- Original Poster
- #1
Hi All.
I would be really grateful for the thoughts and opinions of you on our current predicament!
At the beginning of January this year, we took over two territories of a successful, nationwide franchise. One territory was a going concern, having been run by the head of the franchise and trading successfully, as he slowly started to sell off his four territories around his own home base to concentrate on expanding the model into Europe. The second territory was a virgin territory, but as we were geographically based on the border of the two, it made sense to us to purchase them both. We felt like we did a fair bit of research and due diligence; received the numbers for the previous two financial years from the franchisor and were happy with what we saw, spoke to various other franchisees both recommended by the franchisor, and others who were not. We looked into local competition, spoke to contractors who would have been our main source of B2B referrals, spoke to the bank who later gave us a business loan for the purchase, did extensive cashflows, made many marketing plans etc. etc. Essentially, while I'm not saying we did EVERYTHING possible, I feel like we went into this with a fair idea of the good and bad.
From the day we were handed over the franchise, something felt a bit off. We were expecting bookings to come, as the franchisor was supposedly still booking clients for us to take over when the time came, and the lead time for the work is 1 - 2 weeks. However it came with none. We had three income generating areas; the brand website with contact form to be found both organically and with Google Ads (plus other online presence i.e. Facebook and Instagram), a network of local contractors we had started building up before the takeover, who would refer clients needing our services; 42 promised account clients who would book in with us between weekly and monthly, depending on demand. At the moment we seem to only be generating income from the web side of things, and the small number of local guys we have formed relationships with; nothing from account clients, and the income from the website is much, much lower than expected. we have essentially just taken over the franchisor's website etc. We just cannot get our heads round this, seemingly, nor can the franchisor. I expected their to be a drop in turnover the first year; we are inexperienced with booking clients, probably slower on the job, so would not necessarily be able to maximise in year one, however we are currently trading at 50% of the previously prepared year end accounts (2017 -2018).
Having spoken to a number of fellow franchisees, we have heard something worrying. In January 2018, an employee of the franchisor (i.e. at the time would have been working in the territory we now own), left the franchisor and set up exactly the same business on his own, working in the area that is now ours in terms of the franchise. Having requested sales figures from this time until our takeover in January 2019 from the franchisor, I am anticipating a drop in sales, particularly from what are now our account clients, as I suspect these have all gone with the franchisor's former employee who would undoubtedly have a relationship with them. These were figures we were not given access to at the time, we were satisfied with 2016-2017, and 2017-2018 figures, especially as they were consistent. Plus we didn't know of this former employee.
Aside from my rambling, and based on the assumption that we are correct in a drop in sales, I am really interested to hear any thoughts on this; Has the franchisor acted deceptively, knowing that account clients we bought as goodwill had already gone elsewhere, and knowing that a former employee of his had set up in direct competition, but not telling us?
Thanks in advance
I would be really grateful for the thoughts and opinions of you on our current predicament!
At the beginning of January this year, we took over two territories of a successful, nationwide franchise. One territory was a going concern, having been run by the head of the franchise and trading successfully, as he slowly started to sell off his four territories around his own home base to concentrate on expanding the model into Europe. The second territory was a virgin territory, but as we were geographically based on the border of the two, it made sense to us to purchase them both. We felt like we did a fair bit of research and due diligence; received the numbers for the previous two financial years from the franchisor and were happy with what we saw, spoke to various other franchisees both recommended by the franchisor, and others who were not. We looked into local competition, spoke to contractors who would have been our main source of B2B referrals, spoke to the bank who later gave us a business loan for the purchase, did extensive cashflows, made many marketing plans etc. etc. Essentially, while I'm not saying we did EVERYTHING possible, I feel like we went into this with a fair idea of the good and bad.
From the day we were handed over the franchise, something felt a bit off. We were expecting bookings to come, as the franchisor was supposedly still booking clients for us to take over when the time came, and the lead time for the work is 1 - 2 weeks. However it came with none. We had three income generating areas; the brand website with contact form to be found both organically and with Google Ads (plus other online presence i.e. Facebook and Instagram), a network of local contractors we had started building up before the takeover, who would refer clients needing our services; 42 promised account clients who would book in with us between weekly and monthly, depending on demand. At the moment we seem to only be generating income from the web side of things, and the small number of local guys we have formed relationships with; nothing from account clients, and the income from the website is much, much lower than expected. we have essentially just taken over the franchisor's website etc. We just cannot get our heads round this, seemingly, nor can the franchisor. I expected their to be a drop in turnover the first year; we are inexperienced with booking clients, probably slower on the job, so would not necessarily be able to maximise in year one, however we are currently trading at 50% of the previously prepared year end accounts (2017 -2018).
Having spoken to a number of fellow franchisees, we have heard something worrying. In January 2018, an employee of the franchisor (i.e. at the time would have been working in the territory we now own), left the franchisor and set up exactly the same business on his own, working in the area that is now ours in terms of the franchise. Having requested sales figures from this time until our takeover in January 2019 from the franchisor, I am anticipating a drop in sales, particularly from what are now our account clients, as I suspect these have all gone with the franchisor's former employee who would undoubtedly have a relationship with them. These were figures we were not given access to at the time, we were satisfied with 2016-2017, and 2017-2018 figures, especially as they were consistent. Plus we didn't know of this former employee.
Aside from my rambling, and based on the assumption that we are correct in a drop in sales, I am really interested to hear any thoughts on this; Has the franchisor acted deceptively, knowing that account clients we bought as goodwill had already gone elsewhere, and knowing that a former employee of his had set up in direct competition, but not telling us?
Thanks in advance
