SumoSalad’s tussle with shopping centres just got tougher

Sarah Stowe

Inside Franchise Business: Luke Baylis has taken the fight to shopping centre landlordsSumoSalad has taken drastic action to protect the financial interests of some of its franchisees. CEO and co-founder Luke Baylis has placed into voluntary administration two leasing entities that lease shopping centre food court space for 12 to 14 SumoSalad stores.

The remaining stores in the 104-strong network are unaffected, and all of the outlets in the chain are trading as normal.

The dramatic move is intended to help franchisees broker better deals for their existing rents.

Baylis, who a few weeks ago announced the longterm intention to withdraw the brand from food courts, said “Sumo has been working with landlords over the past few months to negotiate more realistic food court leases for our stores, with no success.”

And it isn’t just the cost of the rents which are proving prohibitive, he believes.

“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,” said Baylis.

Talking about the decision to move away from food courts to petrol convenience sites, hospitals, univerisities and transport hubs, Baylis previously told Inside Franchise Business the consumer has limited purchasing power in food, irrelevant of the choices available.

“In fashion spend you’ll buy four or five different items from different vendors, in food you eat just one meal. In a fashion based mall, different retailers get more wallet share but this doesn’t apply to food,” he said.

Despite the combination of increased competition and high rentals, negotiations with landlords have failed to reach an outcome that adequately compensates franchisees, he said.

“Landlords [are] now demanding that Sumo and 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.”

Baylis said placing the leasing entities into voluntary administration is the only way to protect the franchisees. “We are confident this will help us restructure our leasing entities in a manner that will create more favourable conditions for our franchisees,” he said.

The administrators now have up to 90 days to renegotiate the leases with the various landlords which includes the Scentre Group which manages some Westfield centres.