The Argentine restaurant group Gaucho is considering the closure of its casual dining steakhouse Cau with the potential loss of about 700 jobs.
It is understood that the privately owned group has appointed advisory firm KPMG to help assess options for the future of Cau, which has 22 restaurants around the country.
The restaurant chain, which serves up burgers and brunch with a Buenos Aires theme alongside steak dinners, has suffered sales declines in double digits for more than a year amid heavy competition and a squeeze on consumer spending.
Higher costs
Business rates and wages are up, as is the cost of imported food. Wages are up partly because of the rise in the legal minimum but also because finding workers is more tricky. High employment means there are fewer Brits available while the Brexit vote is putting off some EU workers who are already less keen because of the lower value of the pound.
The rise of delivery
Deliveroo, UberEats and Just Eat are driving a rise in demand for home delivery, cutting the number of customers eating out.
Over-expansion
Until 2015/16, dining out was growing strongly. Private equity firms helped mid-market chains expand, which increased competition just as the market was feeling the squeeze.
Spending shifts
Takeaway breakfasts and lunches are also diverting money away from sit-down restaurants.
Cau was launched in 2010 and expanded rapidly. Its owner also runs nearly 20 Gaucho-branded restaurants. The Gaucho chain is performing in line with expectations and is not expected to be affected.
A company spokesperson said: “As part of a comprehensive strategic review, the group’s new management team, with the support of its shareholders, is at the early stages of exploring a number of financial restructuring options. No decisions have yet been made.”
Gaucho is understood to be considering closing Cau via a company voluntary arrangement (CVA), Sky News reported. A CVA is a form of insolvency that has recently been used by a string of high street businesses facing tough times.
The upmarket burger chain Byron, Jamie Oliver’s Jamie’s Italian restaurants and Prezzo, the owners of Chimichanga, have all used the process to close stores or cut rents in recent months in a casual dining crunch that followed a wave of private equity investment in the sector.
The high street chains New Look and Carpetright have also closed stores via CVAs, and Poundworld wants to close about 100 stores using the process, while House of Fraser is expected to close about 20 stores in a CVA due to launch next month.
Restaurants and retailers have come under pressure amid rising business rates and minimum wage costs as well as a slowdown in consumer spending as inflation, especially on food prices, has outstripped wage rises.
The private equity firm Equistone bought the Gaucho group in January 2016 having backed a management buyout in 2005. In January, it hired Oliver Meakin, the former boss of the electronics store Maplin, which fell into administration in February.
