Famous Brands, the owner of Steers and Wimpy, has launched an insolvency process in the UK and plans to shut some restaurants as it battles to turn around its Gourmet Burger King (GBK) chain.

The fast-food outlet, whose decision to expand to the UK in 2016 was praised by the market, sending its share price to an all-time high, said on Wednesday that it had launched an insolvency process aimed at stabilising GBK.

The announcement lifted the group’s share price to its strongest close in more than two months. The stock, which reached a record of R172.80 soon after the UK burger business was bought in 2016, closed at R104.50 on Wednesday, up 4.77% on the day.

Facing a tough local economy and political uncertainty in SA, listed companies have been under pressure to diversify offshore, often with expensive consequences. Famous Brands’s misadventure in the UK burger market has already seen it write off the value of GBK by more than half since it bought it for £120m (about R2.2bn) two years ago.

The deal was announced a few months after the UK voted in favour of Brexit, which will see it leave the EU – the world’s biggest and richest trading bloc – and which has caused much uncertainty among investors and consumers.

GBK has been floundering due to lower consumer confidence amid Brexit talks, the rise of online food delivery and fierce competition in the premium burger segment, analysts said.

On Wednesday, Famous Brands said in a stock exchange announcement that a decision was taken by the GBK board to initiate a company voluntary arrangement (CVA) process with the assistance of Grant Thornton. The process, unique to the UK, is used by financially distressed businesses to renegotiate their leases and help them reach agreements or compromises with creditors.

The process is usually used to restructure a business’s rentals in line with current market valuations or to shut outlets.

The BBC reported on Wednesday that GBK had earmarked 17 of its 85 restaurants for closure, citing the chain’s MD, Derrian Nadauld. About 250 jobs are at risk.

Nadauld told the BBC that GBK faced a "challenging casual dining" market and its rental payments were too high.

"We are having to take tough, but necessary, actions to reduce our fixed cost base and restore long-term profitability," he said.

Even the well-known Jamie’s Italian chain is reported to have used the voluntary arrangement process to shut outlets and cut jobs.

David Brockton, an analyst at London-based Liberum Capital, told Business Day earlier in October that the voluntary arrangement regime has placed additional pressure on landlords, including on JSE-listed shopping centre owner Hammerson.

He said Hammerson is trading at an attractive yield.

"But there are some question marks around the sustainability of that income return at the edges, with CVA pressure and some churn in the tenant base as the retail sector struggles to adapt to changing consumer habits and cyclical pressures," Brockton said.

Barclays Research said in a note last week that retail sales in the UK had contracted 0.8% month on month in September, with food store sales volumes falling 1.5% month on month.

This was weaker than consensus, "but broadly in line with our forecast".