Heavily indebted Pick n Pay franchisee has suffered a significant judicial setback in his conflict with the retail giant leading to the retail giant’s decision to liquidate the franchisees’ businesses. Former head of the Franchise Association of SA, John A. Baladakis, has operated nine liquor stores and ten supermarkets at the East Rand as a Pick & Pay franchisee, for thirty years. The stores make approximately R1.5 billion in revenue each year.
Pick n Pay says the group owes it more than R224 million and last week they filed an urgent application in the Johannesburg High Court to gain control of Baladakis’ stores. In his defence, Baladakis claimed that Pick n Pay’s introduction of a bulk discounting model that was placed six years ago, put his franchise group in its current position.
He said that the changes to the discounting model that Pick n Pay introduced to its franchisees in 2018 favoured sales volumes over margins, and caused financial distress escalating debt in his company. Baladakis stated that he did not believe the debt was legitimate, so he decided to challenge it.
Nevertheless, Pick n Pay won the lawsuit; the judge referred to several of Baladakis arguments as “vague,” “frivolous,” and “superficial”. Baladakis then applied for leave to appeal the order, but on Wednesday, a high court judge dismissed the application with costs. Pick n Pay then filed a court application to liquidate Baladakis’s Pick n Pay franchise operations. This is the first time that Pick n Pay has ever applied to liquidate a franchise.
“We’ve done everything possible over a protracted period of time to avoid having to take such drastic action against this franchise group,” stated Pick n Pay CEO Sean Summers. He claims that although the group was still providing daily goods to the franchise outlets, Baladakis had stopped making payments. Summers claims that the Baladakis group made it known that it would keep appealing rulings against it in an effort to disrupt the process. Pick n Pay anticipates that the Johannesburg High Court will be hearing the liquidation application on March 12, 2024.
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