How SumoSalad went from looking at Voluntary Administration to come out the other side with a Business Restructure and their next stage of financial growth.
You Do Win Friends With SumoSalad
In 1995, the Simpsons first declared to the world 'You Don’t Win Friends With Salad'.
Certainly at the time, they were right.
Coming into the new century, fast food was limited to the golden arches of McDonalds and KFC with supposedly “healthy” takeaway options largely reserved to Subways, whatever Woollies & Coles stacked on their shelves as Grab N Go’s and local corner Sandwich Delis. At that point, finicky diets were limited to the lactose intolerant and vegetarians, with gluten-free and vegan only just trembling into existence.
- In 2003, healthy fast food salad bar SumoSalad is launched from the Sydney CBD by Luke Baylis and James Miller.
- They would cater to people looking for nutrition and convenience – big on the servings, healthy on the body with every effort to source produce locally and ethically under sustainable operations.
- Within three years, SumoSalad is listed at 22 in TheSmart50, with more than 60 franchises across the country, making international headway with a Dubai store and recording more than $45M in revenue.
- In 2012, the Tulla Group takes a 60% stake in SumoSalad. The cash injection would see the company reach 100 store openings in Australia, New Zealand, Singapore, UAE, South America and the US, to record $75M in revenue.
- SumoSalad would elevate their brand, collaborating with celebrity personalities, including Chef Pete Evans (though the partnership would end in 2015, coincidentally around the release of Peter’s controversial ‘Bubba Yum Yum: The Paleo Way for New Mums, Babies and Toddlers’), Commando Steve, Dr Zac and Erin Hollard.
- Under Tulla's protection and business vision, 20 SumoSalad stores would open up shop within the Westfield Food Court precincts.
Westfield Don’t Win Friends With SumoSalad
But while the SumoSalad wave is riding high, the business model for shopping centres is forced into a sharp restructure.
- Once the shining gem to retail innovation, from 2010, a 200% increase in ecommerce sales saw a sharp decline in bricks and mortar retail with Shopping Centre behemoth’s like Westfield, AMP Capital, Dexus, Lend Lease and the like looking for alternatives to cover the rent. Welcome to The End of Retail Malls and the coming of wall-to-wall Food Stores.
- In June 2017, Chanticleer in Australian Financial Review shines the spotlight on SumoSalad’s six month battle against Westfield: “SumoSalad uses insolvency laws to fight Scentre's Westfield”. Author Tony Boyd writes that “after many failed attempts over the past six months to negotiate cuts in leasing charges, Baylis put two companies, Sumo Westfield Leasing Pty Ltd and Sumo Leasing Pty Ltd, into Voluntary Administration.”
- Tony Boyd acknowledges the companies were not trading insolvent prior to the June 13 Voluntary Administration appointment.
- The Property Oberserver reports 'SumoSalad in rent dispute with landlord Westfield’, releasing real figures that for the last three years, Shopping Centres had dramatically expanded, with the number of food outlets tripled or quadrupled, while foot traffic rose about six per cent – a significant hit to SumoSalad’s profitability. Luke Baylis was quoted as saying “One shopping centre went from 34 food outlets to 93 in a three-year period with flat foot traffic growth.”
- Red Communications’ Peter James Ryan pens a thoughtful article for Inside Retail acknowledging SumoSalad’s clever use of Voluntary Administration as an offensive tactic to force Westfield’s hand.
When SumoSalad Had To Make The Call
It’s a credit to Sumosalad making the tough call for the sake of their brand and their franchisees
- The overall business model for the two leasing entities was no longer economically viable with their current agreement
- For the good of the operations and finance of the business, a Voluntary Administrator was the only available option to restructure
- Since Westfield's Scentre were not coming to the table and cutting the rent, SumoSalad saw Voluntary Administration a reasonable option for their franchisees to exit the deal.
In an unprecedented move, SumoSalad saw all the positives and advantages of implementing Voluntary Administration
- Voluntary Administration laws were used for the purpose they were intended - to restructure companies and get them back on their feet
- SumoSalad was prepared for using the insolvency laws because its leases were held in separate companies within the SumoSalad Group
- The structure for each franchise allowed for all the positives of Voluntary Administration without affecting the entire group.
- From the two companies, 12 SumoSalad outlets out of 104 stores in total were affected. And while Voluntary Administration meant a bit of heat and unease in the background, it was business as usual for its franchisees and operations.
- Australian Financial Review Columnist Tony Boyd would revisit the tale a month later in Chanticleer, reporting that SumoSalad and Westfield were close to negotiating better rental terms to put franchise owners on a stronger financial footing.
A Brand New & Shiny Business Restructure
SumoSalad’s new plans include
- Making food more convenient and better value without compromising on ethos
- Increasing from current serve of six million healthy meals a year to 25 million meals with the next three years
- Increase revenue in new areas, such as grocery, petrol and convenience store locations, airport terminals and other transport hubs, universities and colleges
- Move stores away from traditional outlets and into other customer-focused locations.
- Result would be the closure of some stores in shopping centre food courts in New South Wales and Victoria, but a minimal impact on the network of more than 92 stores.
- A partnership with the Caltex service station network
- A partnership with Menulog to deliver through the day directly to homes and workplaces
- Target corporate partnerships
- Raising up to $3 million in new equity capital for next stage of financial growth
Moral Of The SumoSalad Story
Voluntary Administration is not the end of business. It is the beginning of Business Restructure.
*Image Source: Monash University
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