What Darrell Lea's collapse means for retail landlords

Cara WatersJuly 10, 20120 min read

Landlords of Darrell Lea's 69 stores are concerned about what the future holds for them after administrators were appointed to the confectionery and chocolate company yesterday.

If Darrell Lea is liquidated the retail stores will need to be released and each centre will deal with that in accordance with their individual leasing policy, according to Simon Fonteyn, founder and managing director of Leasing Information Services.

"Anecdotally there is evidence that leases which go into administration usually carry a higher incentive, but that depends on the quality of the location," he says.

"Landlords as a general rule do not like any vacancies whatsoever, so they will meet the market to get it re-leased."

Fonteyn says if Darrell Lea is sold as a going concern then it is just "business as usual", but a buyer may look at some closures on a case-by-case basis.

"From what I've read there are a number of factors at play. I know that Darrell Lea was well represented in terms of their tenancy; they were paying market rates and were well advised," he says.

"Obviously blind Freddie knows that in retail things are tight but other retailers are weathering the storm, so there are likely to be other factors involved in the collapse."

Darrell Lea's employees are also frightened about their job prospects .

PPB's Mark Robinson said a major review of the business was underway in the hope a buyer could be found to help save the 85-year-old company and its 700 workers.

"At this time it is business as usual and our primary focus is for the employees and store owners that are impacted by this unfortunate event," Robinson said in a press conference yesterday.

"This is an iconic brand which means a lot to Australians and I'm sure it will live on in some form into the future."

Robinson said the company's directors were disappointed and "saddened" by the problems they faced, although he said there was some hope for the business as the administrators had received several unsolicited approaches.

Jennifer Dowell, national secretary of the Australian Manufacturers and Workers Union food and confectionery division, says she is concerned that all 700 employees would lose their jobs if the company was liquidated.

"We don't really know a great deal at this stage. We spoke to the administrator yesterday and we are waiting for them to confirm that they have signed off on funding to pay the workers' wages, we are still waiting on that," Dowell says.

"They are saying they need a couple of days to ascertain the financial situation of the company and it does not look good.

"We are trying to find out if there is enough money to cover the employee entitlements and we are not sure if there is at this stage."

Dowell says PPB expects to have a better idea of what the financial situation looks like.

"Aside from securing funds to pay the wages, their first priority is to sell the company. They say to sell they may have to restructure and we are always worried when they talk about restructuring that someone is going to lose their job.

"The workers themselves are absolutely beside themselves as most of them found out through the media so they feel like they haven't been treated very well and, of course, they are upset and frightened."

Even Prime Minister Julia Gillard weighed in on the debate, saying it was sad news for the company.

"I certainly hope that we can see someone step forward and take this business over and keep that very famous Darrell Lea brand going for us,'' Gillard told reporters in Ipswich yesterday.

"Everybody has probably eaten a lot of their Rocky Road over the course of their lives, I know I have.''

This article originally appeared on SmartCompany.

Cara Waters

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