A coffee shop chain with four branches in Tayside and Fife is on the brink of insolvency.
Caffe Nero, the UK’s third largest coffee chain, has asked landlords for better terms and warned that closures and job losses may follow.
Chief executive Gerry Ford said it is now “imperative” that the business takes steps to reduce pressure, as its cafes were forced to close for a second time this year in England.
Proposal for landlords
It has started a company voluntary arrangement (CVA) process in a bid to slow the flow of cash away from the business.
Caffe Nero operates from Brook Street in Broughty Ferry, Perth High Street, Dunfermline High Street and Dundee’s Murraygate.
“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 runs 800 shops in the UK, employing about 6,000 people.
Founded in 1997 by Mr Ford, it has expanded into 11 different countries, with a total of 1,000 stores.
A Caffe Nero spokesman said that if it has to shut down any outlets it will try to redeploy workers, and store closures and job losses will be “minimal”.
It 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 like 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.
The CVA will allow it to “better manage its fixed costs moving forward”.
Devastating impact of pandemic
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.”