Personal equity-owned Italian restaurant chain Prezzo is planning to shut a few third of its websites, placing greater than 800 jobs in danger, in an indication of how excessive inflation and the price of residing disaster are squeezing the UK casual-dining sector.
Prezzo, which was purchased out of administration by personal fairness group Cain Worldwide in 2020, introduced on Monday that it could shut 46 loss-making websites throughout the UK, slicing its property to 97 eating places and lowering its workforce to about 2,000 workers.
Dean Challenger, Prezzo’s chief government, stated the previous three years —masking the pandemic when Covid-19 restrictions led to a widescale shutdown of the hospitality trade — “have been a few of the hardest occasions I’ve ever seen for the excessive road”.
He added that “the price of residing disaster, the altering face of the excessive road and hovering inflation has made it unimaginable to maintain all our eating places working profitably”, including that the closures introduced on Monday would have an effect on websites “the place the post-Covid restoration has proved more durable than we had hoped”.
The announcement reveals the pressure that hovering value inflation within the aftermath of Russia’s invasion of Ukraine is placing on casual-dining operators as they attempt to get well from the pandemic. Prezzo recorded a lack of £22.4mn in 2021, in accordance with its newest firm accounts.
Prezzo stated it had confronted double-digit wage inflation up to now yr and its utility payments, which now account for 9 per cent of whole revenues, had greater than doubled over the identical interval. The value of components corresponding to pizza sauce and spaghetti had risen 28 per cent and 40 per cent respectively over the previous yr, the chain added.
The variety of casual-dining retailers throughout the UK fell 13 per cent within the three years to March 2023, in accordance with the Native Knowledge Firm. Final month, Frankie & Benny’s proprietor The Restaurant Group stated it could shut 35 of its worst-performing websites, because it faces strain from activist buyers over its low share value.
Prezzo stated its property would focus extra on procuring centres, retail parks, vacationer locations and journey hubs to higher cater for altering shopper habits. Challenger added that he believed the “robust choices” taken by administration would safe its future for “many extra years to come back”.
Tom Pringle, joint head of restructuring at regulation agency Gowling WLG, stated the closures had been a “clear instance of the financial fallout of extended excessive inflation”. “Big rises within the prices of vitality and meals are eroding buying and selling margins, and concurrently making it troublesome to move these prices on to prospects who’re seeing the identical pressures at house,” he added.
Prezzo final introduced a spherical of website closures and job cuts in early 2021 after it was purchased out of administration by Cain.