Franchised Food Company chief executive Stan Gordon has attacked the administrator of collapsed fast food franchise Souvlaki Hut, claiming the sale of the chain to a group of investors led by former Video Ezy chief Daryl McCormack should have been more transparent.
But the man in charge of the sale, BDO administrator Laurie Fitzgerald says Gordon is simply upset his company did not offer the winning bid.
Gordon says that the administrators should have conducted a more open process when deciding to sell the company.
“There was no tender process, nothing was put out. They put it into administration and sold it three minutes later. It is a disgrace.”
Souvlaki Hut was placed into administration last week after former owners John and Bill Fotiadis experienced financial difficulties and threats of litigation from disgruntled franchisees.
But Fitzgerald says Souvlaki Hut has been up for sale since May, and that Franchised Food Company was one of a few organisations interested in buying the company. When Fitzgerald took over as administrator, he argues that he had to make “the best decision” about how to keep the company afloat.
“He is absolutely incorrect,” Fitzgerald says.
“The franchise had been marketed since back in May and Stan had been in discussions as early as that time. He had knowledge of the company being for sale.”
“What I did when the company went into administration is that I came to know about these different negotiations. And I felt the need to make a sale quickly because of the nature of the financial difficulties, and judging by each offer, we went ahead and did a deal.”
Fitzgerald says Gordon is simply upset that he missed an opportunity, and points out that the deal still needs to be put before the creditors. An initial creditors meeting will be held on Monday, with another meeting to be held on January 14.
It is understood creditors will come to know whether they will receive any of their money after Christmas.
Fitzgerald says that at no point is the administrator obliged to run an open tender process – they can sell to whatever party that can offer the best deal.
“There are two things that are necessary when discussing a sale. The first is how it affects the franchisees, the ongoing viability of the business. And secondary are the creditors, and how they can expect to see a return. But it’s a bit early at this stage to judge that and we’ll know after Christmas.”
“I need to make a decision about how long the business can keep trading and whether all these deals are reasonable or not, or do I hold it open for a better deal? It’s a commercial judgement, and the one I made was to go ahead and make the deal that protects the business.”
Meanwhile, Daryl McCormack had told SmartCompany that the company will undergo a period of review over the next six months while franchisees are brought into meetings and new ideas are thrown around.
“We share a lot of the vision of the original founders and we think they’ve done a fantastic job in creating and building a brand that has national interest. But we are going to speak and consult with all franchisees to have greater sympathy to where they’re travelling.”
“For a period of about six months we’re just going to take stock of where we are, and we’ll look at where we want to improve, and possibly expand. But those guys have created a successful model and we think we can market it, get some scale and an uptake in customers.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
