Pick n Pay to liquidate major franchisee’s business

Pick n Pay has been given the go-ahead to attach the property of the Baladakis group, after the franchisee lost its battle to stop liquidation for a debt of R224-million. The retailer says it now expects the liquidation application to be heard in the Johannesburg High Court by about 12 March.

John Baladakis, who heads the AJP Group, has been a Pick n Pay franchisee for more than 30 years, owning 10 stores and nine liquor stores. The business was established by his father and uncle. 

Baladakis employs 450 staff, uses about 250 contractors and 80 subcontractors, and has an annual turnover in excess of R1.5-billion. 

On 23 February, Baladakis expressed concern for his staff, saying their livelihoods were at risk. “We’re very, very worried about what happens to those employees because if PnP manages to take over our stores, they have their own structure so we probably have between 80 and 100 people who are going to lose their jobs. We’re extremely concerned.”

On Wednesday night, Pick n Pay CEO Sean Summers said this was the first time the group had to liquidate a franchisee and that they had done everything possible, over a protracted period, to avoid having to take such “drastic action” against this franchise group. 

“On a personal level, it is deeply disappointing as I have known the family for some 30 years and have not taken this decision without due consideration.

“But the truth of the matter is that the serious financial situation that the Baladakis [group] finds itself in is a reality. We have many other franchisee groups – some even larger — and individual franchisees who are running profitable and sustainable businesses.”

Summers’s statement said that in line with Pick n Pay’s contractual obligations, it had continued to supply the group with stock daily, but the AJP Group had ceased all payments in the past week. Meanwhile, Pick n Pay’s liability was growing. “We have a duty to act in the best interests of all parties, including all our franchisees and the Pick n Pay Group, in order to maintain continuity and respect for the agreements we have in place.” 

Read more in Daily Maverick: Judge rules for embattled Pick n Pay after franchisee says group crippled its business

He said it was the first time in the group’s history that Pick n Pay had applied to liquidate a franchise business, but it had no other option because the AJP Group had made it clear that it would continue to frustrate the process. “We will always follow due legal process and it was never our intention to have this play out in the public domain. The facts will become apparent with time – we have nothing to hide.”

Baladakis had argued that Pick n Pay’s redrafting of its discounting model (introduced in 2018 during former CEO Richard Brasher’s term) crippled franchisees’ costings and profits, causing the AJP Group to rack up debt.

While Pick n Pay’s model changed again last year, the group and other franchisees have been saddled with a historic debt, which PnP is now calling in. 

Baladakis was not available for comment and is said to be considering his options. DM