Caffe Nero is planning to ask its landlords for better terms after it claims the second lockdown has forced the coffee chain into a corner.
The coffee chain was placed into a Company Voluntary Arrangement on Thursday as it looks to get its finances in order.
Chief executive Gerry Ford said it is now “imperative” the business takes steps to reduce pressure, as its cafes were forced to close for a second time this year.
Caffe Nero runs 800 shops in the UK, employing about 6,000 people.
The UK’s third largest coffee chain was founded in London 30 years ago, but it wasn’t until Mr Ford took over the business in 1997 that it expanded outside London. It now has outlets in 11 different countries, with a total of 1,000 stores.
Mr Ford has said he will ask landlords for better terms as part of a company voluntary arrangement (CVA), in a bid to slow the flow of cash away from the business.
“Like so many businesses in the hospitality sector, the pandemic has decimated trading, and although we had made significant progress in navigating the financial challenges of the first lockdown, the second lockdown has made it imperative that we take further action,” Mr Ford said.
Caffe Nero is the latest in a long list of businesses that have been forced to take drastic measures during the Covid-19 pandemic.
Shoe seller Clarks and Pizza Express are among the other companies to enter CVAs during the period, after their debts ran away from them.
Companies such as Caffe Nero, which caters to many commuters and office workers, have been especially hard hit during the pandemic.
As many workers continue to use their kitchen tables as their office, and footfall remains low in city centres, “it is unclear how long this will impact Caffe Nero”, the business said.
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The CVA will allow it to “better manage its fixed costs moving forward”.
Will Wright and David Costley-Wood, restructuring experts from KPMG, are working on the CVA.
Mr Wright said: “Caffe Nero is an iconic brand on the UK’s high streets with a terrifically loyal customer base.
“However, like many others across the sector, the impact of measures introduced in response to the Covid-19 pandemic has been devastating.
“In putting forward this CVA proposal, the directors have worked hard to strike a fair compromise with stakeholders to provide the flexibility the business urgently needs to get it through the pandemic.”