More than 1.600 workers at Gaucho Restaurant Group are at risk of losing their jobs. The restaurant group is folding and filing for bankruptcy. While seeking for a buyer, its 16 outlets still open. Meanwhile, 22 outlets, where 540 people are working, in the UK are closing immediately. Overall, if all the outlets are closing and the remaining 16 outlets are sold, a total of 765 employees and administrative staff will be at risk of losing jobs.

Why Is Gaucho Restaurant Group Folding? Internal Factors

A team of accountants from an agency named Deloitte serves as joint administrators for Gaucho Restaurant Group and Cau chains. The agency had tried to identify why the restaurant chain is folding. They noted the following reasons:

• The brand had been struggling in the casual dining sector, where too many actors are competing.
• Rapid over-expansion due to failure to consider the urgency of expansion
• Poor location selection made the outlets ‘not found’ by the potential customers.
• Burdensome lease agreement, which led to overpricing of the restaurant building
• Poor customer review, which is a fatal mistake done by any business.

To prevent further loss, Gaucho Restaurant Group had decided to close the loss-making outlets. Unfortunately, closure of some outlets even led to more complicated redundancies. Profit-making outlets are still trading to balance the loss. Some outlets benefit from guest loyalty, strong branding, and appropriate market segment.

Gaucho Restaurant Group was bought by a private equity firm named Equistone in 2016. The firm recently submitted a rescue plan to the lenders. After trying to survive by restructuring the management, Gaucho still ran into crisis. The peak was when it had to pay a tax bill of more than £1 million that was due last Friday. In addition, the company had to repay its £50 million debt from banks.

Why Is Gaucho Restaurant Group Folding? External Factors

Actually, Gaucho is one of the few restaurant chains to close in the last few months. Prezzo, Byron burger chain, and Jamie’s Italian had previously shut their outlets down and cut many jobs. The troubles had been related to the decreasing consumer spending and overexpansion triggered by the private equity investors. The following are some external factors that influenced Gaucho in a negative way:

• Rising business rates. Not only Gaucho, most restaurants and retailers have been under pressure from the hiking business rates
• Increasing minimum wage costs
• Squeeze on consumer spending, since inflation grew faster than the wage did
• Increasing food and material prices, which forced the restaurant chains to increase price

A representative of Pundworld estimated that all outlets and warehouse would have been closed by August 10. A total 1.800 workers will lose their jobs. If the company cannot find a good buyer, they will sell the asset while potential employees will lose their jobs. Unfortunately, talks are conducted to identify potential sales of the remaining parts of the business. Then, the government will be faced with another problem of providing job opportunities for laid off workers in this industry.