Financially troubled, Future Retail and Texas-based convenience store chain, 7-Eleven have today decided to mutually terminate their franchise agreement after the Kishore Biyani company failed to meet the target of opening stores and payment of franchise fees.
In a statement to the stock exchanges, Future Retail said no financial or business impact on the company is expected as the arrangement was at the subsidiary company level.
In February, 2019, both companies had signed the franchise agreements for developing and operating 7-Eleven branded stores within India. Future group was planning to set up 7-Eleven convenience stores all over India to sell soft drinks to grocery items.
The Future group already owns Nilgiris branded stores but 7-Eleven is known for its 24-hour accessibility format and offering extras to its customers. 7-Eleven has close to 71,000 in 70 countries as of July last year.
The 7-Eleven project failed to take off as Future group financial condition started deteriorating due to rising debt both at the holding companies level and at the operating companies level since mid-2019.
In March 2020, the Corona pandemic further impacted sales and profitability of Future Retail. For the fiscal 2021, Future Retail’s sales fell 62 per cent to Rs 6,261 crore while it made a loss of Rs 3,180 crore. The group had to seek a one time debt restructuring to avoid a collapse.
In August last year, the Future Group decided to merge all the group’s listed companies into Future Enterprises and then sell the underlying businesses and debt to Reliance Retail for a total consideration of Rs 24,700 crore. The transaction is currently on hold due to a litigation with American retail giant, Amazon which had bought 49 per cent stake in a holding company of Future Retail Ltd. . As on June 30, 2021, Future Coupons held 9.82 per cent stake in Future Retail, according to BSE. Overall, promoter group held 19.86 per cent in Future Retail.
Amazon says it had signed a non-compete agreement with Future group and has the right of first refusal over Future’s stake in the holding company and hence its transaction with RIL is invalid. The matter is currently pending in the Supreme Court which has asked both parties to wait for the final order of Singapore arbitration court.
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