The restaurant chain Pizza Hut is considering restructuring its debts in an insolvency agreement that could involve job losses.
The UK company has hired turnaround specialists Alvarez & Marsal to examine options for the business that could include a company voluntary arrangement (CVA), a deal with creditors to reduce debts, often including rent reduction.
Pizza Hut Restaurants ran 244 branches across the UK before the coronavirus pandemic hit, employing 5,700 people. However, it was forced to shut all branches during the UK’s lockdown.
It has since reopened the majority of its sites, and is aiming for 213 restaurants to be trading by 10 August, potentially allowing it to benefit from the government’s “eat out to help out” meal discount vouchers on Mondays, Tuesdays and Wednesdays. The government scheme, which will give a £10 per head discount, will run throughout August.
The UK’s casual dining sector was already under severe pressure before the pandemic, with intense competition across a crowded high street.
The lockdown has made it even more difficult for restaurants, with social distancing requirements limiting the number of customers who can dine at any time.
Casual dining companies that have cut jobs since the lockdown include Restaurant Group, which last month announced almost 3,000 job losses in chains such as Frankie & Benny’s, Burger King, with 1,600 job losses, and Bella Italia owner Casual Dining Group, with the loss of 1,900 jobs.
Pizza Hut’s delivery arm, a separate entity, is not expected to be part of the restructuring, and no decision has been taken on the shape it will take. Sky News first reported the appointment of advisors.
Pizza Hut Restaurants is run under franchise from Yum! Brands, the S&P 500 fast food company that also runs KFC and the Mexican-themed Taco Bell chain.
In a statement, Pizza Hut said: “Despite government support and entering lockdown from a place of strength, there has been a substantial impact on the whole restaurant sector.
“Along with many other businesses, we are looking at ways to minimise that financial impact, while continuing to trade as usual. Whether this will require financial restructuring in the form of a CVA or otherwise is as yet undecided. While no decisions have yet been taken, we will continue to communicate and engage with employees on a regular basis.”
Pizza Hut was one of a number of restaurant companies that in June called for urgent help from the government for the sector to prevent mass closures.
The businesses, which also included Wagamama, Itsu, Pret a Manger and takeaway delivery company Deliveroo, wanted VAT cuts for restaurant food, and the continuation of the coronavirus job retention scheme for restaurant workers while physical distancing measures remain in place.
The proposals also included “mortgage holidays” for landlords so they could offer temporary rent reductions to restaurant tenants without taking losses themselves. Deliveroo said nearly three-quarters of its restaurant partners were concerned about rent payments while social distancing restrictions were in place.
