Failed Mad Butcher looking to fundraise $15,000 for unpaid staff

Tuesday, 4 July 2017

Increased costs and inadequate margins squeezed the Mad Butcher store's profitability.

A failed Mad Butcher franchisee is seeking donations to help pay staff who 'did not deserve to lose their jobs' when the company's franchise agreement was terminated.

The company which formerly operated the Mad Butcher store in Papanui, Christchurch, went into liquidation in May following a dispute with the franchisor.

Allan Aitchison said he did not have the funds to pay the people who had become his friends at the company.

Insolvency Management liquidator Wayne Deuchrass estimated there would be a $660,000 shortfall to those owed money, after rising costs and low profit margins had squeezed the business.

Former employees were owed about $15,000, but it was unclear whether there would be enough money to pay them.

* Mad Butcher Tauranga in liquidation after months of poor trading

* Former Mad Butcher store owners blame 'economic conditions' for collapse

* Mad Butcher Silverdale placed into liquidation**

As a result, the company's director, Allan Aitchison, set up a Givealittle fundraising page looking for donations to cover the unpaid wages.

The page said the 15 staff made redundant were just 'normal working folks' who cannot afford to take this loss.

So far, just $620 has been raised from 13 donors.

Aitchison said he did not have the funds to pay the people who had become his friends at the company.

'We are looking for support to pay our 15 staff [who] were made redundant when our Mad Butcher franchise was terminated, this happened for reasons I cannot disclose.

'We do not have the funds to pay the staff who were a really great team and did not deserve to lose their jobs like this, unfortunately any funds from the business will be taken by the bank to repay debt.'

The first liquidators' report for the company noted 13 secured creditors, while the plant and equipment was subject to a security interest from Westpac.

One former staff member, who worked at the butcher for more than two years, said the staff had been relying on the money to pay bills and other costs associated with the demise of the business.

He estimated he was owed about $2000 as a preferential creditor.

'But we aren't preferential enough to get a single dime that is owed to us back.'

The first liquidators' report for the store says it ceased trading in May after the franchisor was granted an injunction against it by the High Court in Christchurch.

The store had operated for about two-and-a-half years before this, the report says.

'But increased operational costs combined with inadequate margins and funding costs ultimately lead to declining profitability and insufficient cash flow to pay debts as they fell due.'

Mad Butcher stores in Napier and Dunedin have been sold by their respective franchisees in the past six months while at least eight stores have gone into liquidation in the past couple of years.

Veritas Investments, the listed company which owns the franchise, in February made an after-tax profit for the six months to December 31 of $1.2 million.

This was a $6m improvement on the $4.8m loss it had made last half-year.

Veritas chairman Tim Cook said at the time the market the Mad Butcher faced was competitive and supply shortages had create challenges around product choice and pricing.

The two main supermarket chains had also seen competition 'intensified significantly', he had said.

'The board's focus is on ensuring profitability within each store and we are working closely with franchisees to support and maximise their performance.'