Up to 3,000 jobs could be lost across Frankie & Benny’s, while more than 500 have already been cut at the Monsoon Accessorize fashion retailer, as high street firms instigate drastic restructuring plans after the lockdown.
The Restaurant Group, the listed parent company of Frankie & Benny’s, announced plans this week to shut 125 of its outlets which even before the lockdown, had been trading poorly, carried expensive and restrictive leases, or showed low prospects of generating profits in future.
The plans are included in a company voluntary arrangement (CVA), which needs approval from landlords of the restaurant sites due for closure. While the 125 closures mainly impact Frankie & Benny’s, some Chiquito and Garfunkel’s sites may also be affected.
Andy Hornby, the former boss of HBOS who’s now chief executive of The Restaurant Group, said: "The issues facing our sector are well documented and we have already taken decisive action to improve our liquidity, reduce our cost base and downsize our operations.”
The move will leave up to 3,000 jobs on the line, in the same week that retailers announced hundreds of job losses as they struggled to withstand the impact of three months of shutdown.
These and more announcements expected soon are now likely to be on the radar of lenders’ company watch programmes, to contact customers at immediate risk of redundancy.
Year of the CVA
For The Restaurant Group in the immediate sense, the CVA has been designed to shrink the number of sites Frankie & Benny’s trades from to a sustainable level, and secure improved rental terms on the remaining restaurants that stay open.
If the CVA is approved, 160 restaurants will carry on trading. The CVA will also include a mechanism to exit from 25 locations which are already closed – reducing what the group called an “onerous, existing lease provision” on its balance sheet. The arrangements will have no impact on the group’s Wagamama, airport concessions and pub operations.
To demonstrate that the business has been in open talks with landlords, The Restaurant Group’s announcement included a comment from Melanie Leech, chief executive of the British Property Federation (BPF).
She said: “These situations are never easy, particularly now for the retail and hospitality businesses on our high streets at the sharp end of the Covid‐19 pandemic. Property owners, however, need to take into consideration the impact on their investors, including the millions of people whose savings and pensions are invested in commercial property, as they vote on any CVA proposal.”
Leech added that The Restaurant Group and Alix Partners engaged with the BPF before launching this CVA proposal, which provided an opportunity to improve their understanding of property owners’ interests and concerns.
Clare Kennedy, Peter Saville and Catherine Williamson of AlixPartners, the corporate restructuring and turnaround firm, are leading the CVA.
News on The Restaurant Group emerged just as other retailers entered administration and announced plans to cull under-performing sites.
This week Monsoon Accessorize entered a pre-pack administration in a move that has saved 450 jobs, although 35 stores closed and 545 staff were made redundant.
Tony Wright and Alastair Massey, partners at FRP Advisory, were appointed to manage the pre-pack on June 9. The administrators struck a deal with Adena Brands to enable the Monsoon Accessorize to continue trading online.
The fashion chain will now try to renegotiate lease terms on its remaining 162 shops, to help safeguard 2,300 jobs.