Villa & Hut competitor Samsara, a Gold Coast-based coffee shop and Indonesian homewares junk importer, has collapsed leaving very angry franchisees and huge debts.
THE ANNOUNCEMENT on the failure notes that "While the Samsara model includes Asian cafes, it typically relies on the importation of exotic Asian furniture and gifts from the ‘cheap and nasty' to unique beauty produced by masterful craftsmen sitting on dirt floors in third world countries."
SOUNDS EXACTLY LIKE VILLA & HUT!
Peter "Pinnochio" Graham (pictured above) has said that Villa & Hut would make $1.5million in profit the first year - so why would the founders sell out to Allied Brands for $1million? Normal business valuations would indicate Villa & Hut should sell for $6million to $7million. The whole deal smells dodgy, and Samsara portends the future for Villa & Hut.
These kinds of businesses are among the first to go when discretionary income is no longer available to their customers. Funny, but instead of overpriced coffees and junky Balinese furniture, people prefer to PAY THEIR RENT!
Founders are being investigated for "Trading While Insolvent". The aggressive investigation by the Rudd Government of franchisor companies "trading while insolvent" has likely put a chill thru the Allied Brands offices. These clever directors have given each general manager "full responsibility" for each of their brands. When the crash comes, they'll find that the fine print of their contracts makes THEM responsible for any ASIC issues, not the board.
Allied Brands Ltd. (ABQ) reported cash on hand in June of 08 of $4.2million, by December 31 this had over halved to $1.9million. Even more misleading however is their claim to have $3.4million in "assets held for sale" - in reality both new and repossessed shops, Baskin Robbins, CookieMan, Kenny's Cardiology, that are grossly overvalued and a huge cash drain on the company. ALL OF THEM are reported to be showing operational losses, with rents, employees, utilities, and other costs a giant cash vacuum on the Allied Brands balance sheet. And the shortage of product for no apparent reason can only be cash-flow related.
As their primary cash cows CookieMan and Baskin Robbins are now in their slow winter seasons, it's no wonder they're trying to raise more capital under the guise of their Villa & Hut acquisition. It would appear that Allied Brands could easily be out of cash by the end of the financial year without this emergency capital raising.
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