Stories about franchisees losing out at the hands of their franchisor are usually mum and dad tales of woe. This one is different.
The world’s biggest fast-food company, US-based Yum Foods International, which owns the KFC brand, is refusing to renew the franchise licenses held by Competitive Foods in Western Australia, according to a newspaper report.
Competitive Foods Australia, owned by franchise hall-of-famer Jack Cowin and worth an estimated $350 million, operates 46 KFC restaurants in WA, four in the Northern Territory, as well as 300 Hungry Jack’s outlets around Australia.
Labor MP Paul Papalia told the Western Australian Parliament last week that Yum Foods had offered to buy Competitive Foods KFC licences for “significantly less than their market value”.
The West Australian newspaper has reported that Competitive Foods has rejected the offer. As a result, Yum will take control of each outlet as its franchise agreement comes to an end. The first licence to expire is the KFC in Rockingham on 19 November.
Papalia asked Premier Alan Carpenter to intervene and announced that an inquiry would be launched into the operation of franchising in WA and would report to Parliament by 31 March next year.
The politician was concerned that the franchisor could potentially deny the franchisee the economic benefits of building a strong and successful business, without any compensation for the goodwill built by the franchisee.
The problem with this argument is that this is the great limitation of franchising for franchisees, the franchisor owns the brand. The franchisor always has the power to walk away and take the brand with them at the end of the agreement.
Meanwhile, disgruntled former Bakers Delight franchisee, Deanne de Leeuw has called for a federal inquiry into franchising.