Sumo Salad plays hard ball with Westfield
SumoSalad has taken its battle with the Westfield shopping centres managed by Scentre Group over lease payments to a new dimension: it has put two of the 20 companies in the group into voluntary administration.
It’s a strategy designed to get Scentre back to the negotiating table.
Sumo Salad put the two companies Sumo Westfield Leasing Pty Ltd and Sumo Leasing Pty Ltd, which hold the leases over about 12 SumoSalad outlets in Westfield shopping centres into voluntary administration.
That comes after it had unsuccessfully tried negating cheaper rent over the last six months.
The problem, according to SumoSalad chief executive and co-founder Luke Baylis, lies in the way shopping centres have expanded the number of food outlets within the centres.
This has seen foot traffic in shopping centres rising only six per cent over the last three years while the number of food outlets has tripled or quadrupled. And that hurt SumoSalad’s profitability.
“Sumo has been working with landlords over the past few months to negotiate more realistic food court leases for our stores, with no success," Baylis said in a statement to the Australian Financial Review.
"Regrettably, landlords have opened the door to more and more food businesses in recent times, as well as opening whole new eating areas within the same precinct, which has essentially cannibalised existing tenants.
"One shopping centre went from 34 food outlets to 93 in a three-year period with flat foot traffic growth.
"Our negotiations with landlords have failed to reach an outcome that adequately compensates our franchisees, with landlords now demanding that Sumo and our franchisees collectively pay millions of dollars to surrender the existing shopping centre leases.
"This is an untenable and unfair demand on small business owners, which would send our franchisees in those shopping centres broke.
"Placing the leasing entities into voluntary administration is the only way to protect our franchisees, and we are confident this will help us restructure our leasing entities in a manner that will create more favourable conditions for our franchisees."
SumoSalad is looking at moving its outlets away from shopping centre food courts to more profitable sites.
A spokeswoman for the Scentre told the Australian Financial Review: "Scentre Group works closely with its retail partners in an effort to resolve trading issues."
by Leon Gettler, June 14th 2017
