Private equity-owned Italian restaurant chain Prezzo is planning to close about a third of its sites, putting more than 800 jobs at risk, in a sign of how high inflation and the cost of living crisis are squeezing the UK casual-dining sector.
Prezzo, which was bought out of administration by private equity group Cain International in 2020, announced on Monday that it would close 46 loss-making sites across the UK, cutting its estate to 97 restaurants and reducing its workforce to about 2,000 staff.
Dean Challenger, Prezzo’s chief executive, said the past three years —covering the pandemic when Covid-19 restrictions led to a widescale shutdown of the hospitality industry — “have been some of the hardest times I have ever seen for the high street”.
He added that “the cost of living crisis, the changing face of the high street and soaring inflation has made it impossible to keep all our restaurants operating profitably”, adding that the closures announced on Monday would affect sites “where the post-Covid recovery has proved harder than we had hoped”.
The announcement shows the strain that soaring cost inflation in the aftermath of Russia’s invasion of Ukraine is putting on casual-dining operators as they try to recover from the pandemic. Prezzo recorded a loss of £22.4mn in 2021, according to its latest company accounts.
Prezzo said it had faced double-digit wage inflation in the past year and its utility bills, which now account for 9 per cent of total revenues, had more than doubled over the same period. The price of ingredients such as pizza sauce and spaghetti had risen 28 per cent and 40 per cent respectively over the past year, the chain added.
The number of casual-dining outlets across the UK fell 13 per cent in the three years to March 2023, according to the Local Data Company. Last month, Frankie & Benny’s owner The Restaurant Group said it would close 35 of its worst-performing sites, as it faces pressure from activist investors over its low share price.
Prezzo said its estate would focus more on shopping centres, retail parks, tourist destinations and travel hubs to better cater for changing consumer habits. Challenger added that he believed the “tough decisions” taken by management would secure its future for “many more years to come”.
Tom Pringle, joint head of restructuring at law firm Gowling WLG, said the closures were a “clear example of the economic fallout of prolonged high inflation”. “Huge rises in the costs of energy and food are eroding trading margins, and simultaneously making it difficult to pass these costs on to customers who are seeing the same pressures at home,” he added.
Prezzo last announced a round of site closures and job cuts in early 2021 after it was bought out of administration by Cain.
Source: Economy - ft.com
