The billionaire Issa brothers have said a rise in working from home has held back Leon’s post-Covid recovery, as losses mount at the fast food chain.
Leon forms part of the Issa brothers’ sprawling EG Group empire, which includes thousands of petrol stations and supermarket giant Asda.
Zuber Issa said sales across Leon’s 85 UK restaurants improved “week by week” in 2022 as Covid restrictions eased, although 2023 “remained challenging” as workers stayed at home.
He said: “[The] working-from-home trend has impacted many Leon restaurants, particularly those in office-centric locations, and these have seen a slower recovery”.
Sales rose £29.1m to £82.6m at Leon’s restaurants in 2022, newly-filed accounts show, but losses widened from £7.5m to £12.6m.
Revenues were more than £30m lower than in 2019 when the chain’s turnover hit £115m.
Leon is not the only fast food chain that has suffered from the rise in hybrid working, as rival Itsu has been forced to turn some central London restaurants into three-day operations.
Julian Metcalfe, Itsu chief executive, said earlier this year that the “traditional Itsu heartlands” of central London and the West End had “changed fundamentally” because of working from home.
Pret A Manger has also been forced to switch its focus from city centre sandwich shops to more suburban sites.
Mr Issa added that Leon had to contend with the effects of strike action on Britain’s railways, which “further affected the business given the location of many Leon restaurants to transport hubs”.
Trade association UK Hospitality has estimated that industrial action on Britain’s railways has cost the country’s pubs, bars and restaurants around £3.5bn over the last 18 months.
Leon was founded in 2004 by John Vincent, Henry Dimbleby, and chef Allegra McEvedy, who styled it as an alternative to traditional fast food outlets, offering a range of wraps, salads and hot dishes.
The chain was bought by the Issa brothers in 2021 in a deal rumoured to be worth around £100m, which came shortly after they bought Asda in a highly leveraged £6.8bn deal.
After growing their empire rapidly over the last decade thanks to cheap debt, the Issas have spent much of 2023 selling off assets to reduce borrowings as interest rates rose.
Earlier this week, EG Group announced a deal to sell 218 KFC franchise restaurants to Yum! Brands’ KFC division.
A Leon spokesman said: “While the business saw a continued recovery from the lingering impact of Covid-19 in 2022, wider market conditions remained challenging.
“This included the impact of the war in Ukraine, which led to inflationary pressures – particularly on electricity and cost of sales – and industrial action on the rail network that impacted restaurants close to transport hubs at those times.”