Pick n Pay Heads to Court to Liquidate Debt-Laden Franchisee

In a precedent-setting move within South Africa's retail sector, supermarket chain Pick n Pay has filed for the liquidation of the franchise businesses owned by the Baladakis group, which owes the retailer a staggering R224 million. The motion for liquidation was officially set in motion on the 28th of February 2024, signifying an assertive legal step by Pick n Pay following a victory in the Johannesburg High Court.

Pick n Pay and the Baladakis group have a long-standing history, with franchise agreements that include the operation of 10 supermarkets and 9 liquor stores. However, a controversial discounting model implemented by Pick n Pay in 2018 seems to have been a catalyst for discord. John Baladakis has attributed the accumulated debt to the impact of the model which, he claimed, compromised profit margins in favor of bulk sales, leading his businesses to financial jeopardy.

Despite Baladakis’ arguments, which were presented in an appeal for relief, the court found the claims to be substantially lacking in evidence and dismissed the appeal with costs, tipping the scales firmly in favor of the retail giant. Further applications for leave to appeal were rejected, leaving the group with waning options and the liquidation process as the probable outcome.

This step marks a first in the history of Pick n Pay, according to CEO Sean Summers, highlighting both the gravity of the situation and the retailer's commitment to maintaining financial integrity across its franchises. Summers, in an emotive address, revealed the personal toll of the decision, made more profound by his 30-year acquaintance with the Baladakis family.

The CEO emphasized the responsibility of Pick n Pay to all its stakeholders – from other franchisees to the larger group – to make sustainable and profitable decisions. The liquidation process is not solely a last resort for recovery of the substantial debt, but also a protective action for the brand and its network of profitable franchisees.

Summers went on to express regret that the issue had become public but stood firm on the decision, stating the group's dedication to transparency and legal due process. Enforcing the liquidation is, in the eyes of Pick n Pay, an unavoidable end to an exhaustive dispute with the Baladakis group. The liquidation hearing is anticipated to proceed around the 12th of March, with many in the business community closely watching.