CVA on the menu at natural fast food chain Leon
3 Dec 2020
Business advisory firm Quantuma has been appointed by Leon Restaurants Ltd to launch a company voluntary arrangement (CVA) as the high street fast-food chain reported a 70% drop in sales
3 Dec 2020
Founded in 2004 with its first site on Carnaby Street, London, the chain specialises in offering a natural and healthier range of food and has expanded to operate 75 sites globally both owned and franchised.
The company-owned restaurants in the UK total 44, in prime locations and transport hubs, predominantly across central London. Ovid restrictions saw 32 of these stores forced to close temporarily.
However, during the first lockdown, many remained open to facilitate the launch of a number of essential initiatives, including ‘FeedNHS’ – created by Leon to provide over one million meals to critical care teams in 38 key hospitals for the worst eight weeks of the crisis.
The CVA proposal comes as the chain continues to suffer from severely reduced footfall numbers following the second national lockdown, and as tougher restrictions continue to be introduced in the majority of cities and towns throughout the UK.
There has been a significant reduction in the number of city centre workers attending their offices and also a severe reduction in domestic and international tourists. In this second lockdown Leon is experiencing a 70% reduction in sales compared with the same period last year.
In the year to 30 December 2019, Leon achieved revenues of £76.3m and announced plans to open 30 new restaurants in 2020, most of which had already been identified.
Quantuma’s Andrew Andronikou and Brian Burke, as joint nominees, will oversee the CVA process.
Andrew Andronikou, managing director at Quantuma said: ‘While the plans for a UK vaccination programme are promising, the fact remains that a return to normal may still be some way off, and this uncertainty continues to have significant consequences to businesses reliant on footfall and a return to normal working practices.
‘Our number one priority, as we work with the board of Leon over the coming weeks and months, will be to allow the business to navigate the current challenges and help the business return to its positive trajectory whilst protecting jobs and minimising the need for store closures.’
John Vincent, founder and CEO of Leon said: ‘The CVA is intended to provide the company with a foundation to first survive and then carefully rebuild.
‘We had a growing and profitable business before Covid. Despite taking many actions to reduce cost and optimise revenue during the crisis, the continued lockdowns and restrictions have made this CVA a necessity.’
The Leon CVA delivers no cuts to existing staffing levels, and preserves the majority of the firm’s store footprint. Quantuma said in formulating the CVA, the company directors and the joint nominees have engaged with the British Property Federation (BPF), in a bid to improve understanding of property owners’ interests and concerns.
Separately, ReSolve is handling a CVA for The Bleeding Heart Restaurant Group, the owner and operator of four well-known and established restaurants in Central London, which has faced severe financial challenges during the pandemic.
ReSolve advised the group on its options, leading the company to pursue a CVA which would allow two of the restaurants, The Bleeding Heart Tavern and The Bleeding Heart Bistro, to continue trading. More than 94% of the creditors agreed to the CVA.
Lee Manning, partner at ReSolve, said: ‘While the pandemic has been catastrophic for the hospitality industry, there are still viable solutions available. However, those avenues will only be available to those operators that take action to assess their options sooner rather than later.
‘We commend the Bleeding Heart Group for making the tough decisions in a timely manner instead of waiting until the very end. This made all the difference.’
Blick Rothenberg is warning of a ‘retail domino effect’ because of the impact of high street retail collapses on property owners.
Mark Cunningham, a director at the firm, said: ‘Retail property owners have been amongst those hit hardest by the pandemic as retail and hospitality businesses have been unable to pay their rents.
‘There is a real risk that landlords are next on the list to be in serious trouble. The government needs to step in to stop the domino effect and prevent these landlords from being the next to go under.
‘Costs on empty retail properties continue to be high with little prospect of new tenants coming in. Landlords are being crippled by councils refusing to enter negotiations about the payment of rates. Those landlords who are highly leveraged will be particularly impacted and need a solution.
‘A fund needs to be provided to enable landlords to service their debt and to reposition their assets. Such a fund should also be accessible for small businesses to fit out new premises.’