Gourmet Burger Kitchen restaurants at risk as 17 branches set to close

Gourmet Burger Kitchen used to have a branch in Leeds
Gourmet Burger Kitchen used to have a branch in Leeds
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The future of hundreds of Gourmet Burger Kitchen staff has been thrown into doubt as the fast-food chain becomes the latest firm to embark on a store closure plan.

The group, owned by South Africa's Famous Brands, has announced plans for a Company Voluntary Arrangement (CVA), an insolvency procedure which allows struggling firms to dump unprofitable stores.

Some 17 restaurants have been earmarked for closure, impacting 250 jobs.

GBK operates more than 80 stores and employs 2,000 people.

Famous Brands, which acquired GBK in 2016 for £120 million, said on Wednesday that the board would initiate the process with help from advisers at Grant Thornton.

Famous Brands has previously unveiled stinging losses at the burger chain.

The company said earlier this month that it would take a pre-tax impairment charge of 874 million rand (£47.2 million) due to the brand's sustained under-performance.

Creditors will vote on the proposed closures at a meeting on November 9. All restaurants will continue trading in the meantime.

GBK's managing director Derrian Nadauld 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. "

Store closures at GBK would represent the latest in a long line of casual dining firms to shut restaurants this year.

Gaucho, Hummus Bros, Prezzo, Byron and Jamie's Italian have all fallen on hard times as costs have rocketed off the back of the Brexit-hit pound, while consumer confidence has nosedived as the economy falters.

Commenting on the announcement, Alex Probyn, president of UK expert services at real estate adviser Altus Group, said: "There has been huge growth in the casual dining market, with restaurant numbers up 15% overall since 2010.

"The race for space has pushed up rents impacting on rateable values. Extra tax for business rates coupled with rising food prices and staff costs through increases in both the national and minimum wages are creating a potentially lethal cocktail as margins are squeezed."

At the time of its takeover in 2016, Famous Brands said that fears of a Brexit effect on the eating-out market "appear negligible", adding that it would look to export the GBK brand to South Africa.

Famous Brands, which also owns Wimpy, said it would double GBK in size and create more than 2,500 jobs as part of expansion plans.