“We have been hurt so much”: Trouble for Eagle Boys pizza franchises
Monday, October 6, 2014/
Stories of financial hardship and expensive legal battles involving pizza chain Eagle Boys have emerged, with a number of the chain’s franchisees opening up about their experiences to media outlets.
The once prolific chain, which was founded by entrepreneur Tom Potter in Albury in 1987, has shrunk from 340 stores nationwide to just 169 listed on the Eagle Boys website.
According to a report by Fairfax, one Western Australian franchisee claimed to be forced to close their businesses as a result of the actions by Eagle Boys, while others say they are on the brink of losing everything.
“We have been hurt so much, we are trying to avoid bankruptcy,” one former franchisee told Fairfax.
“Before this, we owned our own home – now we could lose everything. They took away our livelihood and still sent in the receivers. I was gobsmacked.”
The WA franchisee who says he was forced to close one of his two Eagle Boys stores, Sunil Kumar, is reportedly now the subject of legal action from Eagle Boys, which says his company, Sunlord Pty Ltd, breached its franchise agreement.
Kumar’s wife Shashi Kumar, who had been an Eagle Boys franchisee with her husband for 12 years, told Fairfax the problems started when Eagle Boys started to reduce its level of advertising, which a number of former franchisees said happened after private equity group NBC Capital purchased the business from Potter.
“We were working very hard, but when the founder sold the business the new owners stopped putting out flyers and stopped advertising,” said Kumar.
“Fast food is visual, people need to see best prices, customers need to see the coupons. The company put everything on the internet but we were still paying all the advertising fees. We asked for reports about where the money was going, but they wouldn’t tell us.”
While Eagle Boys has not responded to the claims in the Fairfax article, it appears the company is looking to expand its franchise network, with several “franchise opportunities” listed on its website.
Eagle Boys is advertising for new franchises in Darwin, Albany in Western Australia and Berri in South Australia. Four other franchises are listed as “other” in South Australia, New South Wales, Queensland and WA.
SmartCompany contacted Eagle Boys but did not receive a response prior to publication. One Victorian Eagle Boys store contacted by SmartCompany said they were not aware of any problems between Eagle Boys and its franchisees.
While not commenting specifically on Eagle Boys, Jason Gehrke from the Franchise Advisory Council told SmartCompany there are always “two sides to every story”.
“When a franchisor seeks to enforce the franchisee’s obligations under the franchise agreement, the franchisor can sometimes be portrayed badly,” says Gehrke.
“However, an agreement is an agreement and there are obligations for both parties under that agreement. One party simply can’t decide they don’t want to fulfil their obligations.”
When it comes to disagreements over marketing activities, Gehrke says it is extremely difficult to “reach universal agreement” between franchisees and franchisors about what constitutes effective marketing.
“Franchisors will have highly qualified and trained staff in their marketing department but franchisees who pay into a marketing fund will often be very subjective in their assessments of what works and what doesn’t,” he says.
Gehrke says there can also be conflict between franchisees and franchisors when there is a change in ownership of the business, as is the case with Eagle Boys.
“When people join franchises they assumes the franchise will also be what it was when they joined without realising change is an inevitable part of any business journey,” he says.
Bruce McFarlane, partner at Hall & Wilcox and franchise specialist, told SmartCompany there could be a range of reasons why disputes appear to be emerging between Eagle Boys and its franchisees.
“There seems to be some issues with their franchise system and it would be unusual for any system not have some unhappy franchisees,” McFarlane says.
“It’s a pretty competitive market for pizza, so potentially the franchisor may not have promoted the business as best it could. They may not have invested time in training their franchisees to deal with competitors, or to develop business skills to manage their financial position.”
While McFarlane says franchisors are not generally required to spend marketing funds on certain activities, undertaking some “internal PR” and telling franchisees where their money is going is worthwhile.
“It’s about having a vision for the brand, and communicating how they plan to grow the brand and spend the money,” he says.
McFarlane says the other consideration is if the number of Eagle Boys stores has been greatly reduced, it also means the franchisor has significantly less money to spend in an increasingly competitive environment.