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Morning Briefing for pub, restaurant and food wervice operators

Mon 5th Feb 2018 - Square Pie goes into administration as restaurant business collapses
Square Pie goes into administration as restaurant business collapses: Gourmet pie company Square Pie, which operates five restaurants, has gone into administration, blaming a “perfect storm” of falling retail demand together with rising rents, rates and increased staffing costs combined with food price inflation. The £4m-turnover company that operated four London restaurants and one outlet in Birmingham, went into administration today (Monday, 5 February) after an extensive marketing exercise undertaken by KPMG failed to secure a buyer for the restaurant side of its business. The 16-year-old Square Pie fell short of a round of equity investment in March 2017 that was designed to help fund the development of a new repositioned restaurant brand aimed at turning around the struggling group. Having raised just £100,000 of its £1m target in its latest fund-raising activity, the directors loaned money to the company to fund the development of the ‘Square & Co’ concept store last summer. However, additional deterioration in trading, together with rising wages, property costs and ingredient prices, combined to leave the group further away from profitability by the end of 2017. Rob Croxon and Will Wright, of KPMG, were appointed joint administrators at the request of the directors. The joint administrators were forced to close all the loss-making restaurants immediately with 50 redundancies across the group. Square Pie’s wholesale pie division remained a viable business and has been rescued, ensuring it will continue to fulfil all its orders, after angel investor and entrepreneur Oliver Wessely acquired a majority stake in a new venture, Beat Foods, which has bought the rights to produce Square Pie products for its grocery and wholesale customers for a six-figure sum. As a condition of the sale, the investor has retained the present management team to ensure the continuity of the wholesale and grocery side of the business. Square Pie founder Martin Dewey said: “Following a month-long process, in conjunction with KPMG, to market the restaurants and the business as a whole to potential food sector buyers across the UK, we were unable to attract any party to make an offer to acquire the whole business as a going concern. The collapse of the restaurant business was something we were desperate to avoid, and we were hopeful even as recently as last weekend that we could save the stores and the jobs, but unfortunately the backing didn’t materialise in the current leisure climate. Together with my colleagues, we worked tirelessly for more than 15 years to create a fantastic brand, and I am devastated that we couldn’t make the restaurants work in the current economy. While the wholesale side of the business remained viable, in the end we ran out of money to put into the business to keep the outlets.” Dewey was among the creditors to the business, which also included HM Revenue & Customs, a number of trade creditors, landlords and bondholders. The failure follows several high-profile restaurant chains facing financial problems in recent weeks. Better burger brand Byron and Jamie Oliver’s eponymous chain both recently entered into Company Voluntary Arrangement agreements in an attempt to reduce costs and restructure their businesses also citing pressure from food price inflation and other rising costs as significant factors. Wessely said: “Square Pie has a great brand and product, and we have acquired the grocery and wholesale business from the administrators to ensure continuity of production. With the assistance of the founder and senior management team who know the customers and product range, we have been able to ensure that we will fulfil every order. Unfortunately, given the current tough trading conditions in the casual dining sector, we were not able to fund a business plan to rescue the loss-making restaurants.” Luke Morgan, a career food industry professional who joined Square Pie in October last year, will become managing director of Beat Foods, which will be headquartered in Nantwich, Cheshire.

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