Indebted Pick n Pay franchisee shuts up shops

• Baladakis brothers’ stores racked up losses of R151m

Pick n Pay franchisees John and Peter Baladakis say they have closed some of their stores in Benoni, Edenvale and Kempton Park.

However, the stores are technically under the control of Pick n Pay, which has undertaken legal processes to recover more than R200m owed to it, making it unclear whether the Baladakis brothers are authorised to take such action.

The family has run Pick n Pay stores for 30 years, but their 10 grocery stores and nine adjacent liquor stores racked up losses of more than R151m last year.

The brothers have been in a dispute about historical debt owed to the listed retail group. The Baladakis brothers also stopped paying the retail group for supplies as tension ratcheted up in recent weeks after arbitration failed.

On Friday, the brothers sent a WhatsApp message to members of an East Rand community group informing them that the stores were closed. “Recent developments with Pick n Pay have led to the closure of a number of our stores and liquor stores, which includes Pick n Pay Brentwood Park, Pick n Pay Birchleigh North, Pick n Pay Elgin Mall, Pick n Pay Glen Balad, Pick n Pay Eden Terrace and Pick n Pay Kempton Gate,” the family said in its message.

“We’re immensely grateful for your unwavering support over the years. Though this chapter ends, our commitment to you does not. We are therefore exploring new ways to bring our offerings to you, prioritising our in-store teams and your continued support.”

John Baladakis blamed Pick n Pay previously, saying that its franchise model was broken and franchisees could no longer make a living. He said that by changing its model between 2018 and 2023, the retailer had implicitly admitted that the model was inadequate.

Pick n Pay won the right to take control of the stores in late February with a Johannesburg high court order after the Baladakis brothers amassed the debt of more than R200m and breached contracts.

Pick n Pay had approached the courts in a technical process called perfecting the notarial bond, in which it called in its R47m security of the debt and won control of the stores’ stock, branding and movable property.

RECENT DEVELOPMENTS WITH PICK N PAY HAVE LED TO THE CLOSURE OF A NUMBER OF OUR STORES AND LIQUOR STORES …

THE FAMILY HAS RUN PICK N PAY STORES FOR 30 YEARS, BUT... RACKED UP LOSSES OF MORE THAN R151M LAST YEAR

The public row and exposure of the 19 stores’ losses has investors questioning the financial health of other franchise stores. The matter also raises questions about how the Baladakis debt was allowed to exceed the R47m in Pick n Pay debt security and if it had adequate credit controls.

The Pick n Pay group is unprofitable now. It has debt of R7.5bn, and has breached loan covenants with bankers. It has asked the market for R4bn in a rights issue to recapitalise the group, which is expected to take place around June.

The Baladakis brothers declined to comment when asked about the WhatsApp message.

Pick n Pay confirmed that it had not closed the stores.

“The decision was made by the Baladakis-owned franchise stores,” it said in a statement.