Uchumi Supermarket PLC has emerged victorious in a commercial dispute with Aljazeera City Market, after the High Court awarded it KSh26.7 million in special damages arising from a breached franchise agreement.
- •The court found that Aljazeera, which signed an eight-year franchise deal with Uchumi in October 2018, failed to meet several key obligations with the defunct retailer including full payment of the KSh 12 million goodwill fee, remittance of royalties amounting to KSh1,080,000, and rent totaling KSh 18,502,500.
- •The court also held the franchisee responsible for assets valued at KSh 1,092,621 that were taken from the business premises when the relationship collapsed.
- •Justice Josephine Mong’are ruled that Aljazeera had breached the terms of the agreement and failed to provide any evidence to support its counterclaims.
“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 KSh 1,092,621. The total claim is therefore proved,” the court ruled.
Aljazeera accused Uchumi of misrepresentation, unfair rent increases, and business sabotage. The firm sought a refund of the goodwill fee paid. The court noted that its claims were unsubstantiated as no witnesses were called and no documents were submitted in court. In contrast, Uchumi tabled substantial evidence and a list of the disputed assets, all of which the court accepted as proof of loss.
Uchumi’s Survival Plans
Franchising has emerged as a survival strategy for Uchumi, allowing the listed but defunct retailer to retain brand presence without the capital-intensive burden of running fully owned outlets. By licensing its name and business model to independent operators, Uchumi aimed to generate revenue and maintain visibility in the Kenyan stock market, which has been under pressure to delist the troubled firm.
Uchumi Supermarket plans to reposition one of its last standing assets, Lang’ata Hyper, into a shopping mall as part of a revenue recovery push. The firm disclosed during a recent creditors meeting that the conversion is on hold due to a legal dispute with a tenant, Hotspot, though the property currently hosts 10 active tenants. Lang’ata Hyper and the Unicity branch near Kenyatta University remain Uchumi’s only functional outlets.
The company’s collapse traces back to a 2006 receivership and deepened after 2015 amid governance failures, swelling debts, and intense retail competition. A Company Voluntary Arrangement (CVA) was first proposed in 2019 under administrator Owen Koimburi but only gained approval after a second creditors’ vote in 2020.
While the mall plan could offer a fresh revenue stream, Uchumi’s broader recovery has remained elusive, hindered by litigation, a shrinking footprint, and a brand long displaced by old rivals like Naivas and newbies like Carrefour and Quickmart. Meanwhile, its shares at the Nairobi bourse are merely penny stocks.