Food News

The forgotten casualties in the Made Establishment group fallout

With the collapse of the Melbourne restaurant empire, the spotlight has been fixed firmly on George Calombaris, writes Tristan Lutze. But the small businesses that form the backbone of the industry are often left behind.

After three years of tumult and a series of front page headlines, few people were surprised when Made Establishment entered voluntary administration in February. The move sounded a death knell for the hospitality empire led by George Calombaris and ignited fierce debate over who was to blame for the collapse. Only one thing is clear: there are no winners in this situation.

Hundreds of employees, from waiters and chefs to cleaners and support staff, lost their jobs overnight as the company’s 18 Melbourne venues were forced to shut their doors, including Gazi, Jimmy Grants and the newly opened Elektra.

But despite the high-profile nature of the closures and the ensuing rhetoric around “an industry in crisis”, one of the most significantly impacted groups has barely been mentioned. Producers and suppliers, the backbone of the hospitality industry, have been left out of pocket following the group’s collapse. It’s a knock-on effect of the restaurant empire’s wage scandals, which have forced local small businesses to cut back staff and face thousands of dollars in unpaid bills.

Gerry Katiforis runs Fresh Generation, a supplier of fruit, vegetables, eggs and native ingredients. He counts Made’s group of restaurants, as well as the AFL Grand Final and many of Melbourne’s top hotels, among his clients. Trading for almost 30 years, Fresh Generation sources seasonal ingredients directly from Victorian growers, whose produce Katiforis says is fundamental to the success of the venues they deliver to. “There was at least one of our products on every single dish, from the starter through to the dessert,” says Katiforis.

While his fresh produce sits abandoned in restaurant fridges, Made Establishment’s unpaid bills have left him struggling to cover the gaps in cash flow. “We don’t really have a leg to stand on when the administrators come in,” he says. “We always tend to be near the bottom when it comes to allocating funds.”

He says the absence of the group will take more than a year to recover from and that he’s already been forced to lose three employees. “It’s tough,” he says. “People don’t really think about those kinds of chain reactions.”

Despite his unpaid accounts, he remains grateful to Calombaris and Made Establishment, saying they remained “upfront and transparent” throughout their recent challenges. “There was no wrongdoing on their part, but there were large bills out there because we were delivering to so many large venues.”

For Lizette Snaith of Warialda Belted Galloways Beef, Made Establishment’s forfeiture marks the fifth time her business has been left with unpaid bills due to restaurant closures.

“It makes you feel like the produce is not valued and neither are the farmers or producers,” she says. “You hear about the banks, employees and ATO getting their money, but we’re lucky to get anything at all. If one of our products has been sold, we deserve to get paid for it.”

Snaith estimates her total losses from unpaid bills over the last 20 years have exceeded $10,000, putting undue strain on her small business. “I have to accommodate the excess stock and sell it at a discount. I’m going to be a bit nervous with any credit that other restaurants have with our business.”

Like Fresh Generation, Snaith has been in the industry for 30 years, supplying restaurants with a rare breed of grass-fed beef from her family-run operation. She believes small businesses like hers should be protected in the same way as employees.

“If the government wants small family-run agricultural businesses to keep on producing food, they need to come up with a way to help protect us,” she says. “It feels as if the Made group knew this was on the cards and took small businesses, suppliers and people along for the ride.”

Among Snaith’s customers was chef Matt Wilkinson, who opened Crofter Dining Room & Bar in Brunswick in January. He had taken over the lease of Made’s Hellenic Republic but was forced to close shop just four weeks later when the group entered voluntary administration. Wilkinson believes more should be done to protect food and alcohol suppliers, as well as other unsecured creditors.

“There are a lot of small companies that are owed money that they’ll probably never see,” he says. “It’s $2000 here and $900 there, but that’s a lot to a small operator and it all adds up. It’s the small-business guys that always seem to lose.”

Who’s to blame for the fallout?

In April 2017, Made Establishment self-reported underpayments of $2.6 million to the Fair Work Ombudsman. It resulted in diners’ loss of faith in figurehead Calombaris (who declined to comment for this article) and a downturn across the group that ultimately led to the operation being handed to administrators.

Prior to the collapse, Reuben Davis served as the executive chef of Elektra and Gazi, and also counts himself as a friend of Calombaris. He believes that the group’s self-reporting and quick attempts to repay employees demonstrate a lack of malicious intent. “George and Made fronted-up,” he says. “As an industry, we have to be prepared to forgive and move on.”

Duncan Welgemoed of Adelaide’s Africola is one of many chefs to have come to Calombaris’s defence. His support, however, is tempered with the understanding that fame, garnered from Calombaris’s decade as a judge on MasterChef, is a double-edged sword. “[George] has invited scrutiny, but he is by no means solely responsible for the situation.”

Others have their doubts, suggesting Made’s wage underpayments were part of a strategy to offset the industry’s famously low margins.

“These were not oversights or errors,” says Mark Best. The chef, who once led celebrated Sydney restaurant Marque, has been a vocal critic of Calombaris on social media since news of the underpayments was first reported.

“[George’s] fall is due to the betrayal people felt when they saw that he is just someone out to profit on their labour.”

Mark Best.

(Photo: Petrina Tinslay)

Anthony Hammel, who began his culinary career under Calombaris at The Press Club and would later work for Best at Pei Modern, equates the hospitality industry to modern-day slave labour. “Working a 90-hour week with no overtime was like a badge of honour. I know this isn’t only George’s fault, but it all started under his watchful eye at The Press Club.”

As for the defence that Made has back-paid staff, Best says this is “irrelevant. Also, the idea that he ‘self-reported’ is bullshit,” he says. “He sold the business to a new investor who under-reported after getting a good look at the books.”

Best is referring to the discovery of Made’s payment errors, reportedly triggered by an investigation into the group’s finances conducted by Swisse vitamins founder Radek Sali, who joined the group as co-investor and chair in 2016. The underpayments would prove greater than first thought, with closer scrutiny revealing a $7.83 million shortfall.

Wilkinson believes the payment scandal, while serious, was a smokescreen for other mismanagement within the company. “There were a lot of people in senior roles [at Made] who don’t know much about hospitality,” he says. He claims those in senior roles were aware of the company’s financial troubles in January, but still signed him on to open Crofter. The restaurant only completed 33 lunch-and-dinner services before closing in February. “That’s what I’m really angry about.”

Duncan Welgemoed concedes there are many challenges facing the hospitality industry, citing the notoriously high restaurant failure rate. Still, he remains optimistic about its future. “I’ve never seen a restaurant that is truly engaged with their customer base and providing a great experience at a reasonable price get taken down by competition.”

But Best says the industry is facing a real crisis. “The margins are wafer-thin and we suffer from oversupply.”

What’s in store for the future?

“I think that it’s an interesting time,” says Elektra’s Reuben Davis. “I hope this situation can create more open dialogue about what is needed to keep it becoming stronger for everyone involved.”

That dialogue, Crofter’s Matt Wilkinson insists, must include the suppliers, producers and farmers. This is the industry he believes are the most negatively affected not only by restaurant closures, but by questionable business tactics that see payments to ingredient, liquor and other service providers delayed to improve cashflow. “Large businesses are using other people’s money rather than the bank’s money, because a bank wouldn’t let it happen,” he says.

While he bears no ill-will towards Calombaris or Made Establishment, Fresh Generation’s Gerry Katiforis says suppliers have the most to lose in a changing hospitality landscape.

“Unscrupulous owners can take advantage of suppliers; we’re the people they can ignore,” he says, citing the lack of contracts, directors’ guarantees and government protections afforded to staff, property owners, banks and the ATO.

And despite his own disappointment at losing his fledgling business, it’s the idea of losing these quality suppliers that Wilkinson believes will most significantly damage the country’s already vulnerable restaurant industry.

“Once we lose those guys, we lose all our great food,” he says. “Nobody thinks about it. Nobody talks about it. Those are the people that are really going to get hurt because they don’t have a voice. They don’t have TV shows.”

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