Food for Thought: Zizzi and Ask Italian owner plans to close 75 branches across the UK
July 29, 2020
2 min read
What's going on here?
Azzurri Group, the owner of restaurant chains Zizzi and Ask Italian, has plans to close 75 locations, risking the loss of up to 1,200 jobs.
What does this mean?
The Group employs over 6,000 people across the UK and is one of the 15 national dining chains that are exploring restructuring options including administration just as the sector reopens, Financial Times analysis shows. The company has been struggling significantly as a result of the lockdown. US private equity investor TowerBrook agreed to purchase the group for £70m with the hope that the chains will become profitable again post-pandemic. Azzurri hopes that through the sale, it can partially repay some debts. The deal struck includes a commitment to closing 75 branches.
Azzurri Group’s struggles did not start with the pandemic. The company was initially sold to private equity firm Bridgepoint for £250m in 2014. Sales started to decrease soon after the purchase, with profits only starting to pick up right before the pandemic. The implementation of lockdown stalled the chains’ expected growth following the sale. This has pushed it to engage in the sale of all its assets in a pre-pack administration deal, meaning a company’s sale is finalised prior to the appointment of administrators.
What's the big picture effect?
The current outlook of the hospitality industry is grim. The pandemic has pushed many popular chains into administration earlier this year, like Carluccio’s. Others are facing imminent financial collapse such as The Restaurant Group (which owns Wagamamas and Frankie & Benny’s) and PizzaExpress. Nationally, it is predicted that over 15,000 hospitality jobs are at risk despite Rishi Sunak’s attempts to help the industry. The Chancellor’s bold £30bn recovery plan relies on the return of customers to restaurants, which is likely to be slow. Recent government data shows that only 20% of people feel comfortable eating out. According to Bank of England statistics, the hospitality sector is likely to have the slowest recovery after the Coronavirus pandemic. With this in mind, it is likely that the hospitality sector will need more than a voucher scheme to stay afloat.
Many popular outlets like PizzaExpress and Pret a Manger are falling out of business as a result of the pandemic. They cannot find sufficient liquidity to continue trading as usual and have had to resort to cost-cutting methods. This was the inevitable outcome of a private equity investment boom into restaurant chains, with over £4.5bn invested in the last decade, according to Refinitiv. This led to an oversaturation of the market. This crisis was already heightening prior to the pandemic from a combination of excessive rent costs and higher staffing costs that made it close to impossible to remain profitable.
To read more about the impact of coronavirus on the hospitality industry, you can find our article here.
Report written by Andreea Dicu
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