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Melissa’s files for liquidation

Deli group closes doors after 20+ years.
Melissa's most recent store opened in July in Ballito. Picture: Melissa's

It seems that the blue and white Melissa’s banner is about to be folded up.

The company – which originated in Cape Town in 1996 when husband-and-wife duo, Melissa and Mark van Hoogstraten, opened a “tiny” store in Tamboerskloof, Cape Town – on Monday filed for insolvency, just nine months after its coming of age.

Having had a significant multiplier effect, the brand’s 19 stores – employing some 400-plus staff across the country – are now facing the threat of closing down.

Apart from its stores and an e-commerce platform, Melissa’s also supplied its products to around 300 national retailers.

Having confirmed the insolvency with liquidator Craig Hathorn, of Lynn and Hathorn Incorporated, Moneyweb learned that the situation was currently under investigation, with a comprehensive report on the much-loved brand’s downturn to its creditors expected by the end of July.

Noting that Melissa’s was “hopelessly insolvent”, Hathorn added that business rescue would not be the right vehicle for the liquidation. Currently, the liquidators would look at selling “the whole, or parts, of the business” as going concerns to maximise value for its creditors.

Only three of the brand’s shops are owned and operated by the original CC – all Cape Town-based, including the original Melissa’s at 94 Kloof road, where Van Hoogstraten first made everything from rusks to snoek paté herself. The company then started outsourcing the production of its goods to “housewives baking out of their kitchens. As our stores grew, their businesses grew”.

The remaining Melissa’s stores, spread across four provinces, are franchisee-owned. Hathorn would be in charge of the three CC-owned shops’ liquidation.

What went wrong?

Hathorn noted that at this stage it was too early to comment on what caused the delicatessen-meets-décor store chain to spiral into liquidation, while Melissa’s employees also preferred to remain mum.

The company boasted two concepts: the Melissa Food.Home.Gifts stores, where customers could shop for Melissa’s range of food and homeware products, alongside a sophisticated café-style restaurant serving light meals, cakes and artisanal coffee.

The second concept, Mantra Café, first opened its doors in December 2016 in Camps Bay, offering a breakfast, lunch and dinner menu and a full bar.

Melissa’s itself dubbed its business plan as a “winning concept”, with its unique retail and dining experience for “discerning customers with an eye for detail and an appreciation for quality”. Its latest store opening was as recent as February 2018 in Hermanus.

The food retailer still had its gaze set on expanding, with Rosebank, Sandton and Pretoria just some of the places in Gauteng earmarked for future stores. The company also aspired to have a presence in Bloemfontein and Swakopmund in Namibia.

In an earlier interview, Van Hoogstraten was quoted by EWN as saying that the company didn’t expand based on a set plan, but rather on people’s enthusiasm for the brand. 

Moneyweb approached a number of franchisees for comment, with most declining to comment, but one adding emotionally that they employed a lot of people and that it all happened very quickly.

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a once thriving economy that is fuberred up by people that can’t govern….that is what went wrong and more businesses will follow suit.

Yet another CT family business – operation so loved by all – going bust and hurting people.

I wonder what protection, if any, the franchise holders who parted with big money will have – – – concurrent creditor??

I say, do formal inquiry in terms of Co Act and “follow the money”.

In a capitalist economy business will and should fail. There cannot be an investigation – funded by taxpayer money – every time a business fails.

Franchisees should do their due dilligence and research. If you do not have the high risk appetite that is needed to be an entrepreneur you are better served investing your money in a broad balanced portfolio of assets. A franchise is no palce to invest your retirement savings.

The understanding of risk amongst most investors is appaling. Often people will choose money market funds over equity because “shares are risky” – self same people will then invest in a franchise, often gearing themselves up. Essentially they view a portfolio of the best businesses in the country with track records stretchinch back decades as riskier than investing in a new, single franchise that more often than not sells an undifferentiated product.

The inquiry I suggest is NOT funded by taxpayers – it is convened by liquidators or shareholders – ordered by court – and held at the shareholder / creditors cost – – as provided in the Companies Act.

The benefit is if there were shenanigans, quite serious sanctions could be applied and it may even lead to criminal and civil actions

The truth of the matter is that Melissa’s was grossly over priced. To own a franchise of this company is R4.6 Million excluding vat. A 285g of choc chip cookies, containing 5 or 6 cookies costs nearly R80. You cannot depend on 15% of the population to support your business.

I don’t know the financial situation in detail but I do believe that this company could have been saved. I take it that they have done a detailed assessment and liquidation was not the first option. Meaning that there legitimately is no hope for the company, which is quite frankly a shame a shame. I love the brand. It has amazing concepts but clearly poorly run and ideas poorly executed.

There has to be a balance between maintaining quality, price and retaining/gaining new customers.

Product mix was wrong.

You probably will find that the following…in my opinion
– original owners sell franchises, take the upfront deposits and move these into seperate company or Trust
– Franchisees don’t get the support or distribution as promised
– unhappy Franchisees stop paying annual franchise fees
– Franchiser central marketing and distribution start losing money operationally and decide to call it a day.
– the original owners have taken their money and are now running
– franchisees are left with the mess
Sad story but not unusual.
Sorry for all the jobs that are going to be lost and for a brand to loose heart like this.
Very sad for South Africa that there is another failure to add to our other recent failures.

This is a small version of what is happening in the big picture of South Afirica.
A shrinking customer base ( Mellissas appeals to a small number of people who can afford the products and lifestyle it represents) be itfrom those leaving the country, or spending less.
The worry is that the same thing is happening with the tax base – less people having to pay more tax. What happens when there is no more money to pay… SARS cant go into insolvency and can’t justprint more money….unless of course they take control of the Reserve Bank from public ownership!
Watch this space!

In other words get your money offshore and in zar hedges now…

Actually, the latest Melissa’s store was only opened in Feb this year at the new Hermanus Whale Coast Mall – feel sorry for the Franchisee!

How is it that almost all Moneyweb articles end with a comment such as “take you money out now”?? I would bet even articles on tennis would end like that haha

Maybe it’s because most people can see the writing on the wall.

Tasha’s ate Mellissas lunch!
Better value and appealing to the same upper crust – also more interesting menu.
Tough times don’t help either.

And the big pockets of famous brands.

Melissa’s…how to price yourself out of the market

End of comments.

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