- Shoprite off ers to buy Pick n Pay franchises at P350m
- SA Franchisor loses case with costs
The High Court in Lobatse has blocked South African based Pick n Pay Retailers (Pty) Ltd in its quest to be permitted to enter Pick n Pay franchises in Botswana, take possession of the stores’ assets and conduct and control the business of the stores jointly with the franchisees, pending the implementation of sale of business transaction.
Pick n Pay franchises in Botswana, sought to sell their businesses to Pick n Pay Retailers (Pty) Ltd for P350 million, but the franchisor only offered half of that, which led to a legal tussle between the two parties. Shoprite International has also shown interest in buying Pick n Pay Botswana stores for R443 million a move which is said to have upset Pick n Pay SA franchisors.
Pick n Pay Retailers (Pty) Ltd, is a South African based business, which operates Pick n Pay retail supermarkets, but also owns the franchise rights of the retailer regionally.
The South African based retailer has issued franchise rights to 8 companies in Botswana which then operate Pick n Pay stores across the country. These are NTS Holdings (Pty) Ltd, Ellena Stores (Pty)Ltd, King Shoppers (Pty)Ltd, Save n Shop (Pty)Ltd, Hurlisterns (Pty)Ltd, Horn of Africa (Pty)Ltd, Nexgen Solutions (Pty)Ltd and Foods Club Pty (Ltd). The franchises are wholly owned by Bruce Milne and Arthur Black
Court documents reveal that Pick n Pay Retailers (pty) Ltd said the 8 franchisees as a collective, failed to make payments to the franchisor, monies exceeding P46 million, as per the franchise agreements, as and when the debt fell due.
According to the franchisor, payment plans were submitted to the franchisees but those were never honoured for the past few months. Further, Pick n Pay Retailers (pty) Ltd said it has been in discussions with the 8 franchisees over the outstanding debt and the future of the stores.
In those discussions, the franchisees are said to have admitted that they owe the franchisor a huge sum of money. The response from the franchisees however, have been the franchisor should provide more favourable terms in the franchise agreement such as higher loyalty resales or that the Franchisor should buy the businesses failing which they would be sold to a third party.Botswana Franchisees, through their attorneys forwarded to the franchisor an offer to sell the business on the terms of an offer sent to them by Retail Holdings Botswana (Pty) Ltd (Shoprite Checkers) for an amount of P352 million, an equivalent to R443 million.
On the 28th May 2018, the Franchisor then exercised its rights in terms of the franchise agreements and cancelled the franchise agreements with the 8 Pick n Pay franchisees in Botswana, while at the same time exercising its irrevocable options to purchase the business of the franchisees. In the notice, the franchisor requested among other things that each applicable franchisee manage and control each of the stores jointly, pending provisions of the regulatory environment. The franchisor in South Africa also wanted the franchisees to agree upon joint control of the stores.
Botswana Franchisees rejected the requests, which led to the franchisor making an application for relief by the High Court in Lobatse.
However, Justice Abednego Tafa ruled in the favour of the local franchisees, that there is no provision in the franchise agreements or joint control of the franchisees in the event franchise agreement is cancelled and purchase of businesses.
In Justice Tafa’s judgement, Pick n Pay SA cannot modify the agreement so as to suit its desired cause of action. He said the franchisor was fully aware that the effective date was the 28th of May, and that the franchisor was aware of the statutory requirements to be complied with, should its exercise its rights in terms of the agreement.