Liquidation case study of a printer cartridge franchise

18 November 2013

A director called us having invested much of his savings to buy a retail franchise in the printer cartridge refurbishment sector. He was worried that the business was not performing as he had been led to expect by the franchisor, and he faced ploughing in more capital, even though he sensed that the market was now moving away.

The company started trading in December 2010 as a retail franchise operation, selling refillable printer cartridges. It traded positively for the first six months and things generally went to plan.

Unfortunately after this, because of improving printer technology and increased on-line competition, there were significant reductions in the price of printer cartridges. This was particularly so for businesses, which to start with had been a good market for the original franchise concept. As such, the need to refill at low-cost, became less attractive. In addition other high street competition had entered the area.

Turnover started to fall, and the company began to face difficulties with its cash flow, resulting in it falling behind with creditor payments.

In an effort to help restore the companys falling turnover, the director, who had previously worked in a number of senior marketing roles, began an extensive marketing campaign in the local media. Regretfully, and despite his best efforts, turnover continued to fall, and the company was loss making after its first twelve months of trading.

Nonetheless, and in the hope that he would be able to turn things around, the director invested further monies to try to help enable the business to continue. However, by June 2012 the companys position had not improved, and the director, whose own health was now suffering, could see no real likelihood of things changing.

The director met with KSA and we took him through all the options. Unfortunately, based on the financial information provided it was evident that the company was not viable. As such, the director felt he had no option but to call a halt, so to prevent matters from getting worse. With the help of KSA, all appropriate documentation and notices were drawn up, and a meeting of shareholders and members was called so as to place the company into voluntary liquidation.

By efficiently managing the process, and by bring matters to a speedy conclusion, KSA helped the director to get his life back, he avoided investing any more family money, his health recovered, and eventually returned to work in a senior marketing role.

Categories: Liquidation