Pick n Pay has applied to liquidate 19 stores that belonged to a franchisee after debt owed to it grew to R224m, in its first ever move of this nature.
An application for liquidation can be used by a creditor, in this case Pick n Pay, to attempt to enforce the repayment of debt, with the liquidation not becoming final if payment is made.
However, if the stores, which are made up of 10 grocery shops and nine liquor outlets, are ultimately closed, it would lead to the loss of 650 jobs.
The stores in Edenvale, Eden Glen, Benoni and Kempton Park were run by the Baladakis family, which has done business with Pick n Pay for 30 years.
But since 2018 its debt from franchise fees, interest and stock has risen to more than R200m.
Pick Pay won the right to take over the stores on Friday as it held R47m security over the stock, in-store equipment and branding. The nonpayment of the debt, the late submission of financial accounts and the fact most stores were racking up millions in losses meant the franchise contract was breached.
It is still not clear why Pick n Pay allowed the debt owed by franchisee John Baladakis to exceed the amount of the security it held.
The appeal by Baladakis over the loss of his stores on Wednesday at the Johannesburg high court was dismissed, with costs also being awarded against him.
While he wishes to go to the Supreme Court to appeal the order giving Pick n Pay control over his stores, the retailer is now applying to liquidate the stores in what is probably an attempt to be repaid some of what it is owed.
Sometimes if money owed is paid, a liquidation order is not made final by the court, while other options such as business rescue can be pursued.
The stores in question, however, are unprofitable, collectively racking up more than R155m in losses in 2023.
Pick n Pay CEO Sean Summers said: “We’ve done everything possible over a protracted period of time to avoid having to take such drastic action against this franchise group. On a personal level, it is deeply disappointing as I have known the family for some 30 years and have not taken this decision without due consideration.
“But the truth of the matter is that the serious financial situation that the Baladakis group finds itself in is a reality. We have many other franchisee groups — some even larger — and individual franchisees who are running profitable and sustainable businesses.”
Summers said Pick n Pay was supplying the stores in terms of its contractual obligations but the family had stopped paying for supplies in the past week.
“Our liability continues to grow. It’s the first time in our history that we have applied to liquidate a franchise business, but we are simply left with no other options given that the Baladakis Group has made it clear that they will continue to frustrate the process by continuing to appeal the judgments that have found against them, thereby exposing Pick n Pay to an ever-increasing debt for which they are making no payment currently.”
Summers said it was not Pick n Pay’s intention for the process to have played out in public.
“We have exceptional franchisees who are profitable, loyal, hardworking and a credit to the group. We believe we have done all we can to try and avoid this action with the Baladakis Group but we are now at the end of the road.”
Baladakis was not immediately available for comment.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.