Little chef set to become Littler Chef…

With RCapital deciding to throw in the towel on the rescue of the beleaguered roadside restaurant chain Little Chef we are reminded that not every rescue plan is successful.

The issues surrounding the failure of Little Chef are many but the tipping point has come as the business is attempting to renegotiate its leases for its sites. It looks like despite the offers to renegotiate the rentals from the their landlord and one time owner the affordable hotel chain Travelodge, a large number of the sites occupied by Little Chef businesses are owned by offshore property groups who seem to be unwilling to cut their prices.

The decision to use a “pre-pack” administration to break off the profitable segments of the business will cause the likely closure of up to 66 of the 161 sites, in stages as viability is determined. As these less cost effective sites are closed a buyer will be able to purchase the remaining 95 money making sites enabling RCapital to recover some of their £10 million they spent on the business in 2007.

The real losers in all of this are again the staff who stayed with the company and have the misfortune to find themselves on one of the most unprofitable sites, and of course the unsecured creditors. That is to say the suppliers of goods and services that makes these restaurants and franchises work. By this writers calculation the job losses due to the closures will be in the region of 500 (based of the percentage of sites claimed to be closing and the numbers in the business at the time of writing).

So today we see another blow to the already shaky service industries.