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Summary
- A unit of Uxbridge-headquartered restaurant group PizzaExpress has filed for bankruptcy protection in the United States
- Earlier in September 2020, PizzaExpress had said that the restaurant group will be shutting down as many as 73 restaurants in the United Kingdom
- Several other food and beverage companies, including Burger King, Pizza Hut, Fuller's Brewery, Greggs, Wetherspoons, and Costa Coffee, have hinted thousands of job losses
The repercussions of the coronavirus pandemic have already gone beyond the expectations as the damage done to businesses across the globe is too wide to contain in a brief period of time. Most industries and business sectors have encountered a plethora of difficulties as the demand for goods and services has fallen to multi-year lows.
Food and beverage industry has been one of the worst affected sectors as the restaurants had to shut their stores after the government imposed the lockdown. Restaurants, traditional eateries, and other food chains have been closing their full-fledged operations followed by a number of reforms to handle the drawbacks of coronavirus and lower disposable income in the hands of middle-income earners.
The unexpected stoppage of regular revenue streams steered the companies and the enterprises running fast food chains and quick service restaurants (QSRs) into unforeseen losses. The fast food restaurants and other age-old eateries that were seeking financial help to meet their respective working capital requirements also took a huge hit. The companies operating in the food business had to quickly revamp their commercial models to reduce the unwanted costs and overheads in order to keep their operations going after several relaxations were provided from the government’s end in the later phases of lockdown.
Massive reduction in the size of staffs, closure of multiple warehouses, discounts on food items, modifications in the food cards, downsizing the number of outlets, composition of a structured food delivery systems accordingly in line with the safety instructions and standard operating procedures prescribed by the government, as well as local authorities are some of the measures taken by the restaurant owners in the recent times. However, a bunch of food chains and restaurants are still not able to stay afloat their respective operations in the chaotic environment where the going concern of business is highly dependent on the number of coronavirus positive cases.
PizzaExpress unit files for bankruptcy
A unit of Uxbridge-headquartered restaurant group PizzaExpress has filed for bankruptcy protection in the United States. PizzaExpress Financing 2 plc, the unit of Honey Capital-backed pizza maker, has filed for Chapter 15 proceedings in Texas, United States. The Chapter 15 bankruptcy will allow effective mechanisms for dealing with the insolvency case involving multiple parties such as debtors, claimants, assets, and other parties of interest.
Following the beginning of Chapter 15, the foreign creditors will become eligible to participate in the bankruptcy proceedings. Further, it protects foreign companies operating in the US from lawsuits filed by US-based creditors with a proper communication between the US courts and parties of interests. A subdued business activity has been a big reason to worry for Pizza Express, as far as its areas of operations are concerned as volume of sales is a key driving factor for fast food chains and quick service restaurants.
Ongoing Disquietness
Earlier in September, PizzaExpress had said that the restaurant group will be shutting down as many as 73 restaurants in the United Kingdom including eight outlets in London itself. The closure of these outlets, approved as a part of the rescue plan, included the original restaurant in Soho at Wardour Street. PizzaExpress has more than 350 restaurants largely spread across the UK and 150 eateries in other countries. PizzaExpress had been looking to reduce the debt burden to £319 million from a cumulative group debt of £735 million.
Way back in 2014, the Beijing-headquartered private equity firm Hony Capital, in order to explore restaurant opportunities in China, bought the UK-based PizzaExpress in a £900-million arrangement.
The so-called trouble with PizzaExpress’ financials had erupted after the fallout of the coronavirus pandemic but the balance sheet got stretched after the parent group started to increase their store count in the countries outside the UK. A part of pain has been evident through the changing food preferences, eating behaviours and the availability of rapidly-increasing intercontinental cuisines.
Earlier in July, PizzaExpress was not able to oblige an interest payment of £20 million due to its bondholders. Following the restructuring proposal drafted in August, it was decided that Hony Capital will continue to run the Chinese operations of PizzaExpress, while the rest of business will be taken over by bondholders.
Testing Times for Tastemakers
A comprehensive restructuring of businesses has been incorporated in almost all the organisations as the disruption in the apparently-smooth functioning of enterprises has been challenged by the pandemic. A sizable reduction in the employed workforce, axing the number of low-profit food outlets or the restaurant units that were running into losses has been the top priority, as far as the enterprises concerned with the food business and quick service restaurants.
Other than PizzaExpress, a bunch of other food and beverage enterprises have collectively signalled towards thousands of job losses including the likes of Burger King, Pizza Hut, Fuller's Brewery, Greggs, Wetherspoons and Costa Coffee etc. As Italian and Zizzi food chains have also intended to close nearly 75 restaurants steering towards a loss of 1,200 jobs, Burger King’s restructuring can cost up 1,600 jobs, Costa Coffee, Fuller’s Brewery and Pizza Hut have announced to cut 1,650, 500 and 450 jobs, respectively. Earlier in June, the Restaurant Group had hinted at the closure of more than 100 restaurants with job losses to the tune of 3,000.
