By Noor Zainab Hussain and Sangameswaran S
(Reuters) - Boparan Restaurant Group will close more than a third of its Giraffe and Ed's Easy Diner outlets in a deal that seeks to shore up the future of the two chains, BRG and its advisers said in emails on Monday.
The company will close 27 of the 70 sites owned by subsidiary Giraffe Concepts and reduce the rent on a further 13 restaurants, said KPMG partner Will Wright, who will supervise the deal, called a Company Voluntary Arrangement (CVA) with creditors.
The moves are the latest evidence of weakness among British casual dining companies, a number of whom have either gone out of business or announced plans to shut shops this year, as they struggle with subdued consumer spending and online competition.
"This CVA seeks to address the cost of the company’s leasehold obligations across a number of unprofitable sites, and if successful, will put the business on a surer financial footing," Wright said.
Sky News earlier reported details of the closures, saying hundreds of jobs would be put at risk. In emailed replies to Reuters' questions, neither Wright nor BRG Chief Executive Officer Tom Crowley, gave any details on job losses.
Crowley said the company had been examining options for the two chains for some time and that the CVA, which allows a business to avoid insolvency by offloading unwanted stores and securing reduced rents on others, was the "only option".
"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 Giraffe and Ed's Easy Diner chains are owned by restaurant tycoon Ranjit Boparan, who also owns the 2 Sisters Food Group, one of Britain’s biggest food manufacturers.
BRG, which also owns the Harry Ramsden restaurant chain, bought Giraffe from Tesco Plc in 2016, before combining it with Ed's Easy Diner, which it had also snapped up in the same year. The two brands have a retail partnership agreement with the supermarket giant.
"Both the Ed's Easy Diner brand and the Giraffe brand were distressed purchases when they came into the group and despite significantly improving like-for-like sales, the performance at a number of sites has remained unprofitable," Giraffe Concepts said.
More than 1,000 restaurants went bust in Britain in the year through September 2018, a 24 percent rise on the previous 12 months as the industry grapples with overcapacity as consumer spending slows, accountants Moore Stephens said https://www.reuters.com/article/us-britain-insolvencies-restaurants/uk-restaurant-closures-surge-as-consumers-lose-appetite-to-spend-idUSKBN1OG00Q in December.
Restaurant chains such as Carluccio's, Prezzo, Jamie's Italian and Strada, Gourmet Burger Kitchen have closed outlets in 2018, and there are few signs of any pick-up in demand.
(Reporting by Noor Zainab Hussain and Sangameswaran S in Bengaluru; Editing by Patrick Graham, Bernard Orr)