SOUTH AFRICA – South Africa’s Taste Holdings, shifting its focus from fast foods to luxury goods, is liquidating the subsidiary that holds the licence for Domino’s SA after failing to find a buyer for the pizza chain.
Taste’s move to voluntarily liquidate the business comes after South Africa entered its second recession in two years in the final quarter of last year.
According to the group, the deal could not be concluded on terms acceptable to all parties and that Domino’s Pizza International is not providing additional financial support to the company.
Due to the voluntary liquidation, the group had written off intercompany loans to the value of R450m (US$26.9m).
Following the liquidation, Taste Food Franchising Proprietary, Taste Commissary Proprietary and Taste Food Trading 1 Proprietary Ltd, will have to fully impair the remaining intercompany loans, with the units valued at about 450 million rand (US$26.9m).
In November, Taste revealed that it was unable to expand its network of chains sufficiently to reach its profit targets and intends to sell its fast-foods businesses.
It has since sold its Starbucks licence as well as Maxi’s and The Fish & Chips Co.
Management had estimated that it required more than R700m (US$41.9m), including the amount it had raised via a right offer, to achieve a positive cash flow, and had to expand the Starbucks network to 150-200 outlets and Domino’s to 220-280.
The closure of Domino’s affects 770 employees, and 55 corporate stores have been closed immediately, Taste said.
Franchisees for the 16 franchised outlets will continue trading, with management providing advice and assistance where possible.
“Taste has received no communication as to the date of cancellation of the franchising licence. The group retains the regional franchising licence until further notice,” the statement read.
“The luxury division is not impacted by these liquidations and will continue with its strategy as a focused luxury retail business consisting of NWJ, Arthur Kaplan and World’s Finest Watches. The banking facilities of the luxury division are unaffected by these developments.”
Taste Holdings CEO Duncan Crosson said the group would meet with the franchisees soon to formulate a way forward.