Italian restaurant chain Prezzo is reportedly set to close 100 of its branches and become the latest victim of what is being dubbed as the casual dining crunch.
Prezzo preparing for a company voluntary arrangement (CVA)
The company, which was founded in 2000, is reportedly preparing for a process known as a company voluntary arrangement (CVA), which may involve around 100 of its restaurants shutting down. The Guardian has reported that this will include all branches of Chimichanga, Prezzo’s Mexican brand.
A CVA is a type of legally binding agreement, where a business’s creditors agree to receive only a proportion of what they are owed. It is used to help to protect a company from going bust.
CVA could involve restaurants’ landlords accepting rent reductions
It has been reported that the company’s creditors could be asked to approve proposals under the CVA which could involve rent reductions for the restaurants’ remaining landlords.
In order for a CVA to go ahead, creditors who, when added together are owed 75% or more of what the company owes, have to agree to it.
Landlords have reportedly not yet agreed to the CVA.
Could result in around 1,000 jobs being lost
It is thought that the move could result in around 1,000 jobs being lost. Some sources are reported to have suggested that staff could be transferred to the restaurants that will remain open, “where possible”.
Latest in the line of UK’s casual dining restaurants in trouble
Prezzo has become the latest in the line of the UK’s casual dining restaurants who appear to be having trouble, with burger chain Byron announcing in January that it was closing 20 (nearly a third) of its UK branches as part of a CVA.
Celebrity chef Jamie Oliver’s restaurant chain Jamie’s Italian also announced in January that it was closing 12 out of its 37 branches, which could include those in Bluewater, Milton Keynes and Harrogate. Early last month, it was announced that the brand’s creditors had agreed to a CVA.
According to the Guardian, Prezzo’s directors are “understood to believe” that it is in “better shape” than Jamie’s Italian or Byron.
Burst of the casual dining bubble
Various elements are believed to have caused the apparent burst of the casual dining bubble, including the National Living Wage causing higher staff costs, weakening consumer confidence and over saturation of the marketplace.
Sky News, where the story broke, has said its sources believe the CVA will be unveiled “in the next few days”.
Prezzo, which was bought by TPG Capital in 2014, currently has 300 UK restaurants.
This is another piece of worrying news for the British high street after it was announced on Wednesday that retailers Toys R Us and Maplin had gone into administration.