A franchisee and one-time state representative for ice-cream and hot dog chain Wendys Supa Sundaes has shared the heartbreaking tale of how the dream of owning a fast food business led to losing his job, and later divorce and suicide.
As SmartCompany recently reported, 116 Wendys stores have either collapsed or been taken over by management over the past eight years. By late last year, Victorian stores were being advertised with an asking price as low as $59,000.
In that time, NSW franchisee Trevor Banks received a letter stating his contract with the chain would not be renewed. Meanwhile, WA State Liberal MP Peter Abetz, Senator Nick Xenophon and Peter Strong were locked out of mediation talks between Wendys and another former franchisee named Peter Coventry after locks on his two Alice Springs stores were changed.
Between 2000 and 2008, Ian O’Neill owned the Wendys franchise in Kings Meadows, south of Launceston. In that time, he also served both as Tasmania’s franchisee trainer and the elected representative for the Tasmanian franchisees.
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O’Neill took on the venture with experience in business, having previously grown his small takeaway business with a turnover of $33,000 to $78,000 over the space of about three years.
However, O’Neill told SmartCompany it didn’t take long for his relationship with the national fast food chain to sour. By 2008, O’Neill had sold the business for just $25,000.
“When I entered into the Wendys’ system in 2000, a very rosy picture was portrayed; including an amount of $30,000 left in the business which I was assured was enough to cover a complete store refurbishment. This assurance was given by Wendys,” O’Neill says.
“Time progressed and there was no store refurbishment. When I inquired as to when this refurbishment was to happen, I was informed by Wendys that it was now going to cost in excess of $80,000, but not to worry, as the funds being held by Wendys was gathering interest.”
“After a further 12 months, I decided to take the refurbishment into my own hands. When I asked for my $30,000 plus interest accrued, I was informed that there was no interest as the funds had been placed in a trust account that did not accrue interest. I went ahead and did the refurbishment for $43,000. Included in the refurbishment were a generic set of computer generated plans for which I was charged $5000.”
According to a recent listing for a Wendys store, franchisees are charged a royalty of 6% and an advertising levy of 4%, paid out of sales. The chain also provides training in a store for three weeks and in a classroom for a week in Adelaide at a cost of $10,000 plus any legal costs.
O’Neill confirms this was correct but says the support offered to franchisees was not what it seemed.
“Wendys charged a weekly fee for their marketing department, and all the stores had to buy through its approved suppliers,” O’Neill says.
“Every Wendys state had ‘business development managers’, that were supposed to help franchisees grow their business. These ‘business development managers’ were in fact compliance managers, looking for compliance breaches against stores, and in particular those stores that could see through the facade of the marketing of Wendys. Today, should a Wendys franchisee have a so-called compliance breach, then that franchisee will incur a $600 fine.”
Over and above the advertising royalty, O’Neill says franchisees were expected to give away discounted products to attract customers.
“Wendys marketing plan consisted of franchisees giving product away to the public in the name of ‘growing the brand’. There were no discounts on the products bought, all being bought at full wholesale price and given away freely at the cost of the franchisee.”
“As well as this, Wendys would annually give out some 500 calendars to each store to be given to the public. On these calendars were monthly giveaways. I calculated that if every calendar was utilised, it was going to cost each franchisee between $16,000 and $17,000 annually.”
But when O’Neill raised his concerns about the calendar promotion with Wendys, it brought his issues with the chain’s head office to a head.
“As the state representative, I raised this issue at national level, and pointed out that this calendar giveaway was in addition to our weekly 5% marketing fund,” he says.
“For my enquiry, I was informed that I was not a Wendys ‘team player’, and it would be best to resign my two state-held positions. This I duly did, as Wendys were totally lacking in any ethical conscience towards their franchisees.”
O’Neill says the pressures exerted on franchisees took their toll at a personal as well as a professional level.
“For my own personal time in Wendys, the pressure exerted by Wendys destroyed a 30-year marriage between myself and my then wife, who later committed suicide,” he says.
Beyondblue head of research and resource development (workplace), Nick Arvanitis, told SmartCompany resources are available for business owners who find themselves suffering from depression or anxiety.
“Small business owners are in a unique position and face a range of additional risk factors such as longer working hours (particularly during the start-up phase), financial uncertainty and expectations for their business to flourish,” he says.
“These pressures can contribute to depression and anxiety and we encourage people to reach out if they are struggling.
“Beyondblue has practical information for small businesses in the factsheet Ten things you can do to make your workplace mentally healthy available to download at beyondblue.org.au/resources.”
SmartCompany contacted Wendys but received no official comment prior to publication.
Mental health professionals are available 24/7 at the Beyondblue Support Service on 1300 22 4636 or via www.beyondblue.org.au/get-support for email or online chat (3pm till midnight).