Franchise issue

[Ste 138]

I hope someone can help with the following franchise issue. Sorry for the war & peace explanation but I feel its important to paint the picture.

I purchased 2 franchise areas with a company who supply HIPs (Home Information Packs in May 2007 that started on the 1st Aug 2007 with a renewal / refund option after 12 months.

My role was to provide the EPC (Energy Performance Certificate) of which there were target amounts promised within the contracts. I saw this as quite a safe investment as, if the target amounts were not met by the company and the renewal option not taken, they would refund the initial investment on a pro-rata basis when the 12 month period was up.

The government rolled out HIPs on a phased basis. 4 bed properties on the 1st Aug 07, 3 bed on the 10th Sep 07 and the remaining properties on the 14th Dec 07.

On 8th April 08, I was given the option to extend the renewal date of my contract until Jan 09 or stay at the previously set 1st Aug 08. I opted to stay at 1st Aug 08 with the intention of have my fee returned as biz levels had been so low (0.27% of target earnings in one area and 2.2% in the other).

On the 22nd July 08 I received an email stating all franchise contracts will be automatically extended until the 14th Dec 08 to give the company a full year to assess the area performance with all properties rolled out. They sited Force Majeure, external powers beyond their control (which is a clause in the contract) as the reason for the delayed contract renewal. However, the Force Majeure paragraph goes on to state ‘but the affected party shall promptly upon the occurrence of any such causes inform the other parties in writing stating such cause has delayed or prevented its performance’. I was informed a week before the due date of renewal, 12 months after the initial roll out commenced, 7 months after the final roll out of 1 & 2 bed properties and over 3 months after being asked what I wanted my renewal date to be set to. They have not therefore informed me promptly in my opinion.

I expected to receive a £14,000 refund on 1st Aug 2008 and feel the company are in breech of contract. Have I got a case that would stand up in court.

Regards
Steve

[Sparky331]

Steve,

This wouldn't happen to have been a company in the Warrington area by any chance? If so I could have some useful information for you but sorry I can't offer any help on whether it would stand up in court. Perhaps one of the solicitors on the forum will come back to you.

Bob

[The Dispute Resolver]

It would be necessary to see the full franchise agreement but the usual effect of a 'Force Majeure' clause is to give some protection against claims for damage due to non-performance by the franchisor and ,as such, would not normally apply to remove a right to a refund or change the renewal date.


I have written here previously that franchising disputes are very suitable for mediation (many factors not least the need for franchisors to try to limit 'me too' claims) Given that the low HIP sales will likely have effected all franchisees, there is the risk that if you sue, you only encourage a bandwagon effect that may result in no adequate funds being available to reimburse you. Litigation is too slow in this situation.

We now have a consultant to advise our mediators in franchise mediations being someone who has personally held franchises in a number of the most well known high st name franchises. Let me know if you want to chat privately about this.