Health food chain, SumoSalad, has put two of its companies into administration in order to protect the financial interests of some of its franchisees and force its retail landlord to negotiate over lease payments.
Luke Baylis, chief executive and co-founder of SumoSalad, said putting two of its companies Sumo Westfield Leasing Pty Ltd and Sumo Leasing Pty Ltd, which hold leases of about 12 to 14 SumoSalad outlets in Westfield shopping centres, would not have an impact on the rest of the Sumo group, with the company’s network of 104 stores still continuing with business as usual.
Baylis said the decision was in line with SumoSalad’s strategic plans to have stores out of shopping centre food courts and into more profitable sites like hospitals, airports, service stations and universities where, he said, the company already has a strong and growing presence.
Baylis added the stores would continue to trade while the administrators renegotiated their rental agreements.
“Sumo has been working with landlords over the past few months to negotiate more realistic food court leases for our stores, with no success,” he said.
“Regrettably, landlords have opened the door to more and more food businesses in recent tiimes, as well as opening whole new eating areas within the same precinct, which has essentially cannibalised existing tenants.”
Baylis said one shopping centre went from 34 food outlets to 93 in a three-year period with flat foot traffic growth.
“Our negotiations with landlords have failed to reach an outcome that adequately compensates our franchisees, with landlords now demanding that Sumo and our franchisees collectively pay millions of dollars to surrender the existing shopping centre leases,” he said. “This is an untenable and unfair demand on small business owners, which would send our franchisees in those shopping centres broke.”
Baylis said placing the leasing entities into voluntary administration is the only way to protect their franchisees.
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