The parent company of Gourmet Burger Kitchen said this morning that it was not willing to provide any further financial support to the struggling UK burger chain.
South Africa-based Famous Brands – which bought the chain back in 2016 in a deal worth £120m -revealed it would cut funding to the business, which temporarily closed all its stores on 21 March due to the coronavirus pandemic.
The firm has also not ruled out writing off its investment in GBK, which it originally acquired to boost its presence outside of South Africa.
It stated: “The board has taken the decision to not provide any further financial assistance to the GBK business. Accordingly, the board of GBK will consider the options available to the business.
“The board’s decision to withhold further financial support for GBK may result in an impairment of the full value of Famous Brands’ investment in GBK. The precise valuation of such an impairment would be determined in due course. A further announcement will be issued as soon as reasonable certainty in this regard has been obtained.”
GBK had 75 sites when Famous Brands bought it in 2016 and at the time it declared it would double the chain’s footprint within five years. But the business has failed to hit the heights it expected and two years ago it closed 15 sites after undertaking a CVA.
The decision to pull funding appears to have gone done well with investors, with its shares gaining as much as 8% on the news.
Analysts said the acquisition had never delivered the returns Famous Brands had hoped and was battling against falling sales.
Famous Brands also owns the Wimpy fast food chain in the UK. However, it is unaffected by the decision to withhold further investment in GBK.