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SumoSalad fights Scentre's Westfield using insolvency laws


SumoSalad fights Scentre's Westfield using insolvency laws

The fight between fast food chain SumoSalad and several Westfield shopping centres over lease payments brings into sharp focus the rising tension between tenants and landlords amid rapidly changing consumer shopping habits.

Luke Baylis, the chief executive and co-founder of SumoSalad, on Tuesday took the extraordinary step of putting two of the 20 companies in his group into voluntary administration in order to force several Westfield centres to the negotiating table.centres to the negotiating table.Tuesday took the extraordinary step of putting two of the 20 companies in his group into voluntary administration in order to force several Westfield centres to the negotiating table.centres to the negotiating table.executive and co-founder of SumoSalad, on Tuesday took the extraordinary step of putting two of the 20 companies in his group into voluntary administration in order to force several Westfield centres to the negotiating table.

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.

These companies hold the leases over about 12 SumoSalad outlets in Westfield shopping centres managed by Scentre Group. SumoSalad has a total of 104 stores and Baylis says the dispute will not affect them trading normally.centres managed by Scentre Group. SumoSalad has a total of 104 stores and Baylis says the dispute will not affect them trading normally.

Baylis says the dispute was triggered by the decision of the shopping centres to dramatically expand the number of food outlets within shopping centres.centres.centres to dramatically expand the number of food outlets within shopping centres.

Talks have failed

He says that over the past three years foot traffic in shopping centres has only risen about six per cent but the number of food outlets has tripled or quadrupled. This has affected the profitability of SumoSalad stores.centres has only risen about six per cent but the number of food outlets has tripled or quadrupled. This has affected the profitability of SumoSalad stores.

"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. "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.cannibalised existing tenants.

"One shopping centre went from 34 food outlets to 93 in a three-year period with flat foot traffic growth.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.centre leases.

"This is an untenable and unfair demand on small business owners, which would send our franchisees in those shopping centres broke.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."


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