South African fast food franchise Steers which has enjoyed robust business in Kenya is fast going under with Muindi Mbingu street branch becoming the latest to close its doors in Nairobi city.
Earlier reports showed that, Azam Samanani, a Kenyan tycoon who represented South African fast food brands and Debonairs will no longer run operations in Kenya.
Ever since South African fast food brands Steers and Debonairs set foot in Kenya, Azam Samanani has represented their brands through his Hoggers Ltd.
Steers and Debonairs are owned by South Africa’s Famous Brands.
On April 24, 1997, Famous Brands partnered with Mr Samanani’s Hoggers Ltd to ensure that Steers and Debonairs rule the fast food industry.
And for the past 23 years, the brands have been a mainstay of Nairobi’s middle class, while earning Mr Samanani the bragging rights for Kenya’s longest running franchise deal in the fast food industry.
In January, Mr Samanani’s 23-year run came to an end when Justice David Majanja allowed South Africa’s Famous Brands to reclaim and operate Steers and Debonairs eateries across the country.
Hoggers had seven separate franchise agreements with Famous Brands that were to see the former operate Steers and Debonairs branches until February 28, 2024.
Heavy borrowing
To honour the contracts, Hoggers borrowed heavily. Unable to repay loans, Owen Koimburi was appointed administrator of Hoggers on February 19, 2020. Suppliers, employees and banks are the casualties of Hoggers’ financial woes.
By the time Mr Koimburi was appointed, Hoggers owed Diamond Trust Bank Sh50 million.
Court papers show that Hoggers owes in excess of Sh67 million, but does not have sufficient assets to pay the creditors.
Interestingly, Famous Brands is also among Hoggers’ creditors, as the latter had failed to remit monthly royalties totalling Sh6.1 million.
Famous Brands’ relationship with Mr Samanani has been frosty for the past four years.
Fail test
When Famous Brands’ franchise manager James Ouma did inspections on Debonairs and Steers branches in the Nairobi Metropolitan, some failed the test. Mr Ouma did inspections last year on April 24, May 5 and June 1.
In some branches, the franchise manager was met by faulty walk-in freezers, refrigerators and oven thermometers. Some branches had insufficient stock and were using a type of cheese not recommended by Famous Brands.
Famous Brands felt that this was a serious breach of the agreements with Hoggers and terminated deals for four branches.
But Mr Samanani’s Hoggers Ltd has been broke since 2018.
Under administration
The situation worsened when Hoggers was placed under administration on March 13, last year.
On June 10, 2020 Mr Koimburi, in his capacity as Hoggers administrator, received two letters from Famous Brands terminating the franchising agreements for Debonairs and Steers Ngong Road.
Famous Brands sent another letter to Mr Koimburi on June 30, calling off the franchise deal for Debonairs and Steers Kiambu road, which was to expire one month later.
Then on July 10, 2020 Mr Koimburi received another letter terminating the franchise deal for Steers and Debonairs Muindi Mbingu street, one of the oldest branches of the two eateries.
The four letters indicated that Hoggers had failed to meet the agreed operational standards for Debonairs Pizza and Steers.
Three-month notice
Famous Brands gave Hoggers a three-month notice of expiry for Debonairs Kiambu road. The three-month period was also to serve as a negotiation period.
Mr Koimburi felt that the operation standards in the franchise agreements were “cumbersome”.
He told the court that allowing the South African firm to terminate the franchise deals would deal a deathblow to the firm.
“The termination and non-renewal are simple acts that take effect upon service of the respective notice. The franchisor does not require to do anything further for the notices to take effect,” Justice Majanja ruled.
He, however, dismissed an application by Famous Brands to compel Hoggers to remove the Debonairs and Steers branding from outlets run by the estranged Kenyan franchise partner.
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