Issa brothers attribute remote work to mounting losses at Leon

THE billionaire Issa brothers blame the surge in remote working for hindering the post-Covid recovery of their fast-food chain, Leon.

Zuber Issa cited the combination of hybrid work models and rail strikes as significant factors contributing to Leon's recent struggles, reported The Telegraph.

According to the report, Leon faced challenges in sales recovery throughout the year.

“[The] working-from-home trend has impacted many Leon restaurants, particularly those in office-centric locations, and these have seen a slower recovery," Zuber was quoted as saying.

While the easing of Covid restrictions saw improvements in sales across Leon's 85 UK restaurants in 2022, the ongoing trend of working from home posed challenges, particularly for locations centered around offices.

The fast-food chain is part of the extensive EG Group empire led by the brothers, which includes thousands of petrol stations and the supermarket giant Asda.

In 2022, sales rose £29.1 million to £82.6m. However, despite this growth, losses expanded from £7.5m to £12.6m.

Also, the revenues were over £30m lower compared to 2019, when the chain's turnover reached £115m.

The impact of remote work on fast-food chains is not unique to Leon, with rival Itsu also adjusting its operations in central London.

Julian Metcalfe, Itsu's CEO, noted fundamental changes in the traditional heartlands of central London and the west-end due to remote work.

Adding to Leon's challenges, Zuber highlighted the effects of strike action on railways, especially impacting restaurants located near transport hubs.

Industrial action on the railways has reportedly cost the country's pubs, bars, and restaurants an estimated £3.5 billion over the last 18 months, according to UK Hospitality.

Leon, founded in 2004 as an alternative to traditional fast-food outlets, was acquired by the Issa brothers in 2021 for a reported sum of £100m, following their acquisition of Asda in a highly leveraged £6.8bn deal.

In response to the challenging market conditions, a spokesman for Leon acknowledged the business's continued recovery from the impact of Covid-19 in 2022 but highlighted broader difficulties.

These challenges included the impact of the war in Ukraine, leading to inflationary pressures, particularly on electricity and cost of sales, and disruptions from industrial action on the rail network affecting restaurants near transport hubs, the spokesman added.