Collusion allegation: AUS bank and franchisor

September 18, 2008

In a Smart Company article by James Thomson called MP renews calls for investigations into mistreatment of Bakers Delight franchisee, he quotes:

NSW parliamentarian Joanna Gash has renewed calls for the Australian Federal Police to launch an investigation into accusations Bakers Delight and ANZ bank colluded to put a franchisee out of business.

Quoting emails between the franchisor and the bank, Gash alleges:

On Monday, Gash revisited the case in Parliament, producing emails from Bakers Delight chief financial officer Richard Taylor and ANZ executives that she says shows “plans had been conspired to terminate Ms de Leeuw’s franchise well ahead of time”.

The bank and franchisor deny all the allegations.

This is the first public AUS public allegation of the key franchisor:franchise banker relationship that I identified and wrote about in a 2005 paper for Industry Canada called Franchising Opportunism [free download].

The Royal Canadian Mounted Police did a 10 month investigation of a related predatory franchise lending matter. [free download: Mounties investigate ‘predatory lending’, Ottawa Citizen, March 25, 2006]

And Mr. Oudovikine is accusing the bank of transferring the loans to Country Style without his authorization before he had a chance to obtain a business plan and other financial details from Country Style.

Mr. Oudovikine says his case shows how big banks, franchisors and franchise brokers team up to take advantage of franchisees, many of whom are recent immigrants like him.

“It’s predatory lending. (CIBC) didn’t do any of the due diligence they should have done,” says Mr. Oudovikine, who sent the Citizen e-mails confirming the RCMP investigation. An RCMP official said the police force doesn’t confirm or deny investigation.

And the Canadian bank’s reaction?

Mr. Oudovikine says he has repeatedly contacted senior CIBC officials and executives about the loan dispute, to little effect. He alleges that CIBC breached the Canada Small Business Financing Act regulations that require lenders to conduct due diligence on borrowers, including their ability to repay loans.

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Roast McTurkey: Guess who’s for supper?

September 17, 2008

I’m still confused. But I never said I was the sharpest skewer in the drawer.

  • Who is John O’Brien calling a turkey?

The Chairman of the Franchise Council of Australia is quoted by James Thomson of Smart Company on September 15th in Franchise Council hits back at critics as saying:

  • “Let’s not let turkeys kill the goose that laid the golden eggs.”

All this poultry talk; It makes me hungry. Could it be that he just wants to have them over for dinner?

  • I’ll leave it to your judgment what Mr. O’Brien means by the word have in this context.

Take a quick look at this 1:05 Muppet Show skit and see how things sometimes boomerang when you bitch slap enough losers.


Homicidal McTurkey spotted in AUS

September 16, 2008

“Let’s not let turkeys kill the goose that laid the golden eggs.”

An interesting quote from John O’Brien, Chairman of the Franchise Council of Australia, NFC in a Smart Company article called: Franchise Council hits back at critics.

It seems Australia’s democratic process (ie. citizens speaking to politicians, members’ raising constituents’ concerns within parliament, Hansard records, governments asking House/Senate committees to look into areas of potential legislation, Joint Committees asking for citizens to contribute, yaddayaddayadda) has AUS franchise industry’s self-proclaimed “peak body”, a little miffed:

The Franchise Council of Australia has urged members to “push back” against claims of franchisor abuse aired in Federal Parliament last week.

A number of MPs, including NSW member Joanna Gash, told Parliament last week of allegations of churning, bullying and intimidation by franchisors. On top of this, a Federal Parliamentary inquiry into franchising was flooded by submissions from disgruntled franchisees.

It appears that Mr. O’Brien is sensitive to any lack of confidence in Australia’s franchise industry:

“If you are as annoyed as I am at these continuing smears against franchising, I urge you to email or write to the committee handling the inquiry right away,” he writes.

“Let’s not let turkeys kill the goose that laid the golden eggs.”

It was unclear to me who Mr. O’Brien was calling a turkey (bird brain?). Each or all of the following:

  1. Mrs. Joanna Gash MP, (duly elected in 1996 then re-elected in 1998, 2001, 2004 and 2007 by the fine people of the Electoral Division, Gilmore NSW),
  2. the other 7 MPs who have joined her in demanding immediate parliamentary action to curb franchisor opportunism (see Franchising at a crossroads),
  3. the Parliamentary Joint Committee on Corporations and Financial Services or
  4. the clearly diabolically obsessed mastermind, the thuggish: Deanne de Leeuw.

In any case, Big Franchising is always more than willing to “hit back” to get their way.

  • As any good fascist knows, democracy is the last refuge for losers.

Oz Churning “Debate”

August 12, 2008

Jason Gehrke writes a weblog called Franchise tips and trends in http://www.smartcompany.com.au. His latest article, Churning: The dark side of franchising, is predictable.

I tried to submit a comment but was unable.

Here is what I would have submitted:

First the industry experts said “There is no churning.” Second, they say, “Well, yes, there is but…There’s just a few bad apples.” And, now, they add: Proving how bad a franchisor abuses their franchisees is difficult anyway (so why bother?).

Who are Australian small business investors going to believe: Franchise experts who keep changing their stories or returning foot soldiers from the franchise front? I have every confidence that people recognize BS when they see it.

1. Churning is a cluster of franchisor behaviors that results in financial catastrophe for the investor. These exercises of discretion within the incomplete contract are perfectly observable, auditable and quantifiable.

How often the abuse happens is irrelevant. Every franchisee knows what happens when you step out of line. Crucifixion was a very effective behavior modification technique.

2. There are no “good” systems or “bad” brands. The ability for franchisors to exercise their discretion in an abuse way (opportunism) arises from the very heart of the relationship. In franchising, the franchisee owns the majority of the store’s assets but the franchisor controls them. It is its great strength and its great source of abuse (it’s someone else’s money).

Attributing intentions (Oops sorry to cut your head off, there buddy. Does it ease your pain that I, admit, am an idiot?) means less than nothing. A family’s bankruptcy forms do not list someone else’s intentions.

3. To say that it is difficult to prove predatory business practices is a misrepresentation.

In Ontario, Canada, Gillian K. Hadfield presented a very simple rule to determine if a franchisor’s behavior was opportunistic: Would the decision in question have been made IF the franchisor HAD owned the franchisee’s assets THEMSELVES? If no, then the franchisor likely abused their dominant contract and economic position.

Example: Would the franchisor voluntarily pay the same price for the products that they FORCE their franchisees to buy from head office? Yes or no. Would they buy or shop around and get better value from another source of supplies? Is the contract being used to squeeze a hidden franchise tax from captured investors? Same thing with head leases, equipment purchases, renewals, etc.

Big Franchising wants everyone to stay asleep and they have a +30 years Oz history of saying anything to maintain their dominance. Get Smart.

Franchising is Unsafe at any Brand.

Les Stewart MBA
Midhurst Canada
lesstewart.wordpress.com


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