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Borders closures impact Gloria Jeans franchisees

By Michelle Hammond
Thursday, 07 April 2011

The future of 14 Gloria Jeans franchisees who operate within Borders bookstores is now in jeopardy, after it was announced Borders’ administrator will close a further 16 stores in a desperate bid to keep the chain’s parent company afloat.

 

Borders’ operator, REDgroup Retail, which also operates the Angus & Robertson bookstore chain, was placed in the hands of administrator Ferrier Hodgson in February.

 

Earlier this week, Ferrier Hodgson announced 12 Angus & Robertson stores will face store closures, adding to the 37 stores already closed.

 

Unlike Angus & Robertson, Borders stores are company-owned, with just one store shut in the initial round of closures, leaving 25 stores still intact.

 

However, the latest round of closures – which will take place over the next eight weeks – will leave just nine Borders stores in operation throughout Australia, putting 512 full-time and casual staff out of work.

 

However, Borders staff are not the only ones who will suffer as a result of REDgroup Retail’s collapse; 14 Gloria Jeans franchisees – operating within Borders stores – will be seriously affected.

 

Gloria Jeans says it is “looking for new locations, along with preparing financial assistance packages for each partner to assist in relocation.”

 

“Although we have taken extensive measures to ensure continuous service to our valued guests, unfortunately the closure of these stores will force our coffee houses at these locations to cease trading,” it says.

 

“Gloria Jean’s Coffees has engaged specialist legal advice to review the position of our company and that of the Franchise Partners who own coffee houses within the affected stores.”

 

Gloria Jeans franchisees located in Borders stores are already being hurt by the downfall of REDgroup Retail, with the negative publicity affecting sales.

 

One franchisee operating within Borders says they have seen their sales fall between 20% and 35% since Ferrier Hodgson’s appointment.

 

Meanwhile, 25 Angus & Robertson franchisees announced plans to go independent earlier this week, essentially forming a breakaway group from REDgroup Retail.

 

This will leave Ferrier Hodgson with a substantially smaller business to revive or sell. The administrator says it will make an announcement on the independent stores tomorrow.

 

The breakaway group claims REDgroup Retail breached their franchise agreements by failing to honour gift cards issued by the chain, thereby damaging the individual stores’ reputations.

 

The group also argues they were no longer receiving the benefits of being a franchisee.

 

Ferrier Hodgson has fought back, saying it intends to “hold each of the franchisees fully accountable under the terms of the franchise agreements.”

 

Ferrier Hodgson’s Steve Sherman says the “restructures” are moving the business towards a more sustainable business model.

 

“It is my hope that the resulting business is able to stand on its own two feet as well as being more attractive to any potential buyer,” he says.

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