The privately-owned Italian restaurant chain Prezzo plans to close around a third of its locations, putting more than 800 jobs at risk, in a sign of how high inflation and the cost-of-living crisis are affecting the informal dining industry in the UK.
Prezzo, which was bought out of administration by private equity group Cain International in 2020, announced on Monday it was closing 46 loss-making locations across the UK, reducing its ownership to 97 restaurants and cutting its workforce to around 2,000. employees.
Dean Challenger, chief executive of Prezzo, said that the last three years — covering the pandemic when COVID-19 the restrictions led to a large-scale shutdown of the hospitality industry: “it’s been some of the toughest times I’ve seen for the high street.”
He added that “the cost-of-living crisis, the changing face of High Street and skyrocketing inflation have made it impossible for all of our restaurants to continue to operate profitably,” adding that the closures announced Monday would affect places “where the Post-Covid recovery has turned out to be more difficult than we expected.”
The ad shows the strain that rising cost inflation following Russia’s invasion of Ukraine is putting on drive-thru operators as they try to recover from the pandemic. Prezzo posted a loss of £22.4m in 2021, according to the latest company accounts.
Prezzo said he had faced double-digit wage inflation last year and that his utility bills, which now make up 9 percent of total income, had more than doubled over the same period. The price of ingredients like pizza sauce and spaghetti increased 28% and 40% respectively over the past year, the chain added.
The number of casual dining establishments across the UK fell 13% in the three years to March 2023, according to the Local Data Company. Last month, Frankie & Benny’s owner, The Restaurant Group, said it would shut down 35 of its worst-performing locations as it faces pressure from activist investors over its low share price.
Prezzo said his ownership would focus more on malls, retail parks, tourist destinations and travel hubs to better serve changing consumer habits. Challenger added that he believed the “difficult decisions” made by management would secure his future for “many years to come.”
Tom Pringle, assistant director of restructuring at law firm Gowling WLG, said the closures were a “glare example of the economic consequences of prolonged high inflation.” “Huge increases in energy and food costs are eroding business margins while making it difficult to pass these costs on to customers who are experiencing the same pressures at home,” he added.
Prezzo last announced a round of site closures and job cuts in early 2021 after Cain bought it out of management.