Gloria Jean’s has moved to reassure franchisees and customers that the business is solvent and continues to trade profitability, after a Court was told earlier this week that Gloria Jean’s parent company Jireh Group was in “financial dire straits”.
“Recent media reports claiming that Jireh Group is in ‘financial dire straits’ or ‘hopelessly insolvent’ are without foundation and are rejected,” the company said in a statement.
“As recently as August 9, 2010 the directors of Jireh signed a statement of solvency. This statement was prepared as part of the process of updating its disclosure document as required under the Franchising Code of Conduct.”
“It is business as usual for all our coffee houses in Australia and the continued operations of the Gloria Jean’s Coffees brand internationally.”
Jireh and its subsidiary Jireh International, which are owned by the chain’s founders Nabi Saleh and Peter Irvine, is locked in a bitter legal battle with a former joint venture partner, small US coffee supplier Western Export Services.
WES is suing Jireh International over an agreement between the two companies made in 1995, when Gloria Jean’s was just getting established. WES says that under the agreement, Jireh promised to pay WES a commission on all coffee supplies sold to franchisees – regardless of whether or not Jireh had purchased those supplies from WES.
Earlier this week, NSW Supreme Court judge Justice David Hammerschlag revised his original damages amount of $8.4 million to $9.7 million, plus $2.6 million in costs.
The judgment also requires that Jireh International honour the original joint venture agreement and pay ongoing commissions on sales of Gloria Jean’s coffee and products to franchisees, worth $1.865 million in the year to June 2010.
But counsel for WES told the court Jireh International “is hopelessly insolvent” and Hammerschlag said on the evidence before him, Jireh International appeared to be in “financial dire straits” without the support of its ultimate parent company, Jireh Group (also owned by Saleh and Irvine).
However, Gloria Jean’s says Jireh International “has the ongoing support of Jireh Group. All trading subsidiaries of Jireh Group are solvent and any statements to the contrary are also without foundation… The Jireh Group continues to trade profitably, as confirmed by the most recent audited financial statements.”
Hammerschlag also granted Jireh a stay in proceedings, to allow the company to appeal. Jireh and Jireh International have consented not to dispose of any assets while the appeals process continues.
Gloria Jean’s said Jireh’s directors are “confident” the appeal will be successful.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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