O’Briens to close nine Irish stores Sunday, July 12, 2009 By Ian Kehoe O’Brien’s Irish Sandwich Bars plans to shut down nine loss making stores, and repudiate leases on another ten vacant premises as part of a rescue plan aimed at saving it from liquidation.
High Court documents, obtained by The Sunday Business Post, also state that the company plans to radically alter the nature of its lease agreements with its franchisees to limit the financial exposure of the master franchise.
O’Brien’s, headed by Brody Sweeney, went into examinership last week with liabilities of €6.4 million.
The examiner, Grant Thornton partner Paul McCann, now has 100 days to save the business.
In addition to the ten vacant and nine loss-making stores, 33 of the remaining 54 O’Brien’s outlets in Ireland owe rents, according to an independent accountant’s report prepared by KPMG and submitted to the High Court last week.
Under the current system, O’Brien’s retains the head lease on all outlets and sub-leases the premises to individual franchisees. This leaves the franchise liable if a franchisee fails to pay rent.
The company’s examiner will now attempt to restructure this arrangement and assign all the leases to the franchisees directly. Negotiations will begin this week in relation to the leases.
McCann is also seeking to source fresh investment, which would be used to offer a dividend to creditors, who will be asked to partially write down their debts.
The Dublin company has also encountered a similar difficulty with its British operation , which went into administration three weeks ago, with the Irish company guaranteeing a total of 46 property leases of its British subsidiary.
To date, two guarantees, totalling »108,000, have been called upon, and the Dublin business is not able to meet the payment.
The company has also suffered from a decline in business.
‘‘Customer numbers reported by franchisees have dropped significantly, and franchisee turnover has dropped by a further 18 per cent in the first six months of 2009,” according to the report.
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