The owner of the Giraffe and Ed’s Easy Diner chains is planning to close 27 restaurants, putting 340 jobs at risk.
Boparan Restaurant Group (BRG) said on Monday that the brands intended to enter a company voluntary arrangement (CVA), an insolvency procedure that can include cutting property costs by seeking store closures or a reduced rental bill.
Paperchase also launched a CVA on Monday, with about five stores thought to be at immediate risk of closure.
The stationery chain operates 145 stores in the UK, of which 98 will receive rent reductions if the CVA is agreed with creditors. Of those, 28 will have a 50% rent cut for three months, after which there will be either a rent holiday or closure.
The latest round of planned closures underlines the struggles of the British high street. Pressure on consumer spending has led to a raft of store closures and thousands of job losses in the past two years. Jamie’s Italian, Strada, Byron, Gaucho and Prezzo are among the restaurants that have closed branches in recent months, while Maplin, and HMV are among the victims in the retail sector.
Staff at 20 Giraffe and seven Ed’s restaurants have been informed of the start of a consultation process on their jobs. The closures will come across the UK, at sites including Aberdeen, Manchester’s Trafford Centre and Holland Park in west London.
Giraffe and Ed’s run 87 restaurants, although none of the potential closures will affect the 17 outlets run by franchisees, including those at airports. Like-for-like sales had improved significantly but the performance at a number of sites remained unprofitable across both businesses, BRG said.
BRG acquired Giraffe from Tesco in the summer of 2016 in a deal valued at about £13m. The company paid almost £10m to acquire 30 Ed’s Easy Diner stores in the same year after the business fell into administration.
The companies were then combined into BRG-owned Giraffe Concepts Ltd, which generated revenues of £67.1m in 2017 but made a loss of £9.9m, according to its latest company accounts. The company employs more than 1,300 people.
If creditors agree to the CVA, it is understood that BRG will inject another £10m into Giraffe Concepts Ltd.
Tom Crowley, the chief executive of BRG, said: “We have been examining options for the two brands for some time and the CVA is the only option to protect the company. The combination of increasing costs and over-supply of restaurants in the sector and a softening of consumer demand have all contributed to the challenges both these brands face.”
Crowley said the company has negotiated a refinancing package with lenders if its creditors agreed to the CVA. As well as the 27 store closures, the deal would reduce rent at 13 of the restaurants. The company needs the agreement of three-quarters of its creditors in a vote on 21 March.
KPMG is advising on the CVAs for Giraffe Concepts Ltd and Paperchase.
BRG is owned by Boparan Holdings, the parent company of 2 Sisters Food Group, the country’s largest supplier of supermarket chicken. The ultimate owners are Ranjit Singh Boparan, known as the “chicken king”, and his wife, Baljinder Kaur Boparan. Their £3bn food empire also includes the turkey producer Bernard Matthews, as well as Fox’s biscuits.
Last year, 2 Sisters was found guilty of regulatory failures and poor hygiene at its poultry plants in a report by the Food Standards Agency, after an investigation by the Guardian and ITV News.
BRG’s other restaurant chains – the fish restaurant Harry Ramsden, US-themed brand Slim Chickens and FishWorks – are not affected by the proposed closures.
