Revealed: owner of former WH Smith stores is charging fee to use fictitious ‘family’ brand
The investment company that owns the former WH Smith high street stores is charging the retailer millions of pounds in licence fees for the right to use its widely derided TG Jones name, the Guardian can reveal.Modella Capital, which bought the chain from WH Smith’s parent company last year, on Wednesday blamed weak consumer spending as it laid out a restructuring plan that could shut 150 of its 450 shops.It also said “the forced name change from WH Smith has also negatively impacted consumer awareness”.However, documents seen by the Guardian showed Modella, which bought the paperclips to books chain for £76m last year, was so far owed £2.9m in royalty fees for use of the fictitious “family” name now used on the former WH Smith stores.
The stores were rebranded to TG Jones to distinguish the chain from the WH Smith stores in railway stations, airports and hospitals that are still owned by the original stock market-listed parent company.That arrangement was agreed at the time of the deal.Under the royalty agreement, TG Jones pays 1.03% of net revenues each month to the licence holder, Modella.This could be increased to up to 15% of net revenue if the restructuring plan is agreed.
The royalty fees are temporarily being paid into an account controlled by Aurelius, a finance company, after it stepped in to loan TG Jones £25m earlier this month,That arrangement – agreed between Modella and Aurelius – will remain in place until the loan has been paid off,It is understood that the setup is designed to prevent Modella from cashing in the takings without approval from Aurelius,Once the loan is repaid, Modella will receive the licence payments from TG Jones directly,The outstanding royalty fees built up since last June, which currently stand at £2.
9m, could be waived by Modella if the restructuring deal is approved.The ongoing fees will still be payable.Those fees will be temporarily capped at 50% of their current rate until next March, and then will return to 100% after that.It is understood the agreement does not require the actual transfer of cash from TG Jones but does mean a debt builds up on the books.That debt could then be paid to Modella if the business calls in administrators or if it returns to profitability.
Aurelius owned the Body Shop before it fell into administration in 2024.The royalty deal emerged in a document laying out the aggressive restructuring plan under which stores could close and rents slashed on dozens more.TG Jones said it was likely to have to call in administrators if creditors did not approve the deal.One creditor said the restructure process was “pretty aggressive” and “tough to swallow”.They were surprised by the licence fee arrangement.
TG Jones has stopped paying business rates and delayed payments to suppliers as it attempts to conserve cash.It warned creditors it feared running out of money after sales slumped from September, the document revealed.TG Jones said it currently owed suppliers £4m and had deferred £3.4m in business rates.It has agreed to delay payment of £8.
4m to HMRC over six months after it slumped to a £18,6m loss between September 2025 and March this year,The restructuring document said sales worsened significantly as the retailer gradually switched to the TG Jones name from WH Smith, slumping by 12% between September and March,The trading difficulties prompted the retailer’s suppliers’ insurers to withdraw cover for invoices to TG Jones, resulting in some refusing to sell the retailer goods and others providing “materially worse” terms,The chain said it was “facing acute cashflow and liquidity pressures” caused by “the loss of customer loyalty associated with the WH Smith brand, continued inflationary pressures and recent adverse fiscal policies, namely increases to employer national insurance contributions and the national living wage”.
Under the restructuring plan proposed to creditors, eight of the chain’s remaining 450 stores will close immediately, while Modella is demanding 100% rent holidays on about 100 more – which are likely to close if the plan is approved in late June,The company also wants 75% rent reductions on hundreds more stores for a year, with cuts of between 15% and 75% beyond that period,Modella has said the plan is an “essential part of the company’s turnaround” under which it will invest £35m,It said the restructure was “designed to protect the substantial core of the store estate and create a stronger, more sustainable business that can continue to serve customers for years to come”,The company’s creditors, including landlords, are set to vote on whether to implement a restructuring plan in late June with the aim of winning final court approval by 29 June.
TG Jones is likely to struggle to win support from landlords as its difficulties follow the collapse of fellow Modella-owned chains Claire’s and the Original Factory Shop, which have closed all stores with the loss of about 2,500 jobs,Modella’s Hobbycraft chain also closed numerous stores under a restructuring plan last year,WH Smith’s travel stores, which were not part of last year’s deal and remain owned by the stock market-listed group, continue to trade unaffected,Modella declined to comment,
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