Gourmet Burger Kitchen (GBK) is to initiate a Company Voluntary Agreement (CVA) process, which could lead to the closure of 17 of its restaurants.

The decision was taken by the board at GBK to begin proceedings, according to an announcement by parent company Famous Brands today.

GBK has proposed a restructure of its UK restaurant estate as part of its ongoing turnaround strategy, amid a challenging market.

Under the terms of the CVA, GBK has earmarked 17 of its restaurants for potential closure, with would impact c250 staff, however the company said every effort will be made to relocate them. Its other 68 restaurants would continue to trade as normal.

A creditors meeting will be held on 9 November. Matthew Richards and Daniel Smith from Grant Thornton UK LLP, the business advisory firm, have been appointed as Joint Nominees to the CVA.

Derrian Nadauld, MD of Gourmet Burger Kitchen, said: “Given the challenging UK casual dining environment and over-rented UK restaurant estate, we are having to take tough but necessary actions to reduce our fixed cost base and restore long-term profitability.

“We have held constructive discussions with our key landlords and strategic partners and will now seek creditor approval on our CVA proposal. This will provide greater security for our staff, suppliers, landlords and customers. GBK is a fantastic brand and with the strength of our core estate, we are confident the Company will emerge stronger from this process”.

Matthew Richards, director at Grant Thornton, commented: “The CVA will provide a stable platform upon which Management’s turnaround plan can be delivered. We have fully engaged with the British Property Federation and its members and their views are reflected in what we believe is a fair proposal to restructure the property obligations of the Company.

“It is important to stress that no restaurants will close immediately and employees and suppliers will continue to be paid on time and in full.”

Stephanie Pollitt, assistant director of Real Estate Policy, British Property Federation (BPF), added: “These situations are never easy as property owners need to take into consideration the impact on their investors, including those protecting pensioners’ savings, as they vote on the CVA proposal.

“Gourmet Burger Kitchen have, however, demonstrated best practice, engaging with the BPF early in the process, but ultimately, it will be for individual property owners to decide how they will vote on the CVA.”

A statement from Famous Brands earlier today, said that while this process evolved, shareholders would be updated when appropriate and are requested to continue to exercise caution in the trading of Famous Brands shares.

GBK made a £2.6m operating loss in the six months to 31 August, the group’s owner Famous Brands admitted earlier this month.

The South African listed company was forced to issue a statement ahead of its H1 results announcement, which is due at the end of this month, to say it would recognise a (pre-tax) impairment of £46m at group level.

The H1 loss compares to an £872,000 decline in the same period last year.

GBK is an indirect wholly-owned subsidiary of Famous Brands, with its registered office and main trading operations in the UK.