Carluccio’s appoints administrators from FRP Advisory

06 April 2020 Consultancy.uk

Following a turbulent three years amid the casual dining crunch, Italian restaurant chain Carluccio’s has been forced to appoint administrators. Professionals from FRP Advisory are now considering whether to mothball the business while using Government support during the Covid-19 crisis, or to pursue an asset sale right away.

The number of licensed premises in Britain continued its steady year-on-year decline in 2019, with one survey finding there had been a fall of 2,920 such venues over the last 12 months. Restaurant numbers in particular took a knock – despite small flourishes in the group restaurant scene.

A combination of falling consumer spending power, heightened business rates and rising import costs saw restaurants of all shapes and sizes impacted. Even the likes of Prescott & Conran – an upmarket restaurant group co-founded by Sir Terence Conran – and the Michelin starred Marc Restaurant Group have folded under the pressure, while the addition of coronavirus into the mix has compounded the crisis faced by every aspect of the food and drink market.

Carluccio’s appoints FRP administrators

With that being said, it is undoubtedly the mid-tier ‘casual dining’ space which has been impacted worse of all. Unable to compete for custom among the bulk of the population against budget outlets, and unable to compete with elite restaurants for money from ‘experience spenders’, chains which found themselves in-between the two spaces have been decimated during the current crunch afflicting the UK’s dining market – something which is already being exacerbated by the Covid-19 shutdown.

Italian dining

One outlet to have been teetering on the brink of collapse for several years now is Carluccio’s. The chain was founded more than 20 years ago by celebrity chef and restaurateur Antonio Carluccio, who died aged 80 in 2017. Carluccio's has faced some difficult times since, and reported a pre-tax profits tumble from £5.2 million to £982,000 that year, before calling in professional services giant KPMG to “look into options” to help the chain. While the hiring of a consulting firm in such a context rarely signifies good corporate health, the chain waved of claims that it would soon enter a Company Voluntary Arrangement (CVA).

At the time, the company stated, “there are currently no plans to restructure.” By the end of 2018, the chain had enacted plans from KPMG to do just that however. Carluccio’s ended up closing a third of its restaurants in 2018 as part of a CVA rescue plan. This has ultimately proven to be in vain though, as while the chain struggled on for a further two years, it has finally fallen into administration.

Administrators from consulting firm FRP Advisory are now "urgently looking at options" for the future of the firm. These are understood to include trying to sell all or parts of the business, as well as mothballing it while using Government support. At present, most of the company's 2,000 employees will be paid through the Government's job retention scheme, allowing staff to be paid up to 80% of their salary while these options are explored. Geoff Rowley, joint administrator and partner at FRP, cited the current coronavirus situation as having hastened the firm’s decline.

Rowley remarked, "We are operating in unprecedented times and the issues currently facing the hospitality sector following the onset of Covid-19 are well documented. In the absence of being able to continue to trade Carluccio's, in the short term, we are urgently focused on the options available to preserve the future of the business and protect its employees."

John Colley, Associate Dean at Warwick Business School, seemed to disagree, however. Speaking to the BBC, Colley said that while firms in the sector were likely to follow Carluccio's into administration thanks to the pandemic, in the case of Carluccio’s it was “just the last straw."

Colley explained, "They over expanded, as did many other restaurant chains… I think the fact that Carluccio's was so quick to go into administration says that this was not due to coronavirus.”


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