CarLovers franchisees face administration – again

The CarLovers Carwash franchise has collapsed into liquidation and receivership for the second time since 2003, folding due to debts left over from its previous failure.

Berjaya Group, which has a 95% share in CarLovers, has called in PKF Chartered Accountants’ Ken Whittingham and Atle Crowe-Maxwell to act as receiver and manager.

Berjaya appointed PKF to protect its secure loans after a lawyer sued to recover funds resulting from the last administration.

It is understood CarLovers’ current earnings have also been affected by the severe weather in Queensland and Victoria.

Berjaya Group, which is based in Malaysia, also owns or has stakes in the businesses operating bookstore chain Borders and doughnut chain Krispy Kreme, both of which have entered into administration.

Whittingham says the plan is for CarLovers to continue trading, and to sell the business as a going concern as quickly as possible.

“I’m pretty confident there is interest out there from buyers, It’s a matter of going to market,” Whittingham says.

CarLovers currently runs 25 locations around Queensland, NSW, Victoria and South Australia.

It is unknown how the CarLovers franchisees will be affected by the latest collapse, but the company has already faced its fair share of hardship.

In 2003, CarLovers faced a debt of $11 million after now disbarred administrator Stuart Ariff brought the franchise to its knees.

Ariff started Stuart Ariff Insolvency Administrators in 2003, quickly becoming the administrator of 200 companies, including CarLovers.

It’s believed CarLovers failed to provide its franchisees with services and products as contracted, prompting franchisees to cease paying their fees.

CarLovers placed itself in administration in mid-2003 after seven years of conflict, with Stuart Ariff Insolvency Administrators demanding franchisees pay their unpaid fees.

The company’s extended administration, which began with a $4.5 million shortfall, was the trigger for a number of investigations into Ariff.

Ariff was eventually charged with 13 offences of defrauding a number of companies, totalling $1.7 million, and six counts of falsifying accounts lodged with the Australian Securities and Investments Commission.

Some of his worst excesses were levelled at CarLovers; Berjaya Group claims Ariff ripped out $13 million in disbursements and fees over four years, almost three times the company’s original deficiency.

Berjaya Group regained control of the business in 2007 and emerged from administration in the same year.

Ariff was barred for life in 2009 by ASIC from acting as an insolvency practitioner and asked to pay clients $4.9 million in compensation for gross misconduct, including charging for hairdressing, taking his family on a $200,000 holiday, and using his clients’ money to pay his legal bills.

At the time of Ariff’s conviction, a CarLovers spokesman said it was a shame ASIC didn’t act when the company made its first complaint in 2005.

“The damage that Mr Ariff and his group caused would have been much less. Now it is nothing more than a hollow victory. Too much damage has already been done. Too many people and livelihoods have been hurt,” the spokesperson said.