The long-running franchising spat between BRW rich lister Jack Cowin and fast-food giant Yum! has entered mediation, with Cowin succeeding in pushing back the closure of his KFC stores until September.
Cowin, whose Competitive Foods company is Australia’s largest franchisor of restaurants, and Yum!, franchisor of KFC and Pizza Hut in Australia, now have 45 days to reach an agreement.
The spat centres on Yum!’s decision to not renew franchising agreements with Cowin’s Competitive Foods, with Cowin accusing Yum! of unconscionable conduct.
Cowin, whose wealth has been valued at $618 million, says Yum! refused to renew the franchise agreement “with no legal basis” so it could transfer goodwill to its own account.
But Yum! notes that it had told Cowin as far back as 2003 that the franchising agreements would not be extended – giving him plenty of time to offload the assets – and calls his criticisms “far-fetched” and “baseless and without merit.”
A spokesman for Yum! said this morning that the company welcomes the opportunity to have the matter settled as soon as possible. Competitive Foods was also contacted for comment this morning.
The 15 KFC stores earmarked for closure tomorrow have been handed a reprieve until September, with mediation to be held over the next two months as ordered by Federal Court judge Justice Geoffrey Flick last Friday.
A trial will take place in September if an agreement can’t be reached.
Cowin is both franchisee and franchisor, operating dozens of KFC restaurants in WA under franchising agreements with Yum!, plus hundreds of Hungry Jack’s store. He is also a shareholder in Domino’s Pizza and Ten Network, and a supporter of Australia’s richest person Gina Rinehart.
He is seen by many as a divisive figure in franchising, with the Franchise Council accusing him of “distorting the regulatory debate” by agitating for state-based franchising legislation, to suit Competitive Foods’ interest.
But franchisee activists say the case highlights the unenviable position of franchisees when a franchisor declines to extend a franchising agreement.
Frank Zumbo, associate professor business law at the University of New South Wales, has hailed the dispute as a “landmark case” for unconscionable conduct.