Jump Swim sale revealed; franchisor narrowly escapes collapse
After months of speculation and a series of legal proceedings, JUMP! Swim Schools has officially been offloaded. Inside Franchise Business can reveal that on Tuesday, Swim Loops, the franchisor responsible for the beleaguered children’s franchise was sold.
In a statement sent to franchisees, administrator Glenn O’Kearney of GT Advisory confirmed an offer from BK’s Gym & Swim Pty Ltd, a subsidiary of multi-brand investment company, Belgravia Group had been accepted.
The Jump Swim sale comes just months after the administrator assumed control of Swim Loops, with the franchisor citing legal costs and mounting media scrutiny as contributing factors for the move.
However, a June creditors’ meeting revealed the situation was far worse than initially expected. The administrator’s report found that the company had unsecured debt in excess of $15m.
A second creditor’s meeting was adjourned, with the company actively exploring options to recover the mounting debt, including a contentious Deed of Company Arrangement (DOCA).
On Tuesday, lingering franchisee suspicions of a Jump Swim sale were confirmed.
Jump Swim sale
The statement; circulated to franchisees and obtained by Inside Franchise Business outlined the administrator’s ongoing efforts to preserve the current operation.
“Throughout the process we have received a number of expressions of interest from arm’s length third parties to purchase the business of the company, an offer from a group of franchisees who expressed interest in effectively ‘buying out’ their franchise agreements, and a number of DOCA Proposals that needed to be considered including a recent proposal from a third party that was received on Friday afternoon,” the statement read.
“Having carefully considered all the options available and working within the strict time restraints of the voluntary administration process, the administrator has proceeded with entering into a binding agreement with Belgravia. In this regard, Belgravia’s lawyers will attend to the formalisation of the assignment notices and settlement of the transaction.”
The administrator had previously recommended a DOCA proposal that would have seen founder and managing director, Ian Campbell continue to operate the business. However, a Federal Court asset freezing effectively put an end to the prospective plan, giving the administrator little option to offload the entity.
Former JUMP! franchisee Juliet Sharpe said the Belgravia acquisition was a positive step forward for the embattled network.
“I feel it is the best way forward and the administrator has made the right decision under a lot of scrutiny,” she said. “It’s great news for Swim Loops franchises. They are lucky they have a school and are no longer under the control of poor management.”
Belgravia acquisition outcomes
The administrator acknowledged that while the Swim Loops sale may not benefit all franchisees, Belgravia’s acquisition allowed JUMP! Swim Schools to continue trading.
“Whilst we understand the Belgravia offer may, on first glance, not be the preferred way forward for a number of franchisees, having regard to the alternatives available should a sale not have been achieved and the company were to cease trading and immediately be placed into liquidation, we are of the view that this option is the best outcome for all stakeholders, including franchisees.”
Throughout the process, Swim Loops franchisees have raised concerns over lease obligations. Under the turnkey operation, many sites were secured and guaranteed by the franchisor, which battling against $15m of debt, left partners in a precarious position.
While the Belgravia’s acquisition announcement does not completely ease concerns, the administrator suggested the new owner had placed a renewed focus on efficiently transitioning the leases.
“Belgravia will shortly write to franchisees and landlords directly to further explain the support and resources that Belgravia will be providing to allow franchisees to continue to generate income, employ staff and service their existing clientele,” the statement read.
“As part of this process, Belgravia is also working with landlords to assign leases as required.”
Details of the Swim Loops sale are unknown, however the brand still faces an uphill battle.
Just last week, Inside Franchise Business reported that a second Jump Swim entity had entered liquidation. Additionally, the Australia Competition and Consumer Commission’s (ACCC) case against the franchisor is ongoing, with franchisees eagerly awaiting the outcome.