Frankie and Benny’s owner The Restaurant Group (RTN) announced it will implement a company voluntary agreement (CVA) to reduce rent costs and downsize the estate. The shares nudged up 1% to 70.5p, having halved over the past six months.
This follows a statement rushed out on 8 June after rising speculation that the company would need to restructure its sites due to ‘significant challenges’ which according to management were present prior to the onset of Covid-19, notably overcapacity and significant cost pressures.
The CVA, if successful will have a mechanism to include around 25 previously closed leisure sites, further reducing existing the ‘onerous lease provision held on the company’s balance sheet’.
Chief executive Andy Hornby commented, ‘the proposed CVA will deliver an appropriately-sized estate for our Leisure business to ensure we are well positioned despite the very challenging market conditions facing the casual dining sector.’
The proposed arrangements have no impact on the group’s Wagamama, Airport Concessions and Pub operations. After a comprehensive review the company identified approximately 210 sites that have been either underperforming, operating on unfavourable lease terms or have little prospect of generating profitable returns.
GLOOMY PROGNOSIS
Around 125 of these sites will close with the balance subject to a reduction in rents and revised lease terms. The rationalisation is not surprising and follows a gloomy article in The Fresh Produce Journal yesterday which predicted a big shift away from the food service and hospitality channels towards the food retailers, suggesting recent lockdown trends will become sustainable.
The article reckons a return to pre-coronavirus revenues won’t happen until 2025 while the channel is expected to halve over the next year. It quoted a survey commissioned by celebrity chef Marcus Warring which found over a third of consumers expected to spend less when returning to restaurants.
