Sean Summers is the CEO of Pick & Pay.
- A Pick n Pay franchisee who owes the retail giant more than R200 million has lost a major legal battle.
- Earlier Wednesday, Pick & Pay moved to liquidate the franchisee's business.
- Franchisees claim that Pick n Pay's introduction of a bulk discount model six years ago led the franchise group to its current situation.
- For more financial news, visit: News24 Business Top Page.
A highly indebted Pick n Pay franchisee has suffered a decisive legal blow in its battle with the retail giant. Pick n Pay moved to liquidate the franchisee's business.
John A. Varadakis, former president of the SA Franchise Association, has been a Pick n Pay franchisee for 30 years and operates 10 supermarkets and nine liquor stores in the East Rand. The annual turnover of these stores exceeds R1.5 billion.
According to Pick n Pay, the group is owed more than R224 million and filed an emergency application in the Johannesburg High Court last week to gain control of the Varadakis store.
In his defense, Mr Varadakis argued that Pick n Pay's introduction of a bulk discount model six years ago led to the franchise group's current situation.
He said changes to the discount model Pick n Pay introduced to its franchises in 2018 prioritized sales volume over margins, causing financial hardship and increased debt for his business. Varadakis previously told News24 that he decided to contest the debt because he believed it was not legal.
However, the court ruled in Pick n Pay's favor, with the judge calling some of the arguments made in the Varadakis case “vague,” “frivolous,” and “superficial.”
Mr Varadakis then applied for leave to appeal against the order, but on Wednesday a High Court judge dismissed the application with costs.
Earlier Wednesday, Pick 'n Pay applied to the court to liquidate the Pick 'n Pay franchise business owned by Varadakis. This is the first time in Pick & Pay's history that the company has filed for liquidation of its franchise business.
“We are taking all possible steps over the long term to avoid having to take such drastic action against this franchise group,” said Sean Summers, CEO of Pick n Pay. I have been taking lessons,” he said.
“On a personal level, I am very disappointed because I have known my family for almost 30 years and this decision was not made without due consideration.”
The group continued to supply inventory to its franchisees on a daily basis, but Varadakis stopped all payments over the past week, he said.
”[The] The truth of the matter is the Varadakis family's dire financial situation. [group] realize that it is reality. We have many other franchisee groups, some of which are much larger, and some individual franchisees who run profitable and sustainable businesses. ”
Summers said the Varadakis Group has made it clear that it will continue to block the process by continuing to appeal the ruling.
“While we always follow due legal process, it was never our intention to expose this incident to the public. The facts will emerge over time. There is nothing to hide from us. There is nothing.”
Pick n Pay expects the liquidation application to be heard in the Johannesburg High Court on or around March 12.
This article has been updated to reflect that Pick & Pay launched a liquidation bid on Wednesday, ahead of the latest court ruling.
