Trading in the shares of Coffee Republic has been suspended after the company placed one of its subsidiaries into administration and called in restructuring advisers from law firm Osborne Clarke.
The ‘financial position of certain subsidiaries including Coffee Republic (UK) Limited, the principal UK operating company’ are being investigated Photo: DANIEL JONES
The British coffee retailer, which has had a chequered history since its inception in 1995, asked for its shares to be suspended from trading late on Friday night after the markets closed
In its announcement to the stock market the company stated that “financial position of certain subsidiaries including Coffee Republic (UK) Limited, the principal UK operating company” were being investigated and that documents had been lodged with the High Court in anticipation of the appointment of administrators to those subsidiaries.
Chief executive Steve Bartlett said that the PLC remained viable but that the board had begun a restructuring programme in order to shed onerous leases for a number of its UK outlets that it was no longer able to support.
“An order has been placed on GoodBean, which is one of our subsidiaries,” said Mr Bartlett. “There are about 12 sites in that company. But it was bought before either I or Peter [Breach, chairman] got involved and these legacy leases have huge charges associated with them. We will now start negotiations with landlords about how to move forward,” he said stressing that most Goodbean sites would continue trading.
Shares, which have lost two thirds of their value over the last year, closed up 2pc valuing the company at £2.8m.
Me again.
Sorry for yattering on so but I would like to draw your attention to a term most franchisees are not aware of called: “Franchisor insolvency, intentional”.
I defined what this means on WikidFranchise.org (http://www.wikidfranchise.org/20011216-csds-sleight). I was told by a franchise banker (Bank of Nova Scotia) that they see 3 to 6 of these intentional insolvencies a year with their clients.
The franchisor’s goal is to shake off the lease obligations (unsecured creditors) they have, since most are lease and then sublease to franchisees. and the debt they had accumulated “living the high life”. This trick is helped by having 3 to 5 legally independent but intertwined corporations make up the franchisor’s group (real estate arm holding the leases, another to hold the franchise agreements, another for the equipment and so on).
Very frequently, the “insolvent” system is sold to the original franchisor’s relative. This is with the 100% approval and knowledge of the secured creditors, corporate lawyers and the accountants who also act as the insolvency agent and management consultants on the flip.
Franchisees who almost never suspect anything untoward and never organized into an association with their own legal counsel, get dragged along for the ride.
By knowing the game and playing it, franchisees who form into a group CAN profit from these shenanigans. But most don’t.
Les Stewart
http://www.linkedin.com/in/lesstewart