Collapse of shopping centre kiosk business John’s Nuts has left franchisees in “terrible condition”, says administrator

SmartCompany, February 23, 2018

The administrator of collapsed snack business John’s Nuts says franchisees have been left in a very challenging condition after the company entered voluntary administration at the end of January.

On January 30, Michael Caspaney of Menzies Advisory was appointed to the five companies that operate the John’s Nuts business, a kiosk-style snack food operator that had seven sites across Victorian shopping centres.

On Thursday, administrators locked in a second creditors’ meeting for next March 1, with Caspaney awaiting claims from creditors, including retail landlords, to establish the overall liabilities of the company.

He says the total amount owed could end up being “multiples of $100,000”.

The exact start date of the business is unclear, but Caspaney says at the time of his appointment there were three company-owned stores in operation at Campbellfield, Fountain Gate and The Pines shopping centres, as well as four franchises at Southland, Highpoint, Greensborough and Doncaster.

It’s unclear whether any of these stores will continue to trade, with the company’s liabilities still being established and leases having been disclaimed.

Caspaney says he has disclaimed all leases as administrator and the situation has “left franchisees in a terrible condition”.

“There was one franchisee who had just paid an enormous amount of money to buy into the franchise just last year. They’re in a terrible position – they paid all this money and there’s nobody there to provide the services that the franchise [owner] would normally do.”

The situation has left the franchisees out on their own to operate the businesses, and while Caspaney says he is unsure of whether these will continue to trade on their own, the company has offered the franchisees access to John’s Nuts recipes so they can continue to make the products for sale if they choose.

While it is currently unclear exactly what factors led to the administration, Caspaney says is appears initially that the rents demanded by large shopping centre landlords “were probably a bit high for this kind of business”.

Caspaney says the prospect of the liquidation of the business will be on the table at next week’s creditors meeting.

While the debts of the business were originally outlined at around $100,000, he says it liabilities could be significantly more than this as “the landlords are owed a huge amount of money” and still have time to make claims against the company.

“I can’t estimate this, because I have to wait for shopping centres to come back to me with their positions,” he says.

In general terms, Caspaney says “the retail sector is getting hammered” at present, meaning businesses that “once had a good formula many years ago” were now facing challenging times.