QSR Media exclusive Q&A with the new CEO of Souvlakihut, Sophie Valkan
QSR Media had a 1 on 1 interview with Sophie Valkan, CEO, Souvlakihut about some of the key points regarding the recent acquisition of the chain by Astera Cororation, headed by Daryl McCormack and their Immanent plans for the brand.
Q 1. Which stores are opening, which are closing and why?
Under the purchase agreement, we took assignments of 8 franchises. Given the state of viability of many stores, about 14 stores were not taken on and these have now been terminated by the Administrators. There is a further group of about a dozen stores who we have asked the Administrator not to terminate yet. These are the stores that we think could be viable if their operating costs, including their rentals, were lower. The Administrator has agreed to hold these agreements on foot for a while. We have given the Administrator a licence to use the system IP for a short while to enable him to do this and we are still providing support services to these stores on the Administrator’s behalf, such as supplying goods to them.
Q 2. So what is the offer you have made to these stores whose agreements are still with the Administrator and haven’t been terminated?
The essence of it is that we will offer to take assignments of these agreements from the Administrator if the franchisees agree that we can terminate their franchise agreement if we are unable to secure acceptable lease terms with their landlord. The reality is that if we can’t secure lower rents, we have formed the view that most of these stores should probably not continue to trade. In commercial terms, our decision was – do we give up on these stores and let the Administrator terminate them leaving them with their debt and no franchise, or do we give them a chance of keeping their business if we can get a better deal for them on their rents? Given the quality of the people in the franchise network, we have taken a risk with the second option and Daryl McCormack is working hard negotiating with the landlords at the moment. We will be notifying the Administrator shortly which agreements we will take from the ones still on foot with the Administrator as we need to bring this process to a close very soon.
Q 3. Some of the franchisees have concerns as they were aware a deal was pending for some time but you were waiting until it went into administration for you to buy it, what are your thoughts on this?
The former franchisor going into administration was a shock to the buyers. There was due diligence work being undertaken on the purchase and the form of contract was virtually ready to sign when it happened. Our people walked away from the table at that point, but were contacted by the Administrator to recommence discussions as a quick sale was the only way the business could stay alive. That’s why a sale was effected so quickly after the Administrator was appointed – the sale agreement was virtually complete by the time of the appointment. You’ll need to speak to the former owners about why they appointed an administrator and the timing of this, we do not know their reasons.
Q 4. We understand some franchisees paid their franchisees fees within the last 6 months, can you tell me how many there are and if you will be doing something for them?
That’s correct, there are about half a dozen people who have paid some or all of the up-front fee for a new franchise to the former franchisor in the last 12 months. We also brought them in to meet with us during our short due diligence period and have met with all the ones we are aware of. We have offered to give these people a franchise on the basis that they will get a credit for the fees they have already paid. That will hurt us financially, but we think it’s the right thing to do. We will be working with these people over the coming months to determine timing on their start dates and their store locations, so if they stay with us and open a store, they will not lose any of the money they have paid and we will just wear that cost.
Q 5. What is happening with the staff at the head office?
We have had two staff leave of their own accord prior to us taking over. We have offered ongoing employment to the remaining staff, save for two who have been offered a contract term to give us time to determine the necessary support structure given the reduction in store numbers. With the people we are taking on as employees, under our contract we had no obligation to honour their accrued annual leave entitlements. In the interest of retaining their goodwill however, we will be covering their annual leave entitlements as indications were that it was unlikely that they would have achieved a full recovery of that from the Administrator.
