Franchise wars head to court

The West Australian. 19 Feb 2018

The own­ers of two of the most recog­nis­able food and drink fran­chises in WA are at war with for­mer store own­ers.

The fran­chisors of Caff­is­simo and Crois­sant Ex­press are em­broiled in le­gal show­downs over al­leged bro­ken prom­ises, bun­gled busi­nesses and bad debts.

The West Aus­tralian can re­veal two for­mer fran­chisees of the Caff­is­simo cof­fee chain are su­ing fran­chisor Caff­is­simo Hold­ings Ptd Ltd in the Fed­eral Court, claim­ing promised prof­its of the busi­ness they were sold were vastly in­flated and prob­a­ble staffing costs hugely un­der­stated — re­sult­ing in the loss of hun­dreds of thou­sands of dol­lars.

The West Aus­tralian can re­veal two for­mer fran­chisees of the Caff­is­simo cof­fee chain are su­ing fran­chisor Caff­is­simo Hold­ings Ptd Ltd in the Fed­eral Court, claim­ing promised prof­its of the busi­ness they were sold were vastly in­flated and prob­a­ble staffing costs hugely un­der­stated — re­sult­ing in the loss of hun­dreds of thou­sands of dol­lars.

And in a sep­a­rate feud, own­ers of a num­ber of Crois­sant Ex­press stores around Perth are also in a le­gal bat­tle with the fran­chisor, Con­sol­i­dated Foods Pty Ltd.

The dis­putes around two well­known food and drink brands are the lat­est in a string of night­mare tales from fran­chisees, which led one sen­a­tor to call for a par­lia­men­tary in­quiry into the sec­tor.

For­mer Caff­is­simo fran­chisee Rob Sealey would un­hap­pily add his tale to the pile. In late 2016, he bought one of the flag­ship Caff­is­simo fran­chises in West Perth, lo­cated in a build­ing steeped in Perth barista his­tory.

Mr Sealey be­lieved the $120,000 deal was get­ting him a busi­ness turn­ing over up to $31,000 a month, based on the al­leged prom­ises of the pre­vi­ous fran­chisee.

In­stead, he claims in his Fed­eral Court pro­ceed­ings that the busi­ness was im­me­di­ately los­ing $5000 a month and that fran­chisor chief ex­ec­u­tive Michael Barr ad­mit­ted Mr Sealey had been “duped and mis­led”.

In­stead, he claims in his Fed­eral Court pro­ceed­ings that the busi­ness was im­me­di­ately los­ing $5000 a month and that fran­chisor chief ex­ec­u­tive Michael Barr ad­mit­ted Mr Sealey had been “duped and mis­led”.

“It’s been a bat­tle — stress­ful, emo­tional, painful,” Mr Sealey said.

In al­low­ing the al­leged fig­ures to be used, Mr Sealey claims in his pro­ceed­ings that the con­duct of the fran­chisor Caff­is­simo Hold­ings was “un­con­scionable”, and is su­ing for the ini­tial out­lay of $120,000 plus an­other $90,000 spent on rent and re­fur­bish­ment.

And he is not the only one. Fel­low Caff­is­simo fran­chisee Alan Evans is us­ing the same law firm to bring a dif­fer­ent Fed­eral Court writ against the Caff­is­simo fran­chisor, this time al­leg­ing he was given in­ac­cu­rate wage fig­ures for the the busi­ness he paid $150,000 for. Those staff costs, Mr Evans says, were dou­ble what he was told — while the busi­ness it­self came with lit­tle good­will from cus­tomers.

And he is not the only one. Fel­low Caff­is­simo fran­chisee Alan Evans is us­ing the same law firm to bring a dif­fer­ent Fed­eral Court writ against the Caff­is­simo fran­chisor, this time al­leg­ing he was given in­ac­cu­rate wage fig­ures for the the busi­ness he paid $150,000 for. Those staff costs, Mr Evans says, were dou­ble what he was told — while the busi­ness it­self came with lit­tle good­will from cus­tomers.

Mr Barr said he be­lieved the is­sues were headed for trial.

“We en­deav­our to work closely with all of our fran­chisees to pro­vide them with sup­port and as­sis­tance in the op­er­a­tion of their busi­nesses which are mostly fam­ily-run also,” he said in a state­ment.

“De­spite our best ef­forts, we some­times end up in dis­putes that are not read­ily re­solv­able by con­cil­i­a­tion and me­di­a­tion.”

Less than 100m from the door of Mr Sealey’s busi­ness is the West Perth Crois­sant Ex­press, one of a string of dis­tinc­tive yel­low-and-blue stores which have served Perth pas­tries since 1987.

Ac­cord­ing to those who used to be the faces of the fran­chise, not all is as cheery as the colour scheme.

One is now be­ing sued for more than $260,000 by Con­sol­i­dated Foods, claim­ing it is still owed fran­chise fees.

That writ claims dam­ages from the for­mer fran­chisees of the Ade­laide Ter­race store, who say they walked away in 2016 af­ter a night­mare ex­pe­ri­ence.

This month, a long-run­ning case between Con­sol­i­dated Foods and for­mer chief ex­ec­u­tive Neil Soares was back in the Supreme Court.