- 20 Byron restaurants at risk of closure.
- Britain’s casual dining sector is suffering from a nationwide consumer spending squeeze.
- KPMG: “Gathering economic headwinds starting to impact the sector more profoundly.”
LONDON – Upmarket UK burger chain Byron could close 20 restaurants, as Britain’s casual dining sector continues to suffer from a nationwide consumer spending squeeze.
Accountancy firm KPMG said on Tuesday afternoon that Byron, which has 67 restaurants and employs 1,800 people, will launch a “company voluntary arrangement” (CVA) on Wednesday. A CVA is a restructuring effort that would help the firm slash its bills but requires the approval of all its creditors, including landlords.
Byron was founded in 2007 and was one of the first restaurants to spearhead a revolution in the UK’s burger market, transforming the image of the fast food from an unhealthy, down-market food to an indulgent treat.
The chain expanded quickly and was sold in 2013 for £100 million to London private equity group Hutton Collins Partners.
But Byron has struggled with “gathering economic headwinds” recently, according to KPMG partner Will Wright. Sales growth slowed from 24.4% in 2015 to 16.7% in 2016, the Telegraph reported, with profit also dipping.
Simon Cope, chief executive of Byron, said in a statement: “Byron’s core restaurant business and brand remain strong but the market that we operate in has changed profoundly. In order to continue serving our loyal customer base, we need to make some critical and difficult changes to the size and shape of our estate.”
Cope, who lead a turnaround of Japanese casual chain Wagamama, was brought in to help revive Byron last May. He told Business Insider at the time: “I think there’s a big ambition for Byron. It’s a very, very competitive space.”
The CVA is vital to Byron’s financial viability because a cash injection agreed as part of a rescue deal last month is conditional on its approval.
A ‘sector-wide slowdown’
Byron’s trendy burger offering has suffered in recent years amid a consumer spending squeeze driven by rising inflation. Inflation peaked at 3% last year, driven by the slump in the value of the pound after 2016’s Brexit vote.
Fulham Shore, the owner of trendy pizza chain Franca Manca, another prominent fixture in the UK’s casual dining scene, saw shares crash 20% in September after the business issues a profit warning citing a “sector-wide slowdown.”
Will Wright, restructuring partner at KPMG and proposed supervisor of the CVA, said in an emailed statement:
“Over the last ten years, Byron has grown to become a stand-out name within the UK’s casual dining sector.
“However, in recent times, certain parts of its portfolio have not met expectations, and with gathering economic headwinds starting to impact the sector more profoundly.
“As with similar CVAs, this arrangement seeks to strike a balance which provides a fair compromise to landlords, while allowing the viable part of the business to move forward across a smaller, more profitable core estate.
“It’s important to stress that no restaurants will close on day one, and employees, suppliers and business rates will continue to be paid on time and in full.”
The creditors will vote on the CVA, which requires 75% approval, on 31 January.