The first of Jack Cowin’s Competitive Foods KFC stores in Western Australia has closed.
The Rockingham, Perth, store closed for the last time at midnight after Yum Restaurants International, which owns the franchise, refused to renew Competitive Foods franchise agreement for the site. The US-based franchisor has indicated it will not be renewing any of the KFC franchises held by Competitive Foods and has offered to buy them out.
Cowin has previously said the price offered is well-below the market value. A spokesman for Competitive Foods says negotiations with Yum Restaurants International are continuing – the next franchise agreement due for renewal is late 2008. “Hopefully before then we will see a conclusion to this issue.”
SmartCompany understands that there is nothing to stop Yum Foods International from opening its own KFC store in Rockingham to replace the popular one that has now closed. However, the company would have to secure new premises and staff. Competitive Foods holds the lease over its Rockingham site.
Cowin is fighting Yum Restaurants on several fronts. He has successfully lobbied the WA Government to announce an inquiry into franchising in an attempt to see changes to the law that would protect franchisees at the end of their franchise term from losing their businesses.
A spokesman for Competitive Foods told SmartCompany that a group of KFC franchisees from the eastern states has made a submission about non-renewal of franchise agreements to the Productivity Commission’s inquiry into retail tenancy, which is due to release its report by March 2008.
Cowin said in a statement: “This strategy is trying to take advantage of a void in Australian law that allows this kind of behaviour, which ironically is outlawed in many parts of the US,” he said. “If a franchise agreement expires, the franchisee must simply close the store, no matter how profitable or successful it is. The franchisee does not even have the right to compensation for the loss of business.”
Cowin has won the support of the Labor candidate for the seat of Brand in WA, Gary Gray. Gray has promised to take the matter to the federal minister after the election on Saturday. He told the West Australian newspaper that franchisees needed protection through legislation similar to that in the early 1980s to protect petrol station owners from oil companies.
The Franchise Council of Australia, which represents franchisors and franchisees, has rejected the need for another inquiry into franchising in strong terms, arguing the relevant laws are federal and that state interference is unwarranted.