Country Style shuts 1 in 4 stores

"This is an absolute slap in the face for the provincial franchise law,"…Franchisees facing closings, who have invested an average of $150,000 to $200,000 in their stores, are desperate, he said. "These are life savings (that) they are just stroking out with a pen."

The Toronto Star
December 15, 2001

Country Style shuts 1 in 4 stores
Franchisees livid as nine Toronto outlets on block
Madhavi Acharya-Tom Yew

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Country Style Food Services Inc. will close a quarter of its stores — effective immediately — under court-ordered bankruptcy protection, giving the struggling doughnut and coffee chain a chance to restructure.

The company said yesterday it will shut 50 stores, leaving 150 locations operating across Canada as it restructures.

Country Style's financial performance has deteriorated as a result of an increasing number of poor locations and under-performing franchises, president Pat Gibbons said in an interview yesterday. "We believe the core of the business is very healthy. It's just that, unfortunately, this process was required in order to move forward."

But one group is angry about the move, accusing Country Style of trying to run franchisees out of business.

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"This is an absolute slap in the face for the provincial franchise law," said Les Stewart, head of the Canadian Alliance of Franchise Operators.

Franchisees facing closings, who have invested an average of $150,000 to $200,000 in their stores, are desperate, he said. "These are life savings (that) they are just stroking out with a pen."

The Alliance plans to meet with Consumer and Business Services minister Norm Sterling on Monday to discuss the Country Style action, Stewart said.

Country Style closed about 25 of the stores last week, after issuing default notices Nov. 20 to outlets that were underperforming. Under its Companies' Creditor Arrangement Act protection, granted Thursday by the Ontario Superior Court, the company will shut another 25 locations, Gibbons said.

In the Greater Toronto area, nine locations will close.

"We feel a number of (franchisees) may elect to continue as an independent doughnut coffee store and we're doing everything we can to help facilitate that," Gibbons said.

"But in most cases, these are stores where the locations are just no longer viable. They probably don't have a drive-through, they're old, they're tired. The business has moved away and they're a financial strain to both us and the franchisee."

Country Style's debts total about $21 million, including a secured debt of $15 million to the Bank of Nova Scotia, Gibbons said.

Deloitte & Touche Inc. will serve as Country Style's court-appointed monitor.

The company hopes to assemble a plan for unsecured creditors by the end of next month, and have it approved sometime in March, Gibbons said.

"We've just opened five stores and are about to open another five. It's a going concern. It's just that the brand has been not tended to in the last several years and it's lost its way," Gibbons said.

Country Style operates from 350 locations in Canada, including kiosks at Sunoco and Shell gas stations. These locations are not affected by the restructuring. Likewise, the company's 100 foreign outlets in locations including Malta, Guatemala and Brazil, as well as 60 Buns Master bakery locations, will remain open.

The restructuring comes as North Carolina-based Krispy Kreme Inc. opened its first Canadian outlet in Mississauga this week, the first of 32 slated for Ontario, Quebec and the Atlantic provinces in the next six years.

Country Style, founded in 1963, is the third-biggest coffee and doughnut seller in Canada, behind giant Tim Hortons and, collectively, independent mom-and-pop coffee shops.

According to Foodservice And Hospitality Magazine, Country Style had sales of $120 million in 2000. Country Style does not release financial results.

Maple Leaf Foods Inc. sold Country Style in 1999.


Risks: Bank of Nova Scotia, Franchisor offers to help its franchisees go independent, Les Stewart, Canadian Alliance of Franchise Operators, CAFO, Ministry of Consumer and Commerical Services, Ministry of Consumer and Business Services, Ministry of Government and Consumer Services, Ministry of Government Services, Ontario, Companies' Creditor Arrangement Act, CCAA, Insolvency trustee, consultant and auditor same firm, Canada, Malta, Guatemala, Brazil, 20011215 CS shuts

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