Shares in the restaurants giant behind Frankie & Benny’s and Chiquito dropped sharply as it warned on site closures and job losses.

The Restaurant Group said it plans to shut around 35 of its loss-making casual dining locations in efforts to boost earnings.

The group, which also owns pan-Asian chain Wagamama, said the closures would help it shore up cash after reporting deepening losses over 2022.

However, one analyst said “above-market like-for-like growth in its core divisions underlined the resilience of its consumer-centric brands”.

Andy Hornby, TRG’s chief executive, said the move forms part of a “robust plan” to improve the group’s margins over the next three years.

“Every year a number of leases come up for potential renewal, so the vast majority is where we are going to selectively - and we haven’t fully decided yet, we are going to constantly review the way the sites are trading - exit a number of those, rather than renew the lease for another five or 10 years,” said Mr Hornby.

“We will manage that on a localised basis, and the teams will be the first people to know. But we are not closing any sites that we think have got long-term profitable futures.”

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Up to three of the sites will be converted to Wagamama over the next two years, and the rest will be sold or the leases will be exited or left to expire.

Mr Hornby said the business would try to offer deployments to staff across the affected sites wherever possible, although did not specify how many jobs would be impacted.

He added: “A significant number of these potential sites are in areas where we have other brands, so the job impact should be significantly less than you might think from the number of sites that we will not be renewing.”

The plans come after TRG has faced pressure from activist shareholders to improve shareholder returns, with shares in the business shrinking to less than a third of pre-pandemic levels.

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The company, which has about 18,000 staff, has already cut a raft of loss-making restaurants over the period, including closing the majority of its Chiquito restaurants at the start of the pandemic to bolster its finances.

TRG revealed its pre-tax losses widened last year from £35.2 million in 2021 to £86.8m in 2022, as it faced a knock-back from cost inflation across food and drink, energy and wages.

Sales from people dining in at Wagamama increased by nearly a tenth last year, offsetting a 17 per cent decline in takeaway sales as people returned to the high streets.

TRG said it wants to open five to six new Wagamama restaurants a year for the next three years, and increase the number of restaurants from 156 today to around 200 in the long term.

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Mr Hornby said that, while the rise in sales was partly driven by higher prices, the chain has also seen an increase in customers.

Lara Martinez, analyst at Third Bridge, said: “Amongst the casual dining sector, The Restaurant Group is more recession-proof than most, thanks to their recipe for consumer-centric brands, a young customer demographic, and higher-margin dark kitchens.”

Russ Mould, an investment director AJ Bell, suggested that TRG focused all its efforts on the better-performing Wagamama chain.

He said: "The Restaurant Group is already announcing plans to close more sites in its leisure division - the Frankie & Benny's and Chiquito chains which offer generic Italian and Mexican food to a captive audience of shoppers and cinemagoers.

"However, the question may well be asked, why not spin off, sell off or in some way get rid of this part of the business entirely, along with the other bits, to focus on Wagamama which is clearly a restaurant brand with genuine appeal.

“Rename the business as Wagamama, clear out the rest, and you would have a streamlined and focused operation which might have more appeal to investors.”

Shares in TRG closed down 15.36%, or 6.96p, at 38.36p.