The Italian restaurant chain Prezzo is to close a third of its 300 UK branches, putting about 1,000 jobs at risk, the latest victim of the casual dining crunch.
The chain, owned by the US private equity group TPG Capital, hopes to engineer a turnaround plan echoing steps taken by the burger chain Byron and Jamie’s Italian to keep themselves afloat.
Prezzo’s creditors will be asked to approve proposals under which its restaurants’ landlords accept rent reductions.
About 100 unprofitable outlets are likely to close altogether, including all branches of its Tex-Mex offshoot, Chimichanga, in an attempt to put the business on a sound long-term financial footing.
While landlords have yet to agree to the plan – known as a company voluntary arrangement (CVA) – it is expected to result in about 1,000 of the 4,500-strong UK workforce losing their jobs.
Sources close to the company said staff would be transferred to the surviving restaurants where possible.
Prezzo is one of several high-street restaurant chains to announce restructuring plans as firms battle factors including rising business rates, higher staff costs due to the “national living wage” and fragile consumer confidence.
Restaurants are also feeling the strain of stiff competition in the crowded casual dining sector, after an influx of private-equity backed firms.
Last month, creditors agreed a CVA to rescue Byron, the chain whose upmarket offering caused embarrassment for the then chancellor, George Osborne, in 2013 when his expensive taste in fast food was called into question.
The celebrity chef Jamie Oliver’s chain, Jamie’s Italian, also entered into a CVA this month.
Prezzo’s directors are understood to believe that the company is in better shape than either Byron or Jamie’s Italian, given that it made a profit of £5m last year and has £11m cash in the bank.
But the CVA will reshape the business, cutting out less profitable restaurants to reflect lower demand, indicated by sales that have been declining compared with last year.
A CVA involves creditors agreeing to forgo some of what they are owed by a business rather than risk it disappearing altogether.
In the case of restaurant chains, this usually involves landlords accepting reduced rent payments.
A CVA has to be agreed by creditors with a combined claim of more than 75% of what the company owes, with the remaining 25% bound by the same terms if the deal goes through.