Health-focused fast-food chain Sumo Salad is still searching for a buyer after the business went into voluntary administration late last month.
The Sumo Group, which boasts a network of 85 franchise stores, called in Ferrier Hodgson partners Morgan Kelly and Peter Gothard as administrators on July 18.
The administration process has an approximate timeline of 35 to 60 days, as Ferrier Hodgson scrambles to explore “rescue options” such as the sale of the business or reaching a compromise with creditors.
Because the chain’s individual stores are operated by franchisees the day-to-day operations of Sumo Salad’s have not yet been impacted.
Stores owned by Sumo Salad Holdings WA will also not be affected by the restructuring process.
In a letter to Sumo Salad employees, administrator Morgan Kelly said it would be “business as usual”.
“The Administrators have been appointed because the Group is having difficulties in meeting its financial commitments,” reads the letter.
“The Administrator’s role is to take full control of the business and investigate options to resolve the financial position quickly.
“The Voluntary Administration process is designed to provide companies with breathing space from creditors and permit time to explore rescue options.”
Kelly said Sumo Salad was “a strong brand” with “a viable business model”, but had been struggling with “legacy debts”.
“With the support of key stakeholders, we are confident that the business can be restructured successfully,” said Kelly.
“The administration process gives the Sumo Salad Group some breathing space, helping to stabilise and restructure the business.”
During Sumo Salad’s administration process employees who had not already booked annual leave will be forced to take unpaid leave.
“Leave days taken by employees of the Group during the period of the voluntary administration will need to be taken as leave without pay, notwithstanding that annual leave may have been approved prior to the appointment of the Voluntary Administrators,” reads Kelly’s letter to employees.
Brian Walker, CEO of the Retail Doctor Group, told 9Finance that expensive overheads meant Sumo Salad will be forced to overhaul its current offering.
“Sumo Salad has actually been quite pioneering in what they’ve done, but they are no longer the only offering in their category in food courts,” said Walker.
“To compete they will have to respond to the changing nature of consumers, offering broader menus, different types of foods and more product depth.
“You’ve only got to look towards businesses like UberEats to see that consumer growth is now centred around being agile and adaptable, and offering convenience.”
After announcing the move to call in the administrators on July 19, Sumo Group CEO Luke Bayliss said the restructuring was part of a long-term strategy to move the brand into grocery and convenience markets.
“The business has some legacy issues that has made ongoing trading challenging, despite the strength of the brand and the business model,” said Bayliss.
“We now need to restructure the balance sheet to address these issues and give the business the strongest possible footing moving forward.
“We will look to propose a Deed Of Company Arrangement (DOCA) to ensure we can provide our creditors with the best possible outcome and plan to continue positive relations with suppliers and partners into the future.
“Since Sumo launched in 2003, we have served 50 million salads and our intention is to serve a lot more by ensuring all of our stores continue to trade normally through this restructure process.”
First published in 9Finance on 2 August 2018.