High Court Rules in Favor of Pick n Pay Against Franchisee, Allowing Property Seizure Amid Debt Dispute

The recent ruling by the Gauteng Division of the High Court in Johannesburg has sent ripples through the South African retail sector, with long-standing supermarket chain, Pick n Pay, being granted the ability to attach the properties of one of its major franchisee groups, the AJP Group, in a bid to recover a disputed debt amounting to R300-million.

On a fateful Friday, the court handed down a judgment that could potentially lead to the closing of the AJP Group's family business, which has been in operation for over 30 years. This acrimonious outcome marks the end of what once was a mutually beneficial relationship between franchisor and franchisee. The conflict emerged following alterations to Pick n Pay's discount payment terms, changes that AJP Group's CEO, John Baladakis, claims severely undermined the business's profitability and initiated an accrual of crippling debt.

Under the stewardship of former CEO Richard Brasher back in 2018, Pick n Pay restructured its discounting model, a move that Baladakis insists had a detrimental effect on the cost structures and earnings of franchisees like himself. The repercussions have been long-lasting as the group continued to struggle with legacy debt, even after Pick n Pay revisited the discount model the following year.

The extent of the fallout between Pick n Pay and its franchisees was laid bare in court, as Baladakis described the fractious situation which saw the franchisees cornered into accepting the new terms without substantial consultation. Fears mounted among the franchisees, as they perceived the imminent risk of their stores being taken over and being charged additional management fees for their continued operation.

The case evolved swiftly from negotiations to legal confrontation, with Baladakis and the AJP Group finding little reprieve. Despite being a successful Pick n Pay franchisee for three decades, operating ten stores and nine liquor stores with an impressive annual turnover, the new discounting model implemented by the retail giant put the group on a path to mounting losses.

The legal struggle has prompted an urgent appeal from Baladakis, projected to be heard on the 28th of February. In his reaction to the court's decision, Baladakis expressed deep disappointment, emphasizing the foundational role his family business played in Pick n Pay's success over the years. Furthermore, he underlined his commitment to contesting the ruling, deeming the claimed debt as an offspring of policies enacted by Pick n Pay itself.

The immediate aftermath of the judgment was marked by a swift move from Pick n Pay to attach some of the AJP Group's stores, a decision facing fierce resistance from Baladakis. The fate of approximately 650 staff, 250 subcontractors, and 80 support staff hangs in the balance, with the potential of significant job losses should Pick n Pay manage to acquire control over the AJP Group's operations.

Pick n Pay spokesperson Tamra Veley conveyed the store's standpoint on the matter, describing it as regrettable but stressing the necessity to safeguard the company's interests. She highlighted the complexity of the accusations made by the franchisee group and affirmed Pick n Pay's commitment to address the issues within the legal framework.

With the retail landscape in South Africa being fiercely competitive and Pick n Pay acknowledging a range of operational missteps, symbolized by the return of Sean Summers as CEO, the legal confrontation with the AJP Group represents a notable predicament. Amidst attempts to recalibrate its business to rekindle growth and re-establish connections with customers and suppliers, Pick n Pay's strategic and financial challenges are now compounded by a significant legal contest.