The Newcastle franchise of world famous rock’n’roll restaurant chain Hard Rock Cafe collapsed with debts of more than £2.6m, documents reveal.
David Tilly and Penny Tilly took over The Guildhall building to bring the global brand to the North East for the first time back in 2018, but they say their plans were beset with challenges from the start. In the month that work started on fitting out the building the world went into lockdown - and it was more than a year later in May 2021 that it was finally able to open.
However, just before St Patrick’s Day events were due to be held there in March, the doors were closed to customers and it later emerged that it had ceased trading, with the loss of all 37 jobs. Documents have now been filed by administrators at FRP Advisory in which the directors cite a series of challenges that led to its demise, including the pandemic, lockdowns and Covid-19 restriction, as well as the cost of living crisis.
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The report says the Tillys had invested over £2m into the refurbishment of the Guildhall, the issues and losses during the pandemic and the increased costs due to events around the world and cost of living crisis, prompting them to approach Hard Rock International about selling the franchise in 2022, just 18 months after it had finally been able to open, “due to the directors’ poor health and difficulties with poor trading figures”.
When the company went into administration it had a total deficiency of £2.68m, which includes unsecured creditors who are owed £421,0024, redundancy pay of £3,929 owed to employees, a further redundancy sum of £67,410, and a £16,660 bounce back loan from Lloyds Bank.
Other claims includes £116,118 to Newcastle City Council in rent and service charges, and a £2m claim for a director’s loan from David Tilly.
The list of 44 creditors includes £144,219 owed to Volkswagen Financial Services, £2,070 to online booking platform Open Table International, £13,220 in business rates to Newcastle City Council, £46,378 to EDF Energy and £104,441 to franchise owners Hard Rock International.
According to the report, the chain of events leading to its ultimate closure also saw it put the business up for sale last year, but a deal with a potential new buyer failed to get over the line amid a dispute over rent and electricity arrears. The administrators’ report says the company had racked up significant arrears which Newcastle City Council wanted to be cleared before it would assign the lease to a new tenant.
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Part of the arrears – electricity charges – are disputed by the company, however, and “discussions have been ongoing with the landlord to resolve the situation”.
The report says: “In May 2021, HRC opened but under the Covid-19 restrictions where it could only run at 2/3 of its capacity. Business was good for the first three months of trading however, this soon reduced once the summer holidays ended. The business appeared promising for December 2021 but a new strain of Covid was prevalent resulting in a lot of large bookings being cancelled.
“The company was also impacted by the energy crisis and cost of living crisis, trade was very slow and significantly less than the trading levels that were experienced when the doors first opened. The company was also hit with the impact of the Ukraine War which resulted in increased costs of food and other supplies. Prices were changing daily but HRC had no option but to absorb these costs.
“The company had fallen behind with the rent and service charges with the landlord as a result of a decline in trade of almost 50% of its business, which the director attributes to Covid-19, the lockdowns and the covid restrictions in place and other events such as the Ukraine War, energy crisis and cost of living crisis.
“By August 2024, Christies & co had identified a buyer interested in purchasing the leasehold interests and tangible assets. The marketing exercise resulted in a purchaser being identified who offered an amount sufficient to settle the arrears of rent and any outstanding service charges.
“The directors and other advisors of the company had been in discussions with NCC (Newcastle City Council) regarding an assignment of the lease however, NCC would not agree to the assignment unless the arrears were paid in advance. The directors have continued to liaise with the landlord to try and find a way forward.”
A spokesman for Newcastle City Council said: “We were very sorry to hear of the closure of the Hard Rock Café. We appreciate the terrible toll that the failure of any business can have on its owners and employees.
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“As landlord we have a duty to the council taxpayer to collect the rent for any property so the money can be reinvested back into the council’s properties or be used to fund public services. It would not be right for any local authority to get into a position where it is subsidising a private business.
“We continued to exercise leniency and engage with the tenant, but the debt continued to grow, and we had a duty to pursue it. We would like to wish the former tenant well for the future. The Guildhall is a prominent building, and we are confident of finding a new tenant, so the building can remain in use.”