001.