T Bello - Case Update

The joint administrators of UK’s largest Taco Bell franchise group have filed their proposals outlining what led to the group’s downfall and the pre-pack sale that ultimately saved a majority of its restaurants.

Kirstie Provan, Robert Ferne and Gary Shankland of Begbies Traynor and Anthony Wright of FRP Advisory were appointed joint administrators of T Bello UK Limited and T Bello Group Limited on 26 June by Santander UK PLC, the qualifying floating charge holder. The companies form part of the larger T Bello Group (the “TB Group”), which operated 51 franchised restaurants under the Taco Bell brand via international franchise agreements with Taco Bell UK and Europe Limited, which is owned by YUM! Brands Inc., the American multinational corporation that operates the KFC, Pizza Hut, Taco Bell and other brands in various countries around the world.

The TB Group was established in 2016 and by 2021 operated over 30 Taco Bell restaurants. In 2022, the TB Group opened 16 new restaurants as part of a rapid expansion programme primarily fuelled by debt. The TB Group’s restaurants were typically located in high-volume and popular areas throughout London and the South of England. It employed approximately 650 staff throughout its restaurants and at its head office.

Despite reporting positive EBITDA, the companies suffered severe liquidity challenges throughout 2023 and into 2024 primarily due to significant asset finance obligations (approximately £300,000 monthly) and lower than forecast gross sales receipts, compounded by a major aggregator removing the Taco Bell brand from its platform.

This led to a significant build up of arrears with several creditors, including Taco Bell, owed approximately £3 million in royalties, and HMRC, owed approximately £500,000 in unpaid tax. The temporary cessation of a major online food delivery network which accounted for a large part of the companies’ turnover in late 2023 and early 2023 had a material impact on revenues, further compounded by the slower than anticipated recovery once the network was recommenced.

The companies made unsuccessful attempts to sell the TB Group’s shares and implemented various cost-cutting strategies, including a reduction in headcount at the head office.

Begbies Traynor were appointed in February 2024 to assist with an accelerated sale process. Given the short timeframe, which needed to factor time for any purchaser to be approved by Taco Bell and YUM!, it was determined that a relatively limited pool of parties with the ability to fund a purchase would be able to conduct due diligence in the time available. Therefore, a targeted, direct marketing approach was pursued.

This ultimately resulted in a pre-pack sale of 46 restaurants to Karali Group, a family-owned business with decades of experience in the restaurant industry, saving 600 jobs. Five restaurants were not included as part of the sale and were closed.

The administrators’ proposals can be found HERE. They have been assisted by TLT, Pinsent Masons, Berg Kaprow Lewis, ERA Solutions and Eddisons.