John Eckbert

Five Guys CEO John Eckbert has responded to reports that central London landlord Criterion Capital has filed a £1.5m county court claim against the business.

Speaking at MCA’s The Conversation event, Eckbert voiced his frustrations at the refusal of a number of landlords to accept a shared sacrifice approach, explaining that the lack of any legal precedent makes the rent issue “very challenging”.

So far, Five Guys UK has been able to reach deals with 80 of its 105 landlords, who Eckbert said have “recognised that we’re going to make it through by coming up with something reasonable together”.

“But of course, there are going to be some exceptions,” he told The Conversation host, MCA contributing editor, Peter Martin, adding that in some cases, the exceptions could be under “more extreme financial duress” than operators.

“But it can’t be that some sort of privileged class are immune from sharing in the pain and the sacrifice,” he continued. “Every company in our sector is under duress and stress, so why should landlords be completely unaffected by this pandemic?”

By nature of its flexible and multi-faceted operation, Five Guys has been able to keep the majority of its sites – 103 of 110 – trading for delivery and click and collect through lockdown.

When it comes to reopening dine-in, Eckbert said the business was in such a position that “it’s really a question of what we’re permitted to do”, rather than weighing up the economic challenges of reopening under restrictions.

Given its resilience, Eckbert said an additional source of frustration is in the unequal rent conditions likely to come out of the rise in Company Voluntary Arrangements (CVAs) being pursued by businesses in comparable locations to Five Guys.

Though he appreciates the “great stress” companies forced to go through CVAs must be in, he made the case that an increasingly unequal and unfair commercial landscape was starting to emerge.

“Emerging from this, if you look at a pitch of restaurants, you could have some distressed restaurants that have been through CVAs and are trading on a very low turnover rent-only basis, right next to restaurants that have been able to survive without going through a CVA, and so are still paying meaningful base-rate rents, plus turnover top ups,” he said.

“How is it fair and right that just because someone was completely weak, they’re paying a fraction of the cost to be on the same trading pitch as operators who haven’t asked for the protection that comes from a CVA.

“In the years to come we’ll have to look at how we level that playing field.”

Also at the event, UK Hospitality CEO Kate Nicholls said that there was a “real nervousness” among ministers about getting involved in commercial contracts, but that it would be under active discussion in meetings this week and next.

Though she doesn’t expect “solutions on the table” any time soon, “the conversations are starting,” and she explained government would likely extend the moratorium ahead of looking to implement a strategy to exit it.

Nicholls doesn’t expect to see government fiscal solutions, but she added that there were reasons to be positive because of the shifting attitudes from some in the landlord community.

“I’m increasingly seeing landlords and landlord representatives moving their position,” she said. “The representative bodies are moving away from the position of ‘can pay, should pay, needs to be paid in full,’ towards trying to find a pragmatic solution.”