O'Brien's enters examinership
The High Court has appointed an examiner to O’Brien’s Irish Sandwich Bars Ltd, which employs 20 people directly and 800 indirectly in 85 franchised outlets in Ireland. The company has a total 220 outlets in 13 countries worldwide.
The court was told an unspecified number of the 85 stores in Ireland are to be closed be closed as part of proposals aimed at ensuring the survival of the company, which is insolvent with debts of more than €4 million, including €3.4 million owed to Bank of Ireland.
An independent accountant believed the company needed “surgery” and, provided that was done, it has a reasonable prospect of survival as a going concern, Rossa Fanning, for the directors, said. The company offered a fundamentally good product and had a sound business model but issues related to under-performing stores and rents would have to be addressed.
As well as 800 persons employed in the franchised outlets here, many suppliers were also dependent on those franchises, counsel said. The company was at “the apex of a lot of economic activity” and a lot of employment was contingent on its continuing survival.
Counsel said the survival conditions include new rental agreements for the franchised outlets as the company had directly entered into leases and was now facing the costs of honouring lease arrangements for some ten outlets which were closed and others which are under-performing due to the difficult economic climate.
Mr Fanning also said the company was involved in negotiations and did not, for commercial reasons, want to disclose the number of outlets which it was proposing to close.
He added one creditor, Lindat Ltd, had secured judgment for some €102,000 against the company and had served notice of its intention to bring winding up proceedings. The company could not pay that sum and it was against that unhappy background the company was seeking court protection. As a going concern, there would be a deficiency of some €4.1 million to creditors while that would increase to some €6.3 million if the company was wound up.
Having read the director’s petition for examinership, the affidavits and the independent accountant’s report, Mr Justice Brian McGovern said he was satisfied to appoint Paul McCann of Grant Thornton as interim examiner and returned the matter to July 22nd next.
Earlier, Mr Fanning said the company, whose directors are Brody Sweeney and Mark O’Neill, was set up in 1994, was a very well known and visible brand and had expanded rapidly. It has 220 outlets in Ireland, Europe and Asia.
The company’s business was valued at €15 million in 2000 and was profitable until last year and continued to be loss-making this year. The reasons for this were a significant downturn in the income from franchisees whose declining sales were having a knock-on effect. The company also had an inherent difficulty due to entering directly with landlords into leases for franchisees and then sub-leasing to the franchisees.
The company was now responsible for a rent-roll of some €480,000 per annum for ten stores which had closed although it was getting no income from those franchises. Nine other outlets had incurred rent arrears of some €276,000.
Those problems had been compounded as a result of the company’s two UK subsidiaries being placed in administration.
In a statement, Mr Sweeney said the O’Brien’s franchises were not subject to examinership and that today's action was being taken to restructure the business and protect jobs.