Angus & Robertson franchisees, Borders employees face nervous wait as administrator prepares to shut stores

The fallout from the collapse of RedGroup Retail, owner of the Borders and Angus & Robertson book chains, is continuing, with administrator Steve Sherman confirming that underperforming stores would have to close in the coming weeks.

At the first meeting of creditors held yesterday in Melbourne, a report from the administrator showed RedGroup owes $118 million to its only secured creditor, private equity group Pacific Equity Partners, which was also the owner of the business.

Unsecured creditors are owed $44 million, while employees are owed $7.8 million in entitlements.

Sherman has kept all 26 Borders stores and 167 Angus & Robertson stores open since RedGroup collapsed in late February, but told creditors it was inevitable that stores would have to be closed.

“When we do make that decision it’s not because we want to make it, it’s because we have to make it,” he said.

Exactly how many stores could go is unclear, although Sherman said it was likely to be less than half.

The breakdown between Angus & Robertson stores and Borders store to shut is also unknown, which means all 3,063 of RedGroup’s staff face a nervous wait to hear their fate.

Another group waiting for more information is Angus & Robertson’s 52 franchisees. While it is believed the administrator does not have the power to close down franchised stores, the franchisees SmartCompany spoke to are anxious to know whether they will actually have a chain to be part of in a few months.

One Victorian franchisee said he had had little contact from RedGroup about the franchisees plight, other than information about the controversial gift voucher redemption program that has seen customers forced to spend the same amount of cash as their voucher is worth if they want to be able to redeem a gift card.

However, franchisees appear to be in a reasonable position, as many deal directly with suppliers.

This should give the franchisees options. If RedGroup’s collapse is found to constitute a breach of the franchise agreement, or if the franchises can extricate themselves from the agreements, they could look to continuing trading as independent book stores, join a buying group or join another book franchise chain, such as Dymocks.

A committee of franchisees has been established, led by franchisees from the Victoria Point store in Queensland.

They declined to comment this morning.

The other group of franchisees waiting for news on which Borders stores might close are from coffee chain Gloria Jeans. There are 23 Gloria Jeans franchises located inside Borders stores and many face instant closure if the store they are in shuts down.

Gloria Jeans said in a statement it was too early to determine how the franchisees might be affected.

“Until further information becomes available from Ferrier Hodgson, the administrators for Borders Australia Pty Limited, we cannot speculate on the future of the 23 Gloria Jean’s Coffee Houses located in Borders’ stores. However, we are in close contact with our franchise partners and team members and are keeping them as fully informed as possible.”

A date for the second meeting of RedGroup creditors is yet to be set.