A Queensland couple who say they were forced to walk away from their failing Cold Rock franchise with hundreds of thousands of dollars of debt are the latest franchisees to voice their concerns about franchising, joining the growing chorus of allegations against franchisor conduct.
Aaron and Kylie Gibson told SmartCompany they have lost more than $370,000 through their Cold Rock Ice creamery franchise and have spent around $14,000 in a legal battle with company.
The Gibsons claim Cold Rock misrepresented the reality of becoming a franchisee to the couple before they purchased the business for $200,000 in December 2010 and offered “little to no support” when the couple struggled to make a profit or voiced their concerns with various franchisor decisions.
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“The perception was that we were buying the equivalent of a McDonald’s or a KFC, that they would help us, that all the procedures and policies would be in place and we would make a decent living,” says Aaron Gibson.
“But none of those promises were ever put down on paper. The week after we signed on the bottom line, the man I was originally dealing with wouldn’t answer calls,” he says, claiming Cold Rock subsequently never responded to “countless” emails and phone calls about the business’ struggles and cancelled scheduled franchisee meetings.
Gibson says the store, which was in a prominent location in Beenleigh, Queensland with significant foot traffic, never made a trading profit in the four years the couple owned it. He says they were forced to obtain a $100,000 credit card to mitigate losses and came close to losing their house over their personal debt.
The Gibson’s other allegations include claims they were made to purchase ice-cream from inferior suppliers, such as chocolate chip ice-cream without any chocolate chips, and being told they could not stock pre-packaged waffles, their best selling winter product, and instead had to purchase a $2000 company-approved waffle making machine.
“I realised I’d made the worst decision of out lives,” says Gibson. “I’d lie awake thinking about it.”
The couple say they were recently forced to walk away from the venture after failing to find a buyer for the business, even though they had dropped to a sale price of just $9000.
But Stan Gordon, managing director of Cold Rock’s parent company Franchise Food Company, rejects the claims, telling SmartCompany the allegations are “without substance”.
“To suggest we did not return emails and phone calls is absurd,” says Gordon.
“We have an open door policy and welcome suggestions by franchisees. However, not all suggestions are implemented due to strategic direction, previous experience and brand suitability,” he says.
Gordon says over the seven-month period prior to the Gibson’s “unilateral closure”, the business was visited or contacted by Cold Rock over 14 times.
“Perhaps any advice and assistance given was not to their liking, and therefore they chose to not follow it,” says Gordon.
He says the couple abandoned the business and premises after they failed to provide any substantiation to their claims through formal franchise mediation.
“Like any business, franchised businesses need to be worked upon. Any franchise is not a recipe to sit back and hope that the cash will roll in,” says Gordon. “It’s a proven system, that requires dedicated and committed people to working in and drive and operate the business”.
However, Kylie Gibson rebukes Gordon’s comments, saying the couple themselves worked nights and weekends and poured in a significant amount of their own money to attempt to keep the business afloat.
She claims while Cold Rock may have contacted the business, the communications were in regards to requesting information such as profit and loss statements, and not in response to the couple’s concerns.
“They saw the decline [in the business] and never once contacted us to say, is there a problem?” says Kyle Gibson. “They say they reached out to us? If that was case we wouldn’t be in this situation.”
Gibson says her husband has been on anti-depressants because of the failure of the business and says she empathises with Wendys franchisees that have dealt with suicide as a result of their experiences with the franchise system.
“Every time I worked in the store I wanted to cry, I completely resented it. It was destroying our marriage, we were constantly fighting,” she says.
She says the couple only survived because of their resilience and reliance upon several other successful businesses they had started, after the failure of the franchise.
“Our other business was running OK, so we were some of the luckier ones,” she says.
However, Gordon claims it was these other businesses that may have led to the failure of their Cold Rock franchise.
“It is apparent that Mr Gibson had involvement in multiple businesses, which may have been to the detriment of his Cold Rock franchise business,” says Gordon.
Gordon also confirmed Franchise Food Company will pursue legal action against the Gibsons for ending their contact.
“For us, where any franchisee decides to unilaterally vary agreements or to not comply, we will protect our rights and the brand at all costs. Additionally, we will also not use the media to debate unsubstantiated allegations,” says Gordon.
But the Gibsons say their motivation for speaking out is to warn other potential franchisees and give a voice to those they believe are unable to speak out.
“Every single [Cold Rock franchisee] empathises with us, but they are either in a position were they can’t say anything because they are still trading or they want to put it behind them and move on,” says Aaron Gibson.
“I remember how they made us feel [before we signed the contract]. We felt excited, like we were going in as a team, but from the moment we signed the contract they made us feel we were on our own,” says Kylie Gibson.
“Mum and dad buyers get wrapped up in the story they tell you. You can only imagine the heartache for some of the less fortunate ones,” adds Aaron Gibson.