Gourmet Burger Kitchen (GBK) filed for a form of bankruptcy protection on Wednesday (October 24) after running up millions of pounds of losses.
The chain's parent, South Africa's Famous Brands, said the board of GBK had initiated a company voluntary arrangement (CVA) for the business that would allow it to avoid insolvency or administration and ensure its continued existence.
Famous Brands bought GBK in 2016, but its contribution to group profitability has taken longer than the company initially anticipated, hampered by pressure on consumer spending as well as factors ranging from higher property rates, increased input costs and an oversupply of restaurants.
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"The CVA process has the objective to ensure financial viability and the sustainability of the business into the future," it said in a statement, adding it has assistance of accountants Grant Thornton for the process.
A string of UK retailers have either gone out of business or announced plans to close shops this year as they struggle with the tough business climate.
Operating Loss And Pretax Impairment
Early in October, Famous Brands forecast GBK would make a wider operating loss of £2.6 million for the six months that ended on August 31, compared with a loss of £872,000 in the corresponding period last year.
It also said it would take a pretax impairment charge of 874 million rand (£46.7 million) due to difficult trading conditions and the sustained underperformance of GBK.
CVAs allow retailers to avoid insolvency or administration by offloading unwanted stores and securing reduced rents on others. They have been adopted by British groups including fashion chain New Look, floor coverings retailer Carpetright , mother and baby goods company Mothercare and most recently home improvements chain Homebase.
News by Reuters, edited by Hospitality Ireland.
Meanwhile, speaking to The Irish Times, a representative of Gourmet Burger Kitchen said that the CVA will have "no impact on the separate GBK legal trading entity in Ireland."
Article posted by Dave Simpson for Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.