Villa & Hut founder Franz Madlener says he is almost certain to be declared personally bankrupt, with more than 12 landlords, suppliers and finance companies chasing amounts that Madlener personally guaranteed when he owned the Villa & Hut chain.
But Madlener says he will not fight the series of bankruptcy petitions, and will instead focus his money and energy on trying to save the Villa & Hut chain for the remaining 22 franchises, the bulk of which are located in Victoria.
“It’s very unlikely that I am going to be able to avoid personal bankruptcy,” Madlener told SmartCompany this morning.
“But I am a big boy, if I go bankrupt I will deal with that. The energy and money that it would take to fight that would be better spent saving the franchise network.”
“They can take away my right to act as a company director, they can take away my right to borrow money, but they can’t take my ability to think, they can’t take away my absolute drive and passion I have for the brand.”
“They can’t strip that from me.”
Madlener will today appear at two separate court hearings involving bankruptcy petitions. One of the petitions relates to $28,000 worth of unpaid rent accrued by a Villa & Hut store at Melbourne’s Fountain Gate shopping centre.
Madlener provided a personal guarantee for the lease when he was owner of the brand, before it was sold to collapsed franchise brand manager Allied Brands in mid-2009.
He says he provided many such guarantees prior to the sale of the business, and claims Allied Brands failed to update these arrangements when they took control of the company.
“I’ve got a myriad of these issues with various landlords, suppliers and finance institutions regarding debts run up in my name by Allied Brands,” he says.
In the case of the unpaid rent at Fountain Gate, Madlener claims the unpaid rent was accrued between July 1, 2009 and October 31, 2009, before Allied Brands signed a new lease.
Madlener says he remains determined to buy back the Villa & Hut brand from Allied Brands administrators, Brisbane-based accounting firm Vincents Chartered Accountants.
He says his consortium of buyers is aware of his likely bankruptcy and says franchisees also remain supportive.
However, Madlener’s attempts to regain control of the brand appear to have hit a serious hurdle. Yesterday, Vincents was appointed as administrator of Villa & Hut Holdings, which owns 10 company owned stores.
Madlener says these company-owned stores were closed down last night, with all staff sacked.
However, a spokesman for Vincents said this morning that the stores had been “temporarily closed for stock take and communications with landlords”.
Madlener also claims he was forced to attend a franchised Villa & Hut store in Melbourne’s Jam Factory shopping complex to try to prevent the administrators shutting down that store. He says the administrators eventually acknowledged they did not have the power to shut this store.
Madlener also claims Villa & Hut’s Melbourne head office – where franchisee support is provided from – was shut down by Vincents this morning, with all staff terminated.
The Vincents spokesman could not comment on this, but Madlener says he is attempting to re-employ the staff to ensure “franchisees are supported to the best of our abilities”.
“I am absolutely shattered for the staff and the suppliers after being given absolute assurances that this wouldn’t happen, particularly as I have put an offer in to buy the brand back,” he says.
“I have got a strong, united, viable franchise network that are very supportive of me getting hold of the brand to allow the franchise network to go on.”
Madlener says he is yet to receive a response from the administrator on his offer, and Vincents were unable to comment on this without making a statement to the Australian Securities Exchange, where Allied Brands is still listed.
While Madlener faces a gruelling day in court, he is trying hard to put on an optimistic spin, arguing that by accepting personal bankruptcy, Villa & Hut’s franchisees will be able to finally severe ties with Allied Brands.
“The quickest way to deal with this at the moment is to let the bankruptcy occur,” he says. “Finally the franchisees will be set free from this rogue franchisor.
“Today is day one of us moving forward.”
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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