Tuesday, October 27, 2009

"easier said than done"

No one likes to see folks in financial trouble but blaming the Premier for their woes by saying the Government was not supporting "buy local" as if they (Bestofpei) owned the "franchise" is carrying things a little too far... simply put businesses come and go but the ones that usually stay around are those with a sound business plan and I'm afraid this might not have been the case here... I suspect cost overruns on leaseholds, a weak location, poor parking, high labour costs and higher than market prices were the most contributing factors in this business not succeeding... but I can't help but think that the latter item "higher than market" prices seemed to be the issue with most people who did some shopping there... both the Binns and the Ghiz Governments have a great track record of supporting “local” where they can but the “local voter” would be the first ones up in arms if a supply contract or tender was “given out” to a “higher” price... we all want to be loyal to our local farmers and fishers but I suspect we are all guilty of putting price ahead of loyalty when it's coming out of our own pockets... and you don't have to go far to find this when you shop at any large grocery store as you often see the consumers bypassing local meat, fish and produce in favour of a lower price competitive product... and it's easy to say these big stores are gouging the consumer but when you examine their "bottom lines" their margins are extremely thin and even thinner when you examine the "co-op" system which in theory more closely represented what Bestofpei was trying to achieve through an Island partnership of suppliers... unfortunately it didn't work this time but we all have our "Charlottetown Farmers Market" to fall back on to show our continued support for our "locals"... let's just say "easier said than done"...
Bestofpei stores abruptly close
TERESA WRIGHT
The Guardian
After just over two years of trying to sell P.E.I. foods and products, the two bestofpei stores in Charlottetown have closed their doors for good. The store’s gift shop on Victoria Row and its newer market on University Avenue ceased operations on Sunday, putting 35 full and part-time employees out of work and leaving many debts unpaid. A ‘notice of distress’ posted on the front door of the market location Monday states the building’s landlord is owed over $24,000 in rent and other assets, and warns that if payment is not received within four days any inventory therein “will be disposed of according to law.” Reached by phone from Toronto Monday, bestofpei owner Bev MacArthur said she is devastated to have been forced to close her stores, but said the business was bleeding red ink. “We were never able to make enough money from the sales in the stores to cover the costs, so over the past year and a half we’ve pretty well drained completely any resources I had with respect to putting my own money in.” MacArthur said she and her husband, Doug, worked day and night at the store and invested hundreds of thousands of dollars of their own money into bestofpei. But the business also got a boost from the Provincial Nominee Program. MacArthur received at least two investment units worth approximately $50,000 each from the PNP. This was used to renovate and open the University Avenue market location in June 2008. Despite these investments, the company just couldn’t make money, MacArthur said. “It just got to a point where we were losing too much and we decided to voluntarily close, rather than wait until somebody forces us to close.” The MacArthurs aren’t the only ones who lost money. The abrupt closure leaves dozens of local suppliers of food and product unpaid. MacArthur said she feels badly to have left her employees and suppliers in the lurch but says she had no choice. She also wrote a letter to Premier Robert Ghiz explaining about her stores’ closure, chastising government for not buying from local suppliers for government facilities such as hospitals and jails. “We started this when the (government’s) buy local initiative started, and we had thought that we would get a lot of support from government based on that,” MacArthur said. “I’m not talking grants or loans, but just basically support and it didn’t happen. I said to government, ‘You preach and preach to buy P.E.I. and you don’t put your money where your mouth is when it comes to actually buying P.E.I.’ She also blamed the fact that Islanders take a long time to break their shopping habits, and are more accustomed to buying from box stores. MacArthur said she will now liquidate the stores' equipment and and use that money to pay as much as she can to her creditors. But not everyone will get the money they are owed, she said. "There's a list of creditors that go in order of preference - not my preference, but secured creditors obviously get paid before unsecured creditors," she said. "I feel very very badly for anyone who is going to get left and not get paid because honestly, there will be people who won't get paid."

6 comments:

Anonymous said...

I completely agree your proposition about the business plan. Doesn't that raise pretty big due diligence questions though? As the owners were PNP recipients, the business plan was vetted by the very well remunerated bureaucrats of Richard's then department. Surely such highly skilled operatives would have seen what I think most of us saw when the place opened - high prices, lack of product focus, expensive building, poor location...

I'd like to know a lot more about the due diligence process as this is not the first PNP recipient to go belly up. Nor will it be the last.

Anonymous said...

I was waiting for this news announcement. They had twice the square footage they needed and about 3 times the staff. It was only a matter of time.
It is unfortunate but so many people in PEI don't realize "it's just business"

Anonymous said...

$50,000 of free PNP money arranged for by the Government of PEI doesn't qualify as "Government Support" ??

Did they not use the money to help support their business???

Anonymous said...

Well actually why couldn;t the PEI Government buy it's food supplies for it's use from local suppliers?

If these suppliers are allowed to sell stuff to the rest of than why not the jails,hospitals or manors?

Is there aproblem with PEI made food products? Is it safe?

I would think that when Ghiz put our tax dollars into the best of PEI store that as taxpayer I would like tosee some return for my investment.

If I was investing ina company or business and they made aproduct that i could use I would certainly be buying from them.

Tim is vetical integration not something YOU practise.

Anonymous said...

I agree with your statements, Tim. Bestofpei can't blame the government for their shortcomings--but perhaps poor management on their part?

Ritchie Simpson, The Mortgage Guy said...

Much as I am prepared to criticize the Ghiz Jr's government for its smelly handling of the PNP issue I think they are blameless in this matter. A Business Plan, however well written and packaged is simply a prediction of what an entrepreneur would like to happen; as the man said "In theory, practice and theory are the same, in practice they are not."
As for buying from local suppliers, this is an excellent plan and should be encouraged at every turn BUT this retail store would not qualify, they were a pure middleman who added very little value for either the primary producer or the customer in the person of the Provincial Government.