A closed Pie Face outlet in the Melbourne CBD
Fast food retailer Pie Face has emerged from voluntary administration with a new chairman and a smaller store footprint but a prospective buyer has labelled the administration process as “disgraceful”.
While few Australian companies will survive a voluntary administration, Pie Face creditors voted on December 30 to support a Deed of Company Arrangement (DOCA) that would allow the company to avoid liquidation.
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Fairfax reports Pie Face director and former federal Liberal MP Andrew Thomson has been appointed as chairman of the company and co-founder Wayne Homschek will remain on the Pie Face board. According to another Fairfax article, Kevin Waite has been retained as chief executive.
Under the DOCA, Pie Face has agreed to pay $2 million to investment fund TCA Global Fund Management, which has bought out major secured creditor Macquarie, which previously appointed Ferrier Hodgson as receivers of a number of Pie Face assets.
According to Fairfax, TCA Global Fund Management will seek to raise $10 million for Pie Face in the US.
While the DOCA allows for payments to unsecured creditors, they are expected to receive just 14-19 cents in the dollar and payments will commence in around two years. Pie Face also owes money to the Australian Tax Office and employees, with debts of more than $20 million expected to be paid over time.
Pie Face, which once had as many as 78 stores around the country, spent just over a month in voluntary administration, following the appointment of Jirsch Sutherland as administrators in late November.
Twenty Pie Face outlets were closed within days of the appointment, affecting 130 part-time employees, while speculation surfaced as to whom, if anyone, would be interested in buying the chain.
Franchised Food Company chief executive Stan Gordon put his hand up to take on the business but told SmartCompany his calls to administrators went unanswered.
“They say they are still looking for buyers but they can’t be looking that hard,” Gordon said in early December.
Speaking to SmartCompany this morning, Gordon says the administration process was “not all it seems”, describing the information memorandum he received about the business as “atrocious”.
“There was no information about the Australian operations, it was all in US accounting, US dollars,” Gordon says. “Of the 80 pages, only one page gave details about the franchises.”
Gordon says he was contacted by several Pie Face franchisees once his bid for the company was made public and now believes there should be an inquiry into how the administration was managed.
“Questions must be raised about the process and the administrator,” he says.
Jason Gehrke, director of the Franchise Advisory Centre, told SmartCompany it is now “business as usual” for Pie Face franchisees, “although I’m sure many will be surprised to see the Deed of Company Arrangement means that the same directors who were running the business when it became insolvent have been returned to control of the business”.
“It will cause a lot of franchisees to question their future in the business and may well be a barrier to recruiting new franchisees,” Gehrke says.
Gehrke says the voluntary administration process will undoubtedly have taken a toll on franchisees and although the company has emerged from administration, “only time will tell if [the Deed of Company Arrangement] is in the best long-term interests of franchisees, creditors and other stakeholders”.
SmartCompany attempted to contact Pie Face and Jirsch Sutherland but did not receive a response prior to publication.