Tesco has bought the Paperchase brand and intellectual property, but not its stores, leaving over 800 staff and 106 landlords in limbo. Here, Beyond Corporate Real Estate Partner, Hannah Al-Shaghana, and Employment Law expert, Lucy Flynn, look at what the purchase means for the staff and landlords left out of the deal.

On 31st January 2023, high street stationary chain Paperchase collapsed into administration after several years of inflated costs and disappointing sales. Paperchase’s collapse came only five months after previous buyout by fashion chain Jigsaw in August 2022, with warning signs of trouble in January 2023 as the retailer said it ‘required additional funding’.

Tesco’s purchase of Paperchase came about through a pre-pack administration. The UK’s largest grocer purchased the brand and intellectual property of Paperchase; however, the deal does not include Paperchase’s 106 physical stores, which are due to close after a period of two weeks where customers can claim unspent vouchers. So, what does the buyout look like for the landlords of the 106 closing stores?

Beyond Corporate’s Real Estate Partner, Hannah Al-Shaghana, commented on how the purchase will affect the landlords of the closing stores: “This will be a very difficult time for the landlords of these premises as they will need to carefully consider their options now that they will be left with empty premises. They will need to actively remarket their premises but at the same time, they need to consider when/if they are prepared to surrender or forfeit the leases as this will ultimately leave the landlord burdened with the business rates liabilities.”

Tesco’s purchase of Paperchase comes at a time of expansion for the grocer, with plans to extend the brand offering to customers. Unfortunately, Tesco’s purchase of the brand and IP of beleaguered Paperchase is unlikely to bring much relief to its remaining staff.

Beyond Corporate’s Employment Expert, Lucy Flynn, comments: “Although the administrators have confirmed that the Paperchase shops will continue to trade in the short-term, Tesco is unlikely to be able to offer alternative employment to Paperchase staff in its own stores, having just this week announced its own plans to cut around 2,000 jobs.

“As such, the future of the Paperchase employees remains very uncertain and will largely be determined by the administrators in the next few weeks. Those staff who retain their jobs for two weeks after the administrator was appointed on 31 January 2023 stand a far better chance of recouping unpaid wages, holiday pay and pension contributions. However, unless a buyer for the Paperchase stores can be found, the remaining jobs are very likely to be lost.”