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Pizza Express closures: why Eat Out to Help Out isn't enough for battered restaurants

The company has reportedly hired financial advisors for help in handling crunch talks with creditors: Getty Images
The company has reportedly hired financial advisors for help in handling crunch talks with creditors: Getty Images

If Chancellor Rishi Sunak went to bed with a full stomach and a sense of satisfaction after the launch of his flagship Eat Out to Help Out scheme last night, Pizza Express served him some rather sour dough balls this morning.

The debt-laden Italian chain – which had been struggling coming into the virus crisis – revealed plans to close 67 restaurants putting 1100 jobs at risk, as well as putting itself up for sale.

Ironically, research from MoneySavingHeroes.co.uk found that Pizza Express was one of the chains Britons were keenest to use the voucher scheme at, coming third in its rankings. The scheme gives diners 50% off meals from Monday to Wednesday during August, up to £10 per head.

While Pizza Express has many of its own problems, its troubles underscore the crisis in the restaurant trade.

To tackle its own issues first, the company – whose majority shareholder is China’s Hony Capital – has faced mounting debts for years, and had a £735 million debt pile. This has made it hard to invest in its décor, seen as cutting edge when it was founded by Peter Boizot in Soho in 1965.

Onerous lease obligations have been a headache in the UK where it has 454 pizzerias (it also owns restaurants in Ireland, Hong Kong, Singapore and China, as well as franchised sites overseas). In response to this, it plans a company voluntary arrangement to cut it rent bill from landlords, and will also sell off its Chinese business to raise cash.

Pizza Express’ troubles have mounted but the swell of positive comments from the public when its financial difficulties emerged last year (remember #SavePizzaExpress?) showed the strength of its brand. The trouble is, an outpouring of sentiment on Twitter doesn’t always lead to hard sales (witness the outpouring of nostalgic media commentary for music chain HMV each time it hits financial hardship).

Julian Cox, partner and employment law specialist at law firm BLM, says: “Pizza Express is yet another household name that has been pushed to the brink by COVID-19, with the hospitality sector hit particularly hard. Whilst the Government has attempted to encourage people through the doors with Eat Out to Help Out, the initiative is clearly not going to be enough to protect the sector in the long term.”

The chain’s problems are also symptomatic of problems in the wider restaurant trade, which have been exposed in recent years. A downturn in consumer sentiment following the Brexit vote was swiftly followed by rising wage and food price costs, while rents and rates are a long-term headache for the burger and pizza chains which have amassed across Britain’s High Streets.

The rising competition from takeaway services has also been evidenced during the Covid crisis. With restaurants forced to shut, services like Deliveroo and Just Eat have come to the fore – although shuttered restaurants from which to serve customers in early lockdown was an issue for them too.

Now eateries have reopened, restaurateurs in London report mixed trade – with customers sticking to local High Streets over the city centre, and preferring to dine al fresco, rather than indoors.

Sunak launched his voucher scheme to tackle the typically quiet days for the trade in August, but if the weather turns bad from September onwards, the industry faces a fresh crisis.

There were positive reports yesterday that bookings had shot up as Eat Out to Help Out (ironically, rather a mouthful) launched. But restaurateurs were keen to press home that help on rents and rates and extending furlough will be the key to protecting the two million jobs that rely on the sector in the short-term.

In the long-term, Britons need the confidence to spend on eating out again, but with a recession on the way you wouldn’t bet much on them finding a sudden appetite for an American Hot.

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Pizza Express to close 67 restaurants putting 1100 jobs at risk