Uchumi Supermarket PLC has emerged victorious in a commercial dispute with Aljazeera City Market after the High Court awarded the retailer KSh26.7 million in special damages for breach of a franchise agreement.
The case revolved around an eight year franchise deal signed between the two parties in October 2018. The court found that Aljazeera had failed to honor critical terms of the agreement, including full payment of a KSh12 million goodwill fee, remittance of royalties amounting to KSh1, 080,000 and rent arrears totaling KSh18, 502,500. Aljazeera was also held responsible for business assets worth KSh1, 092,621 that were removed from the premises when the franchise relationship broke down.
In her ruling, Justice Josephine Mong’are stated that Uchumi had sufficiently proven its claims using documents, letters, invoices, and an asset schedule. “The Plaintiff (Uchumi) demonstrated, through letters, invoices and a schedule of assets, that goodwill, royalties, and rent remain unpaid and that the Defendant removed assets worth KSh1,092,621. The total claim is therefore proved,” she ruled.
On its part, Aljazeera had accused Uchumi of misrepresentation, unfair rent increases and business sabotage. The company had also demanded a refund of the goodwill payment. However, the court dismissed these counterclaims, noting that Aljazeera presented no witnesses or documents to support its accusations. In contrast, Uchumi submitted detailed evidence which the court accepted.
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The ruling comes as a boost to Uchumi’s efforts to stay afloat. The defunct retailer has increasingly relied on franchising as a survival strategy. By licensing its brand and business model to independent operators, Uchumi has been able to maintain a presence without the cost burden of managing fully owned stores. This model has also helped the company maintain visibility on the Nairobi Securities Exchange, where it faces delisting pressure.
As part of its turnaround strategy, Uchumi plans to convert its Lang’ata Hyper outlet into a shopping mall. The plan, however, is currently on hold due to a legal dispute with a tenant, Hotspot. Despite the setback, the property still hosts 10 active tenants. Alongside Lang’ata Hyper, the Unicity branch near Kenyatta University remains one of Uchumi’s only functional outlets.
Uchumi’s collapse dates back to 2006 when it was placed under receivership. The situation worsened after 2015 due to governance issues, rising debt, and fierce competition from emerging supermarket chains like Naivas, Carrefour, and Quickmart.
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A Company Voluntary Arrangement (CVA) led by administrator Owen Koimburi was first proposed in 2019 and only approved in 2020 after a second vote by creditors.
While the court win and the mall conversion plan offer hope, Uchumi continues to face an uphill battle. Legal challenges, a reduced footprint, and a weakened brand have made recovery difficult. The company’s shares remain low-value penny stocks on the Nairobi bourse, reflecting its ongoing struggles.
By Benedict Aoya
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