Franco Manca, a beloved name in the UK pizza sector, is set to shut down approximately 16 of its restaurants, a move that could jeopardise around 225 jobs. The decision, announced by its parent company, The Fulham Shore, is partly attributed to the burdensome tax landscape in the UK, which the company claims has rendered some of its operations unsustainable.
Restructuring Plan Under Company Voluntary Arrangement
The closures are part of a restructuring initiative that will involve implementing a Company Voluntary Arrangement (CVA), a formal procedure allowing businesses to reorganise their finances while continuing operations. Marcel Khan, CEO of Fulham Shore, confirmed that while specific locations have yet to be revealed, the restructuring comes after a thorough review of the company’s strategic options, which included the potential sale of the brand.
The decision to restructure follows a period of financial uncertainty for the group, which also operates The Real Greek chain. The company’s hiring of advisers to explore various strategic avenues indicates an urgent need for adaptation in a challenging economic environment.
The Burden of High Taxes and Costs
In his remarks, Mr Khan highlighted the significant pressures that have been mounting on the hospitality industry, particularly in relation to taxation and operating costs. He noted the substantial increases in national insurance contributions and the national living wage, as well as the lack of business rates relief specifically for the restaurant sector. Moreover, the VAT rate in the UK remains disproportionately high compared to other European nations, exacerbating the financial strain on businesses in the hospitality industry.
“This environment has made it increasingly difficult for even well-performing restaurants to thrive,” Khan stated. He emphasised the need for Fulham Shore to ensure long-term sustainability and growth, which necessitated the difficult decision to close underperforming locations.
Implications for the Hospitality Sector
The impending closures at Franco Manca are emblematic of broader challenges facing the UK hospitality sector. As the cost of living continues to rise and consumer spending habits shift, many restaurant operators are grappling with an unyielding economic landscape. The move to shut down underperforming sites is expected to become more common as the industry seeks to recalibrate in response to these pressures.
Fulham Shore, which was acquired by Japanese restaurant group Toridoll in 2023 for £93.4 million, is now at a crossroads as it seeks to realign its business model with the current economic realities. The company is also reviewing its 28 locations under The Real Greek brand, which may signal further adjustments in the near future.
Supporting Affected Employees
In light of the closures, Fulham Shore has expressed its commitment to supporting employees affected by these changes. Mr Khan assured that the company would provide assistance to those losing their jobs during this challenging transition. “We are deeply saddened by the closures and will support our affected team members throughout this process in every way that we can,” he affirmed.
As the hospitality sector faces ongoing challenges, the fate of Franco Manca serves as a reminder of the precarious nature of the industry and the need for adaptive strategies to navigate the evolving landscape.
Why it Matters
The closure of these Franco Manca locations underscores the significant economic pressures that are reshaping the UK hospitality landscape. With rising operational costs and an unforgiving tax environment, many businesses are being forced to make difficult decisions that could have lasting impacts on employment and local economies. As the industry grapples with these challenges, the situation highlights the urgent need for policy reform and support mechanisms to foster a more sustainable future for the hospitality sector.
