Job losses as Domino’s closes 55 outlets
Taste Holdings, which is 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.
A deal could not be concluded on terms acceptable to the parties during talks with several parties, and Domino’s Pizza International is not providing additional financial support, the group said on Monday.
Due to the voluntary liquidation, the group had written off intercompany loans to the value of R450m.
Taste said in November 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, including the amount it had raised via a rights 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 said.
“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.
Taste Holdings CEO Duncan Crosson said the group would meet with franchisees on Monday,
Taste intends becoming a luxury retail group.
“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 group said.
“The banking facilities of the luxury division are unaffected by these developments,” the statement read.
In morning trade on Monday, Taste's share price was unchanged at 3c, giving it a market capitalisation of R67m. The group’s share price has fallen 93.43% over the past two years.
Small Talk Daily’s Anthony Clark said the liquidation was “an ignominious end to an ego-driven expansion”. The company had “doubled down” on its fast-food venture in 2015, and ultimately cost shareholders R1bn in equity value, he said.
“They simply didn’t have the balance sheet or expertise to roll out two international chains simultaneously,” said Clark, referring to both Starbucks and Domino’s.
The company also overspent capital in some areas, such as Starbucks outlets that were too large, he said.
It was unsurprising that no buyer was found for Domino's, given the intense competition in the pizza market, Clark said.
Update: March 16 2020
This article has been updated with share price information and additional comment