Urgent advice on getting out of a franchise Agreement

Log in to reply
J

James Madden

  • #1
    I took on a 10 yr franchise last October and have sunk all my money into the business. Despite working round the clock the business is failing, and currently in debt to about 15,000 but rising by 1000 a week in rent arrears to the Franchise company. The Agreement is in my name.

    Is there ANY way I can get out of this Agreement, as there appear no provisions in it for me to get out. Only the Franchisor can end the agreement and it says I will be liable for all monies up to the end of the original agreement which has 9 years + left!!!

    have spoken to the company and they say if I hand back the keys they will take me for everything I have got, house, car, make me bankrupt, etc. I dont want this to happen, I cant sell the franchise as I am prevented from selling it for 1st 2 years, and its losing money very very fast. I need help before I lose everything.

    is there ANYTHING I can do to get out and not have my house and personal assets seized.
     
    S

    snipe12

    Free Member
    Nov 2, 2007
    327
    42
  • #2
    You need to speak with a solicitor who deals with contract law.

    It is highly unlikely they could take everything off you but a fair settlement fee would have to be worked out.

    A solicitor may find a loop hole in the contract so see one asap before another 1000 in debt appears.

    Good luck.
     
    Upvote 0
    C

    Chris Ashdown

    Free Member
    • Dec 7, 2003
    13,394
    3,010
    Norfolk
  • #3
    Why is it failing, can you identify the reason, Lack of sales, Not enough profit, Misleading claims in contract etc

    If it's lack of sales then maybe someone can give you some advice, there is lots of experience here on the forum, quite oftem people dont realise how much effort has to go into this field and how easy it is to fail

    I would suggest you first contact a contracts solicitor to have a look at the contract and see what can be done, maybe a couple of hundred but at least you know the full picture, He will need you to help him by identifying where it has gone wrong, and why, so you need to collect all information given by the company to you and write it all down.

    £1000 a week seems a massive amount to pay, who is the franchise and what do you do or sell

    Most area's have a small firms assistance company under different names that give out good advice for free suggest you contact your local council
     
    Upvote 0
    M

    Mister B

    Free Member
    Aug 31, 2007
    2,658
    639
  • #4
    I agree with Chris...instead of getting straight out and risking financial ruin, try and find out the reasons as to why you are failing. look to the franchisor for support.

    Whilst you are doing the above, speak with a franchise lawyer who maybe able to find an exit route for you. Maybe one of the reasons for failure is the lack of support/training from the franchisor?

    Mister B
     
    Upvote 0
    J

    James Madden

  • #5
    Chris Ashdown said:
    Why is it failing, can you identify the reason, Lack of sales, Not enough profit, Misleading claims in contract etc

    If it's lack of sales then maybe someone can give you some advice, there is lots of experience here on the forum, quite oftem people dont realise how much effort has to go into this field and how easy it is to fail

    I would suggest you first contact a contracts solicitor to have a look at the contract and see what can be done, maybe a couple of hundred but at least you know the full picture, He will need you to help him by identifying where it has gone wrong, and why, so you need to collect all information given by the company to you and write it all down.

    £1000 a week seems a massive amount to pay, who is the franchise and what do you do or sell

    Most area's have a small firms assistance company under different names that give out good advice for free suggest you contact your local council
    Click to expand...

    Its a pub franchise under Mitchell and Butler......the rent is £52K a year, hence around £1000 a week...
     
    Upvote 0
    J

    James Madden

  • #6
    Mister B said:
    I agree with Chris...instead of getting straight out and risking financial ruin, try and find out the reasons as to why you are failing. look to the franchisor for support.

    Whilst you are doing the above, speak with a franchise lawyer who maybe able to find an exit route for you. Maybe one of the reasons for failure is the lack of support/training from the franchisor?

    Mister B
    Click to expand...

    its due to the fact we HAD (under the agreement) to use their nominated accountants, Milestone, who have FAILED to provide us with any accounts since November last year....if it was not for this lack of accountant feedback, we would not be in this current mess.....can I argue this with them legally? The Fanchisor has tried to chase them up on our behalf, but the accounts have never been delivered to us, plus they actually gave us wildly innacurate cash flow projections in the first place for the growth rate of the business.......we feel we have been left on our own with lack of support for sure
     
    Upvote 0
    S

    snipe12

    Free Member
    Nov 2, 2007
    327
    42
  • #7
    Now I know why you're struggling. All the franchise pubs are a joke. I have worked for the brewery, in technical services and my father had a pub. It is very hard to make money in one of those pubs due to the massive mark-ups they add.

    Play hard ball with them for a rent reduction. They will likely cave as they won't want another empty pub. You haven't got anything to lose if the solicitor cannot break the contract.
     
    Upvote 0
    M

    Mister B

    Free Member
    Aug 31, 2007
    2,658
    639
  • #8
    James Madden said:
    its due to the fact we HAD (under the agreement) to use their nominated accountants, Milestone, who have FAILED to provide us with any accounts since November last year....if it was not for this lack of accountant feedback, we would not be in this current mess.....can I argue this with them legally? The Fanchisor has tried to chase them up on our behalf, but the accounts have never been delivered to us, plus they actually gave us wildly innacurate cash flow projections in the first place for the growth rate of the business.......we feel we have been left on our own with lack of support for sure
    Click to expand...

    I sympathise. No idea what your chances are, speak with a lawyer who specialies in franchise law. other people have suggested Nina Moran Watson.

    Good luck with it.

    Mister B
     
    Upvote 0
    C

    Chris Ashdown

    Free Member
    • Dec 7, 2003
    13,394
    3,010
    Norfolk
  • #9
    James Madden said:
    its due to the fact we HAD (under the agreement) to use their nominated accountants, Milestone, who have FAILED to provide us with any accounts since November last year....if it was not for this lack of accountant feedback, we would not be in this current mess.....can I argue this with them legally? The Fanchisor has tried to chase them up on our behalf, but the accounts have never been delivered to us, plus they actually gave us wildly innacurate cash flow projections in the first place for the growth rate of the business.......we feel we have been left on our own with lack of support for sure
    Click to expand...

    It gives a glimmer of hope. but talk to both a solicitor and the company, not on the phone but in a office with at least one other person to give you support and also act as a independant record of what was said(might be better to not be family) and tell them what the solicitor has advised you to do.

    Dont waste time its friday tomorrow, get in and see the solicitor, preferably one from a larger group to add more weight and unfortunatly slightly more cost, but experts do cost more
     
    Upvote 0
    S

    Sian Wood

  • #10
    Hi Chris, I dumped my franchise last year under the same threats that you are under. Franchisees have no rights. See if you have a case for misprepresentation. Google Peart Stevenson Associates v Holland 2008. I set up on my own a year ago and they are now trying to get me to cease trading, pay them any money I earned and give them all the information I worked 70 hours a week to gather. I'm not allowed to use words beginning with C on here. There's too much of this about and the franchise organisations only protect the franchisor while the franchisees, made almost bankrupt are unable to afford the legal fees to fight. Is there not one lawyer out there prepared to take this issue on?
     
    Upvote 0
    J

    James Madden

  • #11
    What is the usual process if a Franchisor decides to pull the plug on a franchisee and end the agreement....does the franchiseee get sued for the whole of the original term rent and costs, or just the costs up the point the agreement is ended by the franchisor...is there a legal precedent for the usual procedure? Can you franchisor declare you bankrupt? Will the franchsior sue you if you negotiate and try and come to a plan to pay off the debts? Will the franchisor demand you sell your house to pay off unpaid rent?

    And if the franchisee gives up on the agreement and hands back the keys, is there any difference in the legal processes that happen afterwards? is it best is the franchisor ends the agreement rather than franchisee just handing back the keys and saying they have had enough?
     
    Last edited by a moderator:
    Upvote 0
    C

    Chris Ashdown

    Free Member
    • Dec 7, 2003
    13,394
    3,010
    Norfolk
  • #12
    James

    You started this post on the 11th yet still sound today like you have not had proffessional advice, thats getting on for another £1000 whilst you dilly dally around, just get and see a lawyer at 09:30 tomorrow morning and get the proffessional answers you need, and dont forget to take all your papers with you.
     
    Upvote 0
    J

    James Madden

  • #13
    Chris Ashdown said:
    James

    You started this post on the 11th yet still sound today like you have not had proffessional advice, thats getting on for another £1000 whilst you dilly dally around, just get and see a lawyer at 09:30 tomorrow morning and get the proffessional answers you need, and dont forget to take all your papers with you.
    Click to expand...

    I cant afford a lawyer...that is why I am on here.....I am 50K in debt and cant even fill my car with fuel
     
    Upvote 0
    C

    CertaxBexley

    Free Member
    Jul 6, 2008
    348
    38
    Bexley, Kent
  • #14
    Most lawyers offer a free initial 1 hour or so consultation.
    If you are that much in debt, even if the business is a Ltd, I would suspect that personal guarantees were in place.
    The opposing party would have to take legal action against you, and then if they receive a judgment, take further action to petition for Bankruptcy. All costing them money.
    Assuming you have a partner & a mortgage or any other debts assigned against the property the asset in the property would be in the region of 50% between the selling price less selling costs and the debts against the property
     
    Upvote 0
    J

    James Madden

  • #16
    thanks for that, I am waiting to hear from the area manager because I am tryin gto negotiate a rent reduction so the business can be saved.......if they answer is no and they wont budge, then I will be certainly taking full legal advice as the business is not sustainable at the present extortionate rent.

    Yes I know I agreed to that rent and signed the agreement, but 8 months ago the credit crunch had not really hit this area at all, and now its hit hard....
     
    Upvote 0
    The Resolver

    The Resolver

    Business Member
    • Mar 31, 2006
    3,864
    4
    1,638
    Chester and London
    themediationroom.leadpages.co
  • #17
    James, I do a lot of franchise work - from both sides- i e I have set up franchises and drawn up franchise agreements and currently am consultant to one (different field to pubs) which work involves negotiating issues with franchisees. I also advise prospective and current franchisees - I have provided many UKBF members with my list of questions to ask franchisors before taking the plunge. See here.

    You are not alone. The pub trade is in decline . Pub companies are maintaining wholly unrealistic rentals ,whether by franchises or tenancies, and slowly killing off their own business. Management, trained within the protective cocoon afforded to a franchisor. are out of touch with the real world.

    Signing up to a pub franchise at high rentals as recently as last October was a wholly bad decision. The question is what representations were made. How bad were they? Did anyone lie to you? Also, did you take advice along the way from a lawyer or financial advisor referred by the franchisor? Were you given any warning? If the lawyer failed to ask key questions he may be liable in negligence to you. The failure to obtain the accounts may be key. Were you referred by the company to a 'friendly' bank manager who they claim was expert on franchising? They may have breached their duties to you under a conflict of interests. All sorts of possibilities so do not panic!

    One possible big factor in your favour is that there may be many other franchisees suffering the same as you. Are you in touch with any? make some enquiries The one thing a franchisor dreads is the franchisees ganging up. Best to work as a group so sharing cost.

    I would be happy to have a non-chargebale chat with you by phone. I'll pm my number

    BTW edit out the franchisors name from your posting (No 5). This thread comes up on a search against their name which could be spotted by them on a brand protection trawl.
     
    Last edited:
    • Like
    Reactions: fisicx and James Madden
    Upvote 0
    S

    Sian Wood

  • #18
    I've opened a group on facebook. I would really like to see how widespread this is. The group is called "victims of unfair franchise agreements" and I've put a disclaimer on it to say that membership does not mean that you are implying you're a victim of your franchise but obviously if anyone does want to openly talk about the problems with their franchise they can. I have also started another group that is secret so that those who want to discuss their problems without the franchise finding out. That group is by invitation only. My aim in this is to get enough genuine grievances to get questions asked in parliament. Hope to see you there. Please spread the word on this and hope to see you there. Join the group and you'll find me there.
     
    Upvote 0
    Log in to reply

    Latest Articles

    Join UK Business Forums for free business advice
    Top Bottom
    Community
    Articles
    Menu