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Domino’s fall for Taste

Taste Holdings’s 55 Domino’s Pizza corporate stores in SA will close, 770 jobs cut and R450m in shareholder loans will be written off.
Taste Holdings is liquidating its food business in SA, which includes some 55 Domino’s Pizza stores. Photographer: Jason Alden/Bloomberg

Fast food and jewellery group Taste Holdings has placed its beleaguered food business into voluntary liquidation, which will see some 55 Domino’s Pizza stores in SA close its doors and around 770 employees out of work.

The JSE-listed group, which once ran SA’s fastest growing pizza chain under the home-grown Scooters Pizza brand, confirmed the liquidation of its food business in a Sens statement on Monday morning.

The announcement could not have come on a worse day as the local market also had to digest news around the economic fallout from the surge in coronavirus cases in SA and President Cyril Ramaphosa’s announcement of “state of disaster” measures to curb the pandemic.

Read: Taste loses its appetite, will exit Starbucks and Domino’s

Taste said in a statement that the voluntary liquidation of its food business will see it writing off R450 million in shareholder loans, following an inability to find a buyer for its troubled Domino’s Pizza chain in SA.

“The move affects 770 employees and the 55 Taste Holdings corporate stores have closed effective immediately. 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,” it noted.

Duncan Crosson, CEO of Taste Holdings said in the statement that the group’s management will meet franchisees today regarding the liquidation.

He pointed out that the liquidation of the group’s food business was not expected to affect Taste’s remaining luxury division, which includes the retail brands NWJ, Arthur Kaplan and World’s Finest Watches.

Read: Taste Holdings loses second CEO this year as focus shifts to luxury

The group said that its decision to liquidate the food division comes despite its “extensive international efforts” to sell its licensing agreement for the global pizza brand in SA. The affected companies within its food business include Taste Food Franchising, Taste Commissary and Taste Food Trading.

“The major creditors include Taste Holdings who had provided the funding, employees, Domino’s Pizza, landlords and the supply chain creditors,” it noted.

“After Taste announced its revised strategy and decision to exit the food business in November last year, Domino’s Pizza loaned the group operating capital while management and Domino’s Pizza LLC sought a prospective buyer for the franchising licence. However, discussions with three master franchise partners, as well as various global suitors, finally collapsed last week, triggering the voluntary liquidation decision,” explained Crosson.

“Domino’s Pizza was extensively involved in finding a buyer for our licence and approached other franchisees in their global network as potential suitors,” he added.

Taste stressed that its luxury division and its banking facilities “remain unaffected by the liquidations”. It said that it will continue focusing on its luxury brands.

“Last February Taste had indicated its long-term objective for Starbucks and Domino’s Pizza businesses was to achieve break-even across both international brands within 36-40 months after commencing its expansion plans and to attain positive cash flow after capital expenditure within seven to eight years,” the group noted in its statement on Monday.

“Management estimated it required more than R700 million 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. [However] in November Taste announced a revised strategy to exit the food business as the capital investment required could not be secured in its current business structure and existing market conditions. The group’s food brands included Starbucks, Domino’s, Maxi’s and The Fish & Chip Co,” it added.

Taste sold its 13 stores in the global coffee brand and the franchisor licensing agreements for Maxi’s and The Fish & Chip Co in December 2019.

The group said that it is currently applying for liquidation and a liquidator to take over the food business. “Stores have been closed in an orderly fashion and Taste will communicate further information as it becomes available.”

Taste’s share price has lost more than 99% of its value over the last five years and closed at just 2 cents a share on Monday. The stock lost a third of its value following the food division liquidation announcement, giving the company a market cap of just over R66 million.

Taste Holdings share price

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too much competition,high rent,corona virus,loadshedding etc

….not sure about CoronaV …..but everything else plus staff costs will constrict growth

Value destruction pure and simple. I know some people that lost a lot of money. But in the same breath, someone got rich. Best bet is to delist.

Debt actually.

Too much debt too fast. They were done for long before corona.

It’s funny – the SA companies that go to the USA loose their shirt as they do not understand the US and the US companies have the same happen here. It sympbiotic.

Poor due diligence on the part of the buy and his advisers. One can not rule out corruption and collusion. Business is dirty.

Once again just because something is popular in the United States doesn’t mean that it will work here e.g. DunkinDonats, Star Bucks, Krispy Cream, Burger King etc.

Biggest mistake was neglecting Scooters Pizza, the business was scaling nicely but Carlo and his advisers decided to chase a brand name (Starbucks, Domininos) and here we are today. Talk about value destruction.

Hey I loved Scooters Pizza. One day you wake up and it’s gone!

Maybe they did not understand their customer. They were out of touch with reality. They tried to sell pizza to people who can hardly afford pap. Easy access to unsecured loans created a boom in consumer spending that ended with a bang. The middle class who is supposed to support the fast-food chains is under severe financial stress due to a combination of ANC policies. The unaffordable cost of unavailable electricity, the unsustainable minimum wage, the myriad of taxes and the shrinking GDP change pizza eaters into pap eaters.

This is the type of equality that is brought about by socialist regimes. Everybody eats pap.

Enters Debonairs and Romans Pizza.

Hey Sensei…better to remain silent and be thought a fool than to speak and remove all doubt.

Are those two making any money thu?? Go have a look……..

” we going to focus on our luxury business side”…….. During the start of a recession.

-watch this, hold my beer.

Scooters Pizza worked and was popular.
Dominos = total disaster.

Mso kids what lesson have we learned from today’s episode of Managment Incompetence?
Answer: if it aint broke, dont fix it.

End of comments.

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