Kleins franchisees attempt to buy back collapsed jewellery chain
Tuesday, May 27, 2008/
A group franchisees of embattled jewellery chain Kleins is set to join with an unnamed company to make a bid for the company, which was placed in administration earlier this month with $20 million of debts.
Stephen Giles, a partner at law firm Deacons, is organising the bid. He will convene a meeting of franchisee representatives on Thursday to decide whether to make their preliminary bid a final bid.
Giles says it is his understanding that many of the franchisees remained profitable while the franchisor ran into trouble. The core problem appears to be rental rebates paid by the franchisor to franchisees, which effectively insulated franchisees against soaring rents. “It was a foolish model and it’s come back to bite them,” Giles says.
If Giles’ bid is successful, the rental issue will be one his first priorities. “We’ll be seeking to sit down with the various landlords to negotiate rebate arrangements on the basis that is it a national chain. The key to this is to build a new franchise model where the franchisees and the franchisors can trade profitably.”
Administrator Ferrier Hodgson says there has been interest from a number of parties in the Kleins business, which has about 150 franchisees.
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