viewRestaurant Group PLC

The Restaurant Group to close most of Frankie & Benny's as part of a financial restructuring

The group said overall 210 outlets will be affected by a company voluntary administration (CVA) of its Leisure Division including Garfunkel’s, Chiquito’s, Filling Station, Joe’s Kitchen and Firejacks

Restaurant Group PLC -
The Wagamama chain, and TRG's Airport Concessions and pub operations are not part of the CVA

The Restaurant Group PLC (LON:TRG) has said it is to close most of the Frankie & Benny’s chain as part of a financial restructuring that will demand substantial rent reductions at the outlets that remain open.

In total, 210 outlets will be affected said TRG, with most of these Frankie & Benny’s, but the part of the business being put into company voluntary administration (CVA) also includes Garfunkel’s, Chiquito’s, Filling Station, Joe’s Kitchen and Firejacks.

Of the 210 outlets, TRG said 125 sites will be closed while at the remaining 85 it is seeking a reduction in rental costs and revised lease terms. Around 3,000 jobs are believed to be at risk. 

Some 65 of TRG's leisure division trading sites will be unaffected by the CVA, the group said, while Wagamama, its Airport Concessions and pub operations are not part of the CVA.

Following the CVA, which requires landlord approval, the leisure division will comprise 160 outlets overall, TRG added.

In a statement, Andy Hornby, TRG's chief executive said: "The issues facing our sector are well documented and we have already taken decisive action to improve our liquidity, reduce our cost base and downsize our operations. 

“The proposed CVA will deliver an appropriately-sized estate for our leisure business to ensure we are well-positioned despite the very challenging market conditions facing the casual dining sector.”

CVAs are a controversial process, sometimes called flatpack administration, where landlords agree to accept lower rents or a change in lease terms to keep a tenant in place and operating.

TRG said it had worked with the British Property Federation ahead of this announcement.

Russ Mould, investment director at AJ Bell said TRG was already on the path towards a smaller estate before today’s news.

“It had paid the price for having tired brands and expanding too fast without enough thought to having decent service standards, competitive prices and a modern menu, causing its earnings and share price to plummet.

“There are arguments that it should have fixed the existing business before buying Wagamama in 2018 and taking on lots more debt.

“Yet having Wagamama has provided a new lease of life for the group principally due to its sales growth and expansion potential.

TRG will be keen to get Wagamama’s full reopened as soon as possible but its format of shared benches poses a challenge for social distancing.

Liberum added that the CVA includes a way forward to exit 25 previously closed sites, which will reduce the onerous lease provisions currently held.

“We believe this drastic step should be well received as it accelerates the much-needed change to downsize the structurally challenged legacy Leisure estate and refocus attention on the long term growth potential of Wagamama and its other segments.

“Earnings/valuation visibility is almost non-existent but this should go some way to improve sentiment towards the retained business.”

Shares fell 5% to 67p.


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Quick facts: Restaurant Group PLC

Price: 53.5 GBX

Market: LSE
Market Cap: £315.54 m

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