The board of Gourmet Burger Kitchen has taken the decision to initiate a company voluntary agreement (CVA) that will see up to 17 restaurants close and the UK business restructured.
Business advisory firm Grant Thornton has been appointed to oversee the process, which could involve reducing its store estate by a fifth.
The move comes just two days after its owner, the South African restaurant group Famous Brands, confirmed that GBK had racked up operating losses of £2.6m during the six months to the end of August.
Under the terms of the CVA, GBK said it has 17 restaurants earmarked for potential closure, impacting around 250 jobs. It will attempt to redeploy staff from restaurants should they close. The other 68 restaurants will continue to trade as normal.
Creditors will vote on whether they back the plan at a meeting scheduled for 9 November.
Derrian Nadauld, managing director of Gourmet Burger Kitchen, said: “Given the challenging UK casual dining environment and over-rented UK restaurant estate, we are having to take tough but necessary actions to reduce our fixed cost base and restore long-term profitability.
“We have held constructive discussions with our key landlords and strategic partners and will now seek creditor approval on our CVA proposal. This will provide greater security for our staff, suppliers, landlords and customers. GBK is a fantastic brand and with the strength of our core estate, we are confident the Company will emerge stronger from this process.”
Matthew Richards and Daniel Smith from Grant Thornton have been appointed as joint nominees to the CVA.
Mr Richards said that the CVA will provide a stable platform upon which a turnaround plan can be delivered.
“We have fully engaged with the British Property Federation and its members and their views are reflected in what we believe is a fair proposal to restructure the property obligations of the company. It is important to stress that no restaurants will close immediately and employees and suppliers will continue to be paid on time and in full.”
GBK said that in recent months it has undertaken significant steps towards the operational restructuring of the business including securing the reduction of head office and other key overheads, the facelift refurbishment of 30 restaurants and the implementation of an updated rebrand.
In a statement issued to investors today, Famous Brands confirmed the CVA plans. It said: “The CVA process is unique to the United Kingdom and is a process used by financially distressed businesses in order to come to a binding agreement or compromise with their unsecured creditors. Typically, the process is used to restructure a business’s leased property portfolio in line with current market valuations. The CVA process has the objective to ensure financial viability and the sustainability of the business into the future.”