A former franchisee has spoken out about his legal battle with South Australian restaurant franchise Billy Baxter’s, which is facing a winding-up application over a $1.2 million damages claim.
Ross Pollard and his wife, Sue, are the owners of Trans-It Freighters Pty Ltd, which sued Billy Baxter’s over the failure of their Billy Baxter’s franchise in the Adelaide suburb of Glenelg.
Billy Baxter’s is part of the Paradise Retail Holdings group, which also operates Pets Paradise, Global Pet Products and Warner Bros’ Australian retail operations.
The Pollards claim they were misled by representations of revenue and profit that could be made in the first year.
The franchisor’s representative, Phillip Mauviel, anticipated a turnover for the business of $1.3 million, and suggested turnover would allow the business to pay the rent and return a profit.
These representations – made during the course of negotiations for the site at Glenelg – drew comparisons with an existing Billy Baxter’s outlet in Norwood, another Adelaide suburb.
However, the Pollards’ Glenelg franchise suffered losses, which meant they were unable to pay the fees due under the franchise agreement. They then terminated the franchise agreement.
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The franchisor accepted their termination as repudiation of the franchise and proceeded to pursue legal action to recoup the outstanding fees.
The franchisees denied the claim and counterclaimed on a range of matters, including that they had been induced to enter into the franchise agreement by the misleading and deceptive conduct of Mauviel.
The original judgment found in favour of the franchisor and highlighted that Mauviel had provided a spreadsheet template.
It also found the franchisees ignored advice to enter their own information into the spreadsheet, and to seek independent legal, business and accounting advice.
However, a decision by the Victorian Court of Appeal found there were no reasonable grounds for Mauviel to make the representations regarding turnover.
As a result, the Pollards were awarded $1.2 million in damages.
But according to adelaidenow.com.au, the Billy Baxter’s franchising group has allegedly failed to pay the damages.
The documents allege a statutory demand was made for the payment of the $1.2 million judgment plus costs, but was not paid or disputed within the required 28 days.
The Federal Court can order a company be wound up if that lack of payment is proven and the demand process is not shown to be flawed.
Billy Baxter’s is now facing a winding-up application over the $1.2 million court debt.
Paradise Retail Holdings could not be reached for comment.
However, Ross Pollard told StartupSmart he and his wife have lost “hundreds of thousands of dollars” as a result of the legal battle, which he claims has been going since 2006.
“From the time it started – because of Billy Baxter’s unwillingness to cooperate – it’s taken six years to get to this point,” he says.
“What I want Billy Baxter’s to do is get their checkbook out and pay the money.”
Pollard says he hopes the case will serve as a warning for franchisees with regard to franchise income claims, after the competition watchdog issued a similar warning earlier this month.
“Don’t believe the rubbish the person is telling you,” he says.
“I believe no franchisor should be able to collect a royalty from their franchisee until that franchisee is making a profit.”
“Why should the franchisor take money [from the franchisee] when the poor franchisee can’t even draw a wage? That’s the way the system works and it’s wrong.”