Max Brenner's Australian cafes went into administration owing about $50M

Upmarket chocolate and cafe chain Max Brenner's Australian business went into voluntary administration in October 2018, citing rising costs and sluggish retail trade. Administrators McGrathNicol, appointed by the directors, said the 37 stores would keep trading while it ran an urgent review into selling the business as a going concern or recapitalising it.

The Australian business was owned and run by husband-and-wife team Tom and Lilly Haikin, who hit BRW's Young Rich list in 2013 with a $40 million fortune. The brand was created in Israel by Max Fichtman and Oded Brenner in 1996; it was Haikin who pushed the 'chocolate bar' cafe concept and secured the Australian franchise, opening the first cafe in Sydney's Paddington in 1999. Israeli food company Strauss Group bought the global brand in 2001 and ran stores in Israel, the US, Japan, Singapore, Russia and China.

The warning signs had stacked up: in August 2017 the AFR reported former Consolidated Press Holdings executive Glenn Wein was assembling a rescue package for a business that owed about $50 million at the time. Yet as recently as January 2018 the company told Inside Retail Australia it was looking to open as many as seven new local stores that year. A Queensland ceilings business, Sunstate Ceilings, filed a wind-up notice against it on 29 June.

The chain kept a 37-store, high-lease cafe network running on roughly $50 million of debt, with store economics dependent on discretionary foot traffic that was going the other way.

Expansion planning continued into 2018 even after the rescue talks and the debt load were public knowledge.

Rising costs met sluggish retail: the gaps between cafes' rent, labour and cocoa-priced menus and what customers would spend kept widening.

A franchise cafe chain is a lease-and-debt machine: planning seven new openings while creditor notices arrive means the expansion budget is really a workout budget.

McGrathNicol administrators Barry Kogan, Kathy Sozou and Jason Preston said it was too early to say what debts the business had, while assessing a going-concern sale or recapitalisation.