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Healthy fast-food chain Leon is poised to enter administration, as new owner and co-founder John Vincent lays out plans to close restaurants and cut jobs in an effort to bring the company back to profitability.
Leon, which has 71 restaurants across the UK, said it had applied for an administration order as part of a restructuring programme that began after Vincent purchased the company back from Asda in November.
The fast-food group has struggled to bounce back from the Covid-19 pandemic, when consumers stayed at home and away from the city-centre locations where many Leon restaurants were located. In 2021, the business was sold to the Issa brothers’ EG Group for £100mn, which subsequently transferred ownership to grocer Asda, a company the Issa brothers then part-owned.
“In the last two years, Asda had bigger fish to fry, and Leon was always a business they didn’t feel fitted their strategy,” Vincent said, announcing the administration plans on Wednesday. He said the company’s “immediate priority” was “to close the most unprofitable restaurants”.
Leon said it had appointed Quantuma as administrator and added that its restructuring would “involve . . . a number of job losses”. The fast-food group said it planned to exit administration early next year, and that “in the meantime, all the group’s restaurants remain open serving customers as usual”.
Leon was founded in 2004 by Vincent, Henry Dimbleby and Allegra McEvedy and rode a wave of enthusiasm for healthy eating, with a menu including vegan burgers and gluten-free chicken nuggets. It last made an operating profit in 2016 — when it brought in £609,000 — and fell to a loss of £15.7mn in 2020. Last year, it reported an operating loss of £6.4mn, blaming a weak economy and lower footfall around transport hubs.
UK food-to-go operators, particularly in the middle market, have suffered from the rise of remote and hybrid work. Coca-Cola is in talks over a potential sale of Costa Coffee, its lossmaking café chain, while sales growth has slowed significantly at bakery chain Greggs.
Office workers, who typically purchase lunch less frequently than they did pre-pandemic, are more likely to choose premium restaurants. At the other end of the spectrum, heightened economic uncertainty has also pushed people to seek out cheaper options, including supermarkets, which increasingly offer hot food as part of meal-deal packages.
Vincent, a former management consultant at Bain & Co, told The Times last month after his acquisition that he planned to “recreate Leon as the Earth’s favourite fast food” by revamping its menu. He said the company had become an “orphan child” after it changed hands from EG Group to Asda and its decline had “accelerated” since then.
Vincent added on Wednesday that the hospitality sector faced “an unsustainable tax burden” and called for the government to review how levies were placed upon the sector. “Today, for every pound we receive from the customer, around 36p goes to the government in tax, and about 2p ends up in the hands of the company,” he said.
Additional reporting by Stephanie Stacey in London