Pizza Restaurant Case Study
A Bournemouth-based restaurant was trading well, having been set up a few years ago, and the director was ambitious to open other outlets in nearby Poole and Christchurch. There were also plans for the manager to become a director or a shareholder in the coming years.
Business growth plans also included introducing longer opening hours. However, this was not entirely successful as it meant a higher wage bill and more spent on fuel costs as there were more deliveries going to a wider area. Even so, customers were satisfied and the restaurant won a top place on Just Eat for its pizza delivery service in the Bournemouth area.
But, there was a major blow when the manager left the company, taking the head chef with him. Together, they opened a ‘bistro’ pizza business, which was situated just 100 years away from the company. On top of this, the ex-manager had also taken the company’s database, menus, and supplier list.
The director took some legal advice on an informal basis to see if he could take action against his former manager. This was not viable though as he was told pursuing this could cost around £20,000, it was out of reach as there were insufficient funds. Meanwhile, there was a further problem. HMRC had been paid on a weekly basis by standing order, but the company was told this needed to change to quarterly payments. This proved harder to manage and it had a negative impact on cash flow.
Loss of custom
The company now faced intense competition from the bistro rival and the two were in a head-to-head battle for customers. In an attempt to keep going, the director reduced his minimum order charge, but this largely just ate into his profits. Meanwhile, there were also fewer walk-in customers in the later evenings as a nightclub next door to the business closed down. The director cut the number of staff, closed during the day, and put a hold on all non-essential advertising. But these measures were not enough and VAT arrears and unpaid invoices from a number of suppliers meant the restaurant had to close its doors for good. After consultation with Company Debt, it was decided to place the business into creditors’ voluntary liquidation.