Taste Holdings has announced that it will be liquidating its food business in South Africa with immediate effect, following the group’s failure to sell the Domino’s licence in the country.
The group will write off R450 million in shareholder loans, and 770 employees will be affected with 55 corporate stores closing with immediate effect.
“Franchisees for the 16 franchised outlets will continue trading with management providing advice and assistance where possible. Taste has received no communication as to the date of cancellation of the franchising licence, the group retains the regional franchising licence until further notice,” it said.
The liquidation decision comes despite the group’s extensive international efforts to sell its licensing agreement for the global pizza brand with the affected companies being Taste Food Franchising, Taste Commissary and Taste Food Trading, it said.
The major creditors include Taste Holdings who had provided the funding, employees, Domino’s Pizza LLC, landlords and the supply chain creditors.
Taste said that its Luxury Division and its banking facilities remain unaffected by the liquidations and will continue focusing on its luxury brands NWJ, Arthur Kaplan and World’s Finest Watches.
“After Taste announced its revised strategy and decision to exit the food business in November, Domino’s Pizza LLC loaned the group operating capital while management and Domino’s Pizza LLC sought a prospective buyer for the franchising licence.
“However, discussions with three master franchise partners, as well as various global suitors, finally collapsed this week, triggering the voluntary liquidation decision,” the group said.
In February 2019 Taste had indicated its long-term objective for Starbucks and Domino’s Pizza businesses was to achieve break-even across both international brands within 36-40 months after commencing its expansion plans and to attain positive cash flow after capital expenditure within seven to eight years.
Management estimated it required more than R700 million including the amount it had raised via a rights offer to achieve a positive cash flow and had to expand the Starbucks network to 150-200 outlets and Domino’s to 220-280.
In November, Taste announced a revised strategy to exit the food business as the capital investment required could not be secured in its current business structure and existing market conditions.
The group’s food brands included Starbucks, Domino’s, Maxi’s and The Fish & Chip Co.
Taste sold its 13 stores in the global coffee brand and the franchisor licensing agreements for Maxi’s and The Fish & Chip Co. in December 2019.
The group is currently applying for liquidation and a liquidator to take over the food business.
“Stores have been closed in an orderly fashion and Taste will communicate further information as it becomes available,” it said.
Source: Business Tech