The future of Burger & Lobster is in "significant doubt" after the mid-market brand recorded a pre-tax loss of more than £7m.
The "significant pre-opening" costs involved in funding Burger & Lobster's expansion in the UK, where there are now 14 restaurants (including 12 in London), and an increase in head office costs are also said to have contributed to the poor results.
Cost of sales increased from 43% in 2014 to 47% in 2015, while administrative expenses increased by 82% during the same period.
In 2015, Burger & Lobster received a loan from National Westminster Bank to finance future growth. However, according to the financial report, the group had not been able to meet the necessary debt covenants. At the time the accounts were prepared, the company was negotiating revised financial terms or looking to obtain replacement funding, which is said to indicate "the existence of a material uncertainty that may cast significant doubt of the group's ability to continue as a going concern".
Meanwhile, the group, headed by co-founder and director Russian-born George Bukhov, has taken steps to improve profitability by restructuring its pricing policy in June 2016, resulting in an original burger now costing a more competitive £16, a lobster roll £25, and lobster ranging in price from £19 for 500g to £54 for a kilo.
Loss-making restaurants have also been sold, including a 240-seat site in Cardiff, and the head office restructured, with a reduction of overheads. With these new measures in place, the directors are said to have "reasonable expectation that the group has adequate resources to continue in operational existence for the forseeable future".
Bukhov told thecaterer.com that the group grew very quickly in 2015, opening seven restaurants and expanding from six sites to 13 in the UK alone.
He added: "A big part of the loss is related to a very fast expansion and a weak performance of our restaurants outside London. This was a strategic mistake to open outside London. Also the lobster price has grown significantly in 2015 and 2016 and weak pound didn't help either."
Nonetheless he noted that the London business was "strong" and he added that the bank had been very supportive and that his company has since agreed new terms.
Burger & Lobster was founded in 2011, originally as an off-shoot of the steakhouse restaurant group Goodman.
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