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Voluntary Administration (VA) has the power to not only rescue a business but also save jobs and significant prior investments. When the directors of Lone Star Masterton acted decisively to initiate VA and showed commitment to the process, we were able to turn a crisis into a brighter future for the restaurant and its 40 staff.
Operating from a historic building on Dixon Street, Lone Star Masterton has been a fixture of the local dining scene since opening its doors in 2014. The local owners of the franchise ran a thriving operation until external pressures became too much. The business faced difficulties following the COVID-19 pandemic and the subsequent cost of living crisis, which hit the hospitality sector particularly hard. Ultimately, the directors of the company realised they were in a vulnerable situation and sought advice from BWA Insolvency.
When we met the directors, they were working hard to keep the business running at their personal expense. Despite the mounting challenges, they realised the importance of maintaining relationships with employees, suppliers, and the landlord. However, they knew this was unsustainable and made the astute decision to appoint an Administrator in mid-2023. Because the directors were willing to take action before the operation became unsalvageable, as the Administrator, I was able to recommend Voluntary Administration. This option would offer the opportunity to restructure the business and offer it for sale.
Under the financial strain, the company had reported a trading loss and a negative equity position. Operating overheads exceeded gross profits, resulting in further trading losses and insufficient liquidity to cover operating expenses. Nevertheless, the business had been profitable and had the potential to be so again if given some relief from the debt accumulated as a direct consequence of the pandemic.
Voluntary Administration was chosen because it is a legal framework specifically designed to give businesses the best chance of continuing operations. By enabling the company to be managed by an independent person (i.e., the Administrator), VA fosters trust and confidence during the reconstruction and realisation process. This independence is crucial for successfully navigating the restructuring and eventual sale of the business.
Once I was appointed, we identified the objectives of the VA as being to:
After refining the company’s affairs, the business was prepared for sale in anticipation of the summer season.
In April 2024, a little over a year after the owners first approached BWA, we successfully finalised the sale of Lone Star Masterton. The new owner was an experienced business operator familiar with the Lone Star way. This was one of the best possible outcomes for the business, its staff, and the former directors.
The sale saved the business and the jobs of more than 40 employees. It also saved the building owner from significant refit costs and mitigated the exposure the shareholding interests had for guarantees. Understandably, the shareholders were cautious about taking the major step of engaging an Administrator who would have such control over the business. A business that was their passion and their major investment. Once having accepted that something must be done, they got down to work with the Administrator in a willing and cooperative manner with the result now speaking for itself.
This outcome stands as a testament to the power of Voluntary Administration in rescuing and rejuvenating a business. With commitment and dedication, and under the guidance of an expert Administrator, VA can achieve significantly better results than the often-destructive outcome of a business collapse.