London-focused upmarket burger chain Byron could close more than a dozen restaurants in an attempt to reduce its soaring property costs and keep the business afloat.
The chain, which opened its first restaurant on High Street Kensington in 2007, has proposed a company voluntary arrangement (CVA) that aims to ensure it gets a much-needed injection of cash from investors.
Will Wright, restructuring partner at KPMG and proposed supervisor of the CVA, said in recent times certain parts of Byron’s portfolio have not met expectations.
He said that with gathering economic headwinds starting to impact the sector more profoundly, the directors have embarked upon a strategic review of the business.
The CVA is designed to tackle the cost of the company’s leasehold obligations across its UK restaurant portfolio.
“As with similar CVAs, this arrangement seeks to strike a balance which provides a fair compromise to landlords, while allowing the viable part of the business to move forward across a smaller, more profitable core estate,” Wright said.
“It’s important to stress that no restaurants will close on day one, and employees, suppliers and business rates will continue to be paid on time and in full.”
Byron operates from 67 leasehold restaurants across the UK and holds a further nine non-operational leasehold sites including its head office in London
It has been suggested that around 15 restaurants could be closed.
Bryon’s spokespeople told This is Money: “In the event of closures, we will do everything possible to redeploy staff to other stores and other initiatives.”
Simon Cope, Byron’s chief executive, said the company’s core restaurant business and brand remain strong but the market it operates in has changed profoundly.
“In order to continue serving our loyal customer base, we need to make some critical and difficult changes to the size and shape of our estate.”
Cope added: “With the support of our new owners, our creditors, landlords and other business partners, I’m confident Byron will able to continue providing our consumers with the best burger experience.
“The teams in our restaurants are always such an inspiration and we will work hard to support them throughout this difficult process.”
Five sites have been identified as being viable at a reduced rent, equivalent to two thirds. Another 20 have been identified for reduced rent, equivalent to 55%, which will be paid for six months while the company engages with landlords to agree the basis of any continued trading.
Should the CVA secure at least 75% creditor approval when a vote takes place on 31 January, private equity company Hutton Collins, which paid £100 million for Byron in 2013 and also owns Wagamama, will sell half its current holding in Byron to existing investor Three Hills Capital Partners.
Hutton Collins will retain a significant minority interest in the business and leave Three Hills as the majority shareholder.
Byron closed several under-performing sites last year, including its restaurants at Manchester’s Corn Exchange and the Metrocentre in Gateshead.
DealMakerz thinks the announcement not only suggests the burger boom could be coming to an end, but also shows the increasing burden of property costs in the leisure sector.
Casual dining operators like Bryon face stiff competition from high street and delivery-based rivals.
Last summer, Handmade Burger Co collapsed into administration, while companies including The Restaurant Group – which owns Garfunkel’s and Frankie & Benny’s – have changed their leadership teams in an effort to revive their fortunes.