The healthy fast food chain, which was recently bought back by co-founder John Vincent, has applied for an administration order to formulate proposals for a Company Voluntary Arrangement (CVA) to help accelerate the restructuring of the business.
The restructure will involve the closure of several Leon restaurants and a number of job losses. The company says it has created a programme to support anyone made redundant.
The company says that internal challenges, changing work patterns brought on by the Covid-19 pandemic, and tax increases, have combined to place further strain on the business and that after an initial review of the business the immediate priority is to reduce the number of loss making restaurants.
In addition to internal challenges, changing work patterns, brought on by the Covid-19 pandemic, and also tax increases, have combined to place further strain on the business and the wider hospitality industry in recent years.
It also says that the company drifted from its values under the previous ownership of EG and Asda.
“In the last two years, Asda had bigger fish to fry, and Leon was always a business they didn’t feel fitted their strategy”, Vincent says in a statement.
“If you look at the performance of Leon’s peers, you will see that everyone is facing challenges – companies are reporting significant losses due to working patterns and increasingly unsustainable taxes.”
Discussions with landlords
Leon has appointed Quantuma as administrators and says it will spend the next few weeks discussing the plans with its landlords and laying out options for the future of the company.
It then plans to emerge from administration following a CVA early next year as a ‘leaner business that can return to its founding values and principles more easily’.
Leon currently operates 71 restaurants, of which 44 are company owned.
“The immediate priority is to close the most unprofitable restaurants,” says Vincent. “In many cases we have found other brands to replace us, and in others we will be asking the landlords to take the leases back and find better suited operators themselves.
“We will rebuild LEON on its core values and I hope to be providing jobs to many more people once we have returned to profitability and can continue to grow again.”
Vincent says that the business will look to find people from the closed restaurants roles in other Leon locations and where that is not possible it will offer redundancy payments. It also has a programme with Pret A Manger where affected Leon employees can apply for jobs via a dedicated channel.
“We are looking forward to working with the LEON team to deliver the optimal outcome for all stakeholders of the business, the creditors, suppliers and employees of the company,” says a Quantuma spokesperson.
“Leon is obviously a much loved and cherished member of the retail food community as we have already had very positive support from its supplier base and many of its landlords.”
Last month Leon announced that it would be scrapping it Roast Rewards subscription and Vincent said he would also transform the food offer at the group to return it to its founding principles.
All of the group’s restaurants will remain open in the meantime and Leon’s grocery business will not be affected by the CVA.
