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UK recession claims three victims in bad week for hospitality

16 October 2009
UK recession claims three victims in bad week for hospitality

The hospitality industry was hard hit by the recession this week as three businesses collapsed into administration.

Restaurant chain Tootsies, pub group Merchant Inns and contract caterer Gold & Brown were all forced to call in the administrators after hitting financial difficulties.

Struggling restaurant chain Tootsies collapsed after parent company Clapham House Group withdrew its support and funding.

"Given the current economic outlook and the prolonged downturn in trading and profitability at Tootsies, the Clapham House board believes that there is little prospect of the Tootsies business as a whole generating a profit in the near future," the group said in a statement.

In July, Clapham House wrote down £24.2m in relation to Tootsies, which it admitted had found recent market conditions "challenging". A sale of Tootsies, which Clapham House bought for £25m in 2006, has long been mooted as a way for the company to reduce its debt and focus resources on developing its successful Gourmet Burger Kitchen and Real Greek brands.

Meanwhile ethical caterer Gold & Brown was forced into administration after only a year of trading when a drop in sales over the summer meant the business was no longer sustainable.

Co-founder Andrea Walwyn told Caterer Gold & Brown had become "a victim of the times".

"It's difficult because banks just aren't helping small businesses get through the recession," she said. "An overdraft was declined simply because of timing. It's like they just pulled the plug."

In addition, six pubs out of boutique pub-with-rooms operator Merchant Inns' seven-strong portfolio have been placed on the market after the company also went into administration this week.

The move follows "the discovery of a number of previously unknown financial liabilities in the business in recent weeks, which made it impossible to continue running the business as it stands," according to administrators Deloitte, and comes just two months after Caterersearch revealed that the company's chairman, Robert Breare, had been sacked following a shareholder's meeting.

But it wasn't all bad news. Following Tootsies' collapse, administrators BDO agreed a sale of 11 of its 21 outlets to restaurant group Giraffe for a consideration of £2.5m (before costs).

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