Restaurant Group was already travelling down the path to a smaller sized estate before news of a CVA. It had paid the price for having tired brands and expanding too fast without enough thought to having decent service standards, competitive prices and a modern menu, causing its earnings and share price to plummet.
AJ Bell said: “The announcement it is to now pursue a company voluntary arrangement means it can close more underperforming Frankie & Benny’s sites and seek better rental terms on part of its remaining estate.
“It effectively means Restaurant Group is a significant step closer to cleaning up its business and trying (again) to make itself fitter for the future. Notably its Chiquito and Food & Fuel brands have already been put into administration.
“There are arguments that it should have fixed the existing business before buying Wagamama in 2018 and taking on lots more debt. Yet having Wagamama has provided a new lease of life for the group principally due to its sales growth and expansion potential.
“Management will be eager to get its sites reopened as soon as possible, however Wagamama’s format of shared benches poses a challenge for social distancing.
“Right-sizing its estate is an important step in Restaurant Group’s revival but so too is the ability for its outlets to function normally which seems unlikely to happen for some time.”