Finance, Legal, Management

A&R franchisees in limbo ahead of REDgroup sale

Michelle Hammond /

The fate of 25 breakaway Angus & Robertson franchisees is uncertain ahead of an expected sale of its collapsed parent company REDgroup Retail.

 

Leveraged buyout firm Pacific Equity Partners has confirmed its board representatives, including REDgroup Retail chairman Steven Cain, resigned from the business on March 31 after the company entered into voluntary administration.

 

PEP said the resignations were made in anticipation of either a proposed deed of company arrangement or a sale of the company.

 

A company spokesperson said this would “create a greater alignment between the board and a restructured business potentially emerging from administration”.

 

Gary Dunne, who joined REDgroup in January as managing director of Angus & Robertson, has been appointed acting chief executive of REDgroup’s Australian operations, including the A&R and Borders bookstore chains.

 

Administrators from Ferrier Hodgson are currently assessing expressions of interest from potential buyers of the business.

 

Meanwhile, Ferrier Hodgson is pursuing action in the NSW Supreme Court against a group of 25 A&R franchisees, who have attempted to terminate their franchise agreements.

 

The administrator is pursuing the franchisees, which are not in administration and have moved to reposition themselves as independent bookstores, over fees they had agreed to pay in return for use of the Angus & Robertson brand.

 

Franchising experts say the breakaway franchisees are facing an uphill battle with Ferrier Hodgson.

 

Jason Gehrke, director of the Franchise Advisory Centre, says a company collapse generally doesn’t relieve franchisees of their obligations, and the onus will be on the breakaway franchisees to prove a breach of their franchise agreement has occurred.

 

Frank Zumbo, associate professor at the University of New South Wales, says the legal battle could prompt further legislative reforms within the franchising industry.

 

Zumbo helped develop the Franchising Code of Conduct in the 1990s and has also been involved in drafting private members’ bills in WA and South Australia, proposing reforms to franchising laws at state level.

 

He says franchisees in an administration are left in a “legal limbo” because administrators are not required to keep franchisees informed about the progress of the administration.

 

Zumbo says while the administrator is required to act quickly, it is often difficult to find a buyer, arguing this could be particularly challenging in the A&R case because of the threat of online retail.

 

Marie Fitzpatrick, spokesperson for the A&R breakaway group, declined to comment on the case because it is still before the court.

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