London's A-Z restaurants slide into receivership

Bad news travels fast but it would appear particularly so in the restaurant trade where financial self-preservation is such a fact of life for the best, and invariably the smallest, suppliers and producers.

So the news that A-Z restaurant group, which comprised Alloro, Aubergine, Teca, Spiga, L’Oranger, Zafferano and two branches of Ken Lo’s Memories of China, had gone into receivership was emailed to me by one vegetable supplier, confirmed by a wine supplier, reconfirmed by a chef/restaurateur who believed that amongst the bigger creditors would be a French firm, already quite nervous about the London market, supplying the group with vegetables and salads from Rungis in Paris and then lamented over by a baker who had allowed the group to run up an overdue account of over £5,000 and was not a happy man.

Rumours had been circulating for several months (the wine supplier intimated that he had heard the first rumblings 15 months ago) and over the past few months the group had sold three of its sites – Timo, Rosemarino and Edera – to management buyouts.

This is a worrying sign for restaurateurs. Small groups such as A-Z were supposed to have the financial muscle to buy well and a geographical spread, with restaurants in the West End and the wealthier suburbs, that would minimise risks. And certainly nothing is more fashionable still than Italian food and wine which this group managed to deliver with some panache, particularly at Teca, Zafferano and the less expensive pizza restaurant Spiga ( the second branch of which in Chelsea had closed some months ago). And Aubergine, L’Oranger and Zafferano were receiving numerous plaudits.

The truth may of course never emerge. I know from personal experience of selling my own restaurant to an Italian who not too many years later put it and others into receivership that this practice is not uncommon, but in A-Z’s case the explanation may be more a reflection of the current climate: that although the most expensive restaurants may be full and there is increasingly better value for money at the bottom end, the middle priced restaurants are finding life extremely tough.

Rents are high; labour costs rising and demand is stagnant at best. The summer was not too exciting with restaurateurs blaming Euro 2004 and poor weather and while they all anticipated a quiet August this has unfortunately been followed by a pretty quiet September and October too. The bounce back to normality once the school and Jewish holidays are over has not happened. And Christmas bookings are still a month off.

One other factor should be mentioned. Restaurants such as those in the A-Z group are increasingly facing a pricing dilemma: do they produce an a la carte menu, which in Italian restaurants can lead to a plethora of orders for pasta and risotto as main courses (good for margins but much less good for the average spend) or instead offer fixed price menus with choices and the odd supplement which work well in the evening but tend to be counter productive at lunchtime?

The restaurants are still trading under a receiver but I wouldn’t be at all surprised if, in the current climate, a fair proportion of their staff, their greatest asset, were to slip away.