Threshers fails to deliver for franchisees

Stores fear for future as troubled off-licence chain is unable to fulfil stock orders

Some franchisees of the off-licence chain Threshers are suffering a stock crisis and are furious about how its private equity-owned parent, First Quench Group, is running the operation.

One franchise said that some stores are receiving "on average only about 55 to 60 per cent" of products ordered over the past two months, citing availability problems with well-known brands including Bacardi and the New Zealand wine Montana Sauvignon Blanc, although these can vary on a weekly basis. Some of the out-of-stock problems relate to Threshers' suppliers having their cover scaled back by leading credit insurers.

The revelation about product availability comes after First Quench – which operates 1,400 Threshers, The Local and Wine Rack fascias – issued a "going concern" warning, citing a "material uncertainty" that cast significant doubt on its ability to continue trading, according to accounts filed at Companies House earlier this month. For the period from 16 May 2007 to 28 June 2008, the group made a pre-tax loss of £30m.

A Threshers franchisee said: "Far and away the most serious issue is that of stocks. Inquiries about missing products are ignored. We are just told that it is 'out of stock' in the warehouse." The franchisee also cited "out-of-stocks" with Macallan malt whisky and Lamb's Navy Rum, adding: "We never know what is coming in from one week to the next – yet they want us to increase turnover."

Eyebrows have been also been raised by the news that First Quench last month served notice to terminate its five-year distribution contract with Norbert Dentressangle, which was signed after the private equity firm Vision Capital bought Thresher Wine Holdings in July 2007 for £95m. The owner of Threshers intends to run the operation in-house, although it is unclear when the French logistics company will stop supplying Threshers.

A First Quench spokeswoman said that credit insurance is a "a major issue impacting retailers across the country", but added that it had the full support of all its largest suppliers. She added: "Whilst there have been some temporary out-of-stocks in the supply chain we also recognise that franchisees are a key part of our business." First Quench currently has 83 franchisees with 95 franchised stores, while the other stores are managed by the company itself.

Threshers' franchisees are also angry at their "exorbitant" costs of doing business. For instance, First Quench increased the delivery charge paid by franchisees around July 2008, which means they now pay 86p for every six bottles of wine delivered, up from 82p. Franchisees also have to pay a management service fee – equal to 3 to 5 per cent of a store's sales. "Some franchisees, myself included, are in serious danger of bankruptcy if we don't get out soon," one said. But the First Quench spokeswoman said it had written to franchisees over the weekend offering them a reduction in the management service fee for six months from 28 June.

Martin Healy, the finance director, is currently acting chief executive of First Quench, as Yvonne Rankin, the incumbent chief executive, is on sick leave.