Fast food franchise Souvlaki Hut has been placed into voluntary administration, despite being named as one of the fastest growing franchises in Australia just 10 months ago.
Souvlaki Hut ranked third on the 2010 BRW Fast Franchise list, with revenue of $17.36 million and growth of 217.89%.
But Laurie Fitzgerald from BDO Australia, who has been appointed as the company’s administrator, says poor retail sales, threats of litigation and disgruntled franchisees led to its demise.
“Over the past two months, the directors became aware of some financial pressures due to potential claims against them, and the general tightening of economic conditions in the retail market, which has made business more difficult,” Fitzgerald says.
“There have also been some disgruntled franchises who probably haven’t been getting the attention they should have been getting.”
“But by and large, the franchisees are still with us, keen to do business, and I’m going to be in daily contact with them.”
According to Fitzgerald, the company has already found a buyer, with the hope of finalising an agreement within the next two to three weeks.
But there are other interest parties on the sidelines, with Franchised Food Company chief executive Stan Gordon saying the company is a good fit alongside its existing holdings and that it can deliver value for Souvlaki Hut franchisees.
“We will contact the administrators… and we will make our intentions known to them,” Gordon says.
“We know the business reasonably well – we would very much like to look at seeing what we can do with it, and we think we can be beneficial to the franchisees as a group.”
“Although the stores are a slightly different format, we think it’s a good opportunity for us. We’ve been talking to some of the franchisees for awhile as part of our own business.”
Gordon says the company has already installed some of its franchises alongside Souvlaki Hut locations in Canberra, and it would work well to have multiple franchises in the same locations.
Fitzgerald says his primary concern at present is keeping the business afloat.
“That is my aim right now, to keep the business afloat and keep everything as stable as it can be. And then hopefully we can get it operating with a bigger, better balance sheet and keep serving up some great food,” he says.