Bargain Booze franchisees’ morale is low as thousands of jobs are under threat

22 March, 2018

Bargain Booze franchisees fear for their livelihood as beleaguered parent company Conviviality desperately tries to raise funds to stop it from going under.

The group, which also owns Wine Rack, Matthew Clark and Bibendum, needs to raise £125 million from investors to shore up its finances following a calamitous week.

It has issued three profit warnings to the City and seen its share price collapse, while chief executive Diana Hunter has fallen on her sword.

Some 4,000 jobs are at risk at Bargain Booze alone, and store owners fear their businesses are in trouble as they contend with a lack of products to sell, with some running out of vodka and soft drinks.

Doug McQueen, who had 20 Bargain Booze stores and sold them at the end of 2017, told DRN: “It is very worrying times. I really feel for the ordinary franchisees, because they have relied so much on the Crewe head office for support and supplies.

“While stock is obviously on stop with certain suppliers, and they are going through major out of stocks, then the poor franchisee is in real danger of his business being severely damaged.

“Once a customer comes into a shop twice and you haven’t got a product they will source it elsewhere.

“The next couple of weeks are critical. Conviviality needs to ensure their franchisees are surviving.”

McQueen is now retired but he serves as an advisor to current franchisees and he is also a shareholder in the business.

“The marketplace Matthew Clark supplies will survive,” he said. “Naturally they will be able to go to a cash and carry or use other merchants to supply them.

“For Bargain Booze franchisees, it’s very difficult. They [may] have to go to a cash and carry, which will be in breach of the franchise agreement, but Conviviality is already in breach of the franchise agreement, so there has to be a balance.

“I don’t want to say anything detrimental about the company. It’s a good company, but it has obviously been run by people that have never grasped what the business is about.”

PwC has been brought in to assess the company’s finances as it battles back from a tumultuous week. Shares in the group were suspended at 101p last week – down from a high of 426p in November 2017 – after two profit warnings within the space of a few days.

The first was blamed on an “arithmetic error” made by a member of its finance team and softening margins, and it later admitted it had not budgeted for a £30 million tax bill due at the end of this month.

It has now issued a third profit warning, saying that if a new share placing is successful it expects annual underlying profits to be between £45.5 million to £46 million.

It has announced it will be “unable to trade as a going concern” unless it can raise £125 million through this share placing to shore up its finances, but it said it has had “constructive discussions” so far with investors.

It needs the money to settle the HMRC bill, repay a revolving credit facility, resolve overdue payments with its creditors and return to normalised trading terms.

McQueen said: “I would hope that if the company is carved up that Bargain Booze gets a sympathetic owner who realises that the success of its franchisees will feed back into the success at the centre. So few have realised that in the last 10 years. It has always felt like the franchisees were being milked.

“If Bargain Booze is not saved, there are 700 shops with an average of six to seven staff, part-time and full-time, so there are around 4,000 jobs at risk in Bargain Booze alone.

“I never had great faith when somebody wanted to turn 700 specialist off-licences into convenience stores. It had been tried so often, in several formats, Thresher had tried it, and it had always failed. What gave people the arrogance to make people think they could do it now? Goodness only knows.”

David Robinson, managing director of the group’s retail division, wrote to franchisees this week to keep them abreast of developments.

He said: “The most important first step is to secure the investor funding. The meetings with institutional investors will take place over the next few days, into the beginning of next week, after which I will be able to give you a further update.

“In the meantime can I thank you for your continued understanding and support – it is really appreciated.”

One current franchisee, who asked not to be named, said morale is low and that they are hoping for some positive news within the next week or two as they bid for survival.




Bookmark this


Site Search

COMMENT

Richard Hemming MW's irrefutable wine truths

Two unbelievable truths: every wine shop should sell top-end Bordeaux, and the wine trade is excellent at innovation. And I can prove one via the other.

Click for more »
Upcoming events

Polls

Is blended Scotch overshadowed by single malt in retailers?

  • Yes
  • No
  • Don't know

Facebook

Twitter