Behind the Headlines

Jason Gehrke, Director, Franchise Advisory Centre

This article appears in the November/December 2013 issue of Business Franchise Australia & New Zealand


Tecoma protestors take franchise fight from Melbourne to Chicago

A group of protestors who oppose the construction of a McDonald’s outlet at Tecoma in the Dandenong Ranges near Melbourne have raised $36,000 through crowdfunding to take their protest to the international headquarters of McDonald’s in Chicago.

The group aim to present the results of an online petition featuring more than 93,000 signatures protesting against the store to McDonald’s international CEO Don Thompson.

Additionally, the group has also taken out a large advertisement in the Chicago Tribune, which has led to further publicity for the group from the newspaper and NBC Chicago. Meanwhile a Supreme Court judge has urged the protestors and  McDonald’s not to “throw common sense out the window” and to consult with a mediator by November 12 or else return to Court.

The Supreme Court has extended an injunction against a group of protestors known as the “Tecoma Eight” to prevent them from trespassing and blocking construction traffic for a new McDonald’s outlet to be built in the Dandenong Ranges township  near Melbourne.

McDonald’s are also suing the protestors for interfering with its use of the land, and for damages arising from construction delays, which the company estimates will cost it lost sales of $10,000 per day if the originally scheduled opening date of  November 15 is not met.

The company is yet to specify the total amount of damages it is seeking, but has indicated that it is incurring costs of more than $58,000 per week in security and construction delay costs since work on the site stopped on July 3.

Automotive franchisor abandons franchisees after just 12 months

The shock withdrawal of automotive franchisor Opel from the Australian market barely one year since it entered has left its 20 franchised dealers with useless five-year franchise agreements, half-built showrooms, and significant losses from their  investment in the brand.

Opel made the shock announcement in early August, less than 12 months after entering the Australian market last September. A company spokesman said Opel could not sell its cars at the price needed to meet its volume targets, which were  expected to reach 15,000 sales within three years, but which were reported as reaching just 1,530 by June 30 this year.

Opel has indicated it will pay for unsold stock, demonstrator stock and signage, but dealers with showrooms under construction, or who have made losses on sales while building the brand may be expecting much larger payments. Others are  concerned that their customers will abandon them and are calculating the long-term damage to their reputations and other dealership operations. Warranty and service obligations for Opel vehicles will be performed by Holden.

Rental franchisees forced out of business for customer ripoffs

The franchisees of two separate appliance rental chains have been sanctioned by the Australian Securities and Investments Commission (ASIC) for irresponsible lending practices and for failing to hold proper credit licenses.

Franchisees of Zaam Rentals were found to be targeting indigenous communities, did not make reasonable inquiries about their customers’ financial positions, and failed to provide credit guides or other requirement information.

ASIC surveillance of another group of franchisees from Mobile Rentals (whose franchisor had their credit license cancelled by ASIC earlier this year), revealed that franchisees took none of the required responsible lending steps when entering into rental agreements.

Franchisees of both systems have been forced to exit the credit industry and give written undertakings, as well as to communicate to their former customers that their rental agreements have been terminated, that they can keep their rental products,  and that no further payments are required.

Travel chain to rebrand all Australian outlets at franchisor’s cost

Jetset Travelworld Group, the owner of Harvey World Travel, Jetset and Travelworld, has announced it will convert all three brands to a new brand ‘Helloworld’, starting early next year.

The three travel brands came together following the merger of Jetset Travelworld and Stella Travel Service in 2010. The single brand to be introduced next year will help the company leverage its large scale into customer recognition, with the  entrylevel changeover cost to be funded by the franchisor, not the franchisees

Kitchenware chain in administration

Australian kitchenware retailer King of Knives has been placed in voluntary administration by the company’s directors after the withdrawal of support by a major financier.

The 25 year old business has 60 stores in Australia and New Zealand, however administrators at BRI Ferrier are continuing to trade the business in anticipation of turning it around. The brand’s franchisees are not immediately affected by the administration, however four companyowned stores in New Zealand are likely to be closed, as well as some of the 40 companyowned stores in Australia.

Nando’s multi-unit franchisee charged for illegally employing foreign workers

A franchisee of 13 Nandos outlets in Melbourne has been charged with 22 visa violations after hiring around 20 students from Indonesia over two and half years, with potentially up to 90 charges to be laid as a result of a Department of Immigration  and Citizenship investigation.

The franchisee, Anni Kartawidjaja, is accused of organising the Indonesians to travel to Australia, and providing accommodation at her properties, but deducting rent, phone and heating costs from their salaries. The charges carry a penalty of up to  one year’s imprisonment. The franchisee also directed several store managers to turn a blind eye to the irregular employment arrangements.

Nando’s Australia, which has 271 restaurants employing 5,000 people, stated that it has strict policies about lawful employment and fair work practices, and that it was also investigating the franchisee.

Drive-throughs added to coffee and pie retail franchises

Gloria Jeans has announced it will open its first drive-through coffee outlet in Australia at North Lakes, a growing residential area north of Brisbane. It joins other coffee franchises such as Muzz Buzz and Zaraffa’s to offer drive-through coffee.

Meanwhile pie franchise Pie Face has also announced it will open its first drive-through at Nerang, near the Gold Coast, and include drive-throughs in future stores to be opened in New Zealand and the United States. The company has also announced  it will commence selling a new pizza product called ‘pieza’.


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