In the chat plugin’s settings you can set Chat max direct message users to 1, which will prevent people from creating group chats. The option still appears in the menu but only allows one person to be added.
It would make sense if we hid the group chat option if this if the setting is 1 or less. But for now, if you’d like to hide it you can add a little CSS to a theme.
#new-group-chat {
display: none;
}