Giraffe Concepts operates 70 sites of the two high street restaurant brands, with 13 seeing a rent reduction under the terms of the CVA, and a further 27 facing closure.
“We have been examining options for the two brands for some time and the CVA is the only option to protect the company,” says Tom Crowley, chief executive of BRG. “The combination of increasing costs and over-supply of restaurants in the sector and a softening of consumer demand have all contributed to the challenges both these brands face.”
BRG bought the Giraffe restaurant brand from Tesco in 2016, later combining it with the Ed’s Easy Diner brand, which it also bought in 2016.
KPMG is overseeing the CVA process. “This CVA seeks to address the cost of the company’s leasehold obligations across a number of unprofitable sites, and if successful, will put the business on a surer financial footing,” says Will Wright, restructuring partner at KPMG and a proposed supervisor of the CVA.
“Importantly, it constitutes one element of a wider financial and operational turnaround plan which, subject to the CVA’s approval, will see an injection of funding into the business from the company’s majority shareholder.”
The move will see Giraffe and Ed’s Easy Diner join high street restaurant brands including Prezzo, Byron, Carluccio’s, Jamie’s Italian, Gaucho and Gourmet Burger Kitchen, all of which have undergone the CVA process in the past couple of years. CVAs have become a popular option for businesses struggling against the sector’s headwinds.
“The casual dining sector is a tough environment to be in, competition is fierce,” says Chris Newell, restructuring partner at business advisory firm Quantuma. “The costs of operating, including raw materials, staff costs and business rates have gone up hugely.”
Speaking on the proposed Ed’s Easy Diner and Giraffe CVA, Newell says that BRG will be looking to offload any loss-making restaurants. “BRG has had the Giraffe and Ed’s brands for two or three years now and so will have got to grips with the business and will be looking at the non-performing stores and using the CVA as a tool to deal with them.”
"I expect to see the loss-making stores shutting down and then the business continuing with the healthier stores. If they’ve get their model right and the landlords agree to the principles of the CVA I expect to see the business continuing on a much healthier footing going forward.”
Giraffe Concepts needs to secure at least 75% creditor approval for the CVA for it to proceed. A detailed proposal document is expected to be made available to creditors via a dedicated website today (4 March). The creditors will vote on the CVA on 21 March.