Franchising & The British Franchise Association

[Rick Stally]

When looking at starting your own business you may come across franchising but is it really as good as it sounds?

For a business sector that involves over 31,000 people and has an estimated value of £9.1bn per annum should there be better regulation?

What powers do the British Franchise Association really have and are their accredited members really trustworthy?

[peterjhale]

Hi and welcome

From reading your other posts it seems you are unhappy with the franchising association ? What are your experiences ?

[Rick Stally]

In January 2003 I took the decision to become my own boss, I began by trawling newspapers etc., looking for en established business to buy as I needed an established income.

Whilst looking on a website I stumbled across franchising, not quite sure of what it was or how it worked I investigated it further and found the British Franchise Association. I bought their franchise starter pack and read trough it. Hey presto franchising was the business for me, all I needed to do now was find a franchisor that was BFA accredited in an industry I wanted to be in.

According to the British Franchise Association all their accredited members must prove to have a viable business model, that is franchisable and work within the ethical guidelines of the BFA. I found a business run by a regional chairman of the BFA and began the process of starting my franchise business.

Before you get too far down the road you need to show some commitment and I paid a substantial deposit to secure my franchise region etc., Then the training began and the alarm bells started ringing, these guys couldn’t train a dog to sit let alone run a business.

I had done all the initial investigation into the business and everything had checked out fine so why did things seem so wrong? After paying a private enquiry agent to make some further investigations I discovered that the franchise was a scam and that everyone involved had lost significant amounts of money.

I immediately withdrew and instructed a solicitor (my predecessors had been financially ruined and could not afford to take that sort of action). It turned out that the business model was based on a failed business that went into liquidation owing over £311k. The business was never viable, successful or franchisable but because the Managing Director is a regional chairman of the self regulating body governing franchising in the UK he had covered all the bases and made the business appear successful and viable.

I agreed to participate in the British Franchise Association grievance procedure to prove my case, after entering significant amounts of documentary evidence including written, sworn statements from third parties the matter was passed to the Director General of the British Franchise Association (Mr Brian Smart).

To this day no action has been taken and I hear about more people investing in the business, they lose their money and some have been made bankrupt and even lost their homes. There is not one successful branch of this franchise yet no one is interested in investigating why that is so, I have complained to the Office of Fair Trading, The Trading Standards Agency and the companies investigation branch of the Department of Trade and Industry.

Whilst there is clear, indisputable proof of breaches in the competition act and a complete disregard for section 216 of the Insolvency Act 1986 all the agencies I have contacted say it is outside their remit. The one institution that should act is the BFA but they have been reluctant to do so for some reason (maybe because he is one of them).

I can introduce you to a dozen men and women who have lost significant amounts of money, I can introduce you to suppliers the likes of Panasonic who are pursuing legal action against this man and his company.

This is a horror story and it is still unfolding, last week I heard about a man in Cardiff who spent over £20k on his franchise, he’s just about to find out that he lost his money.

[newhavenfishco]

Sounds Scary! whats the name of this franchise? was it KTAK or somthing else?

[Rick Stally]

Unfortunaley I am no longer allowed to discuss this matter for legal reasons. However the company KTAK Limited has absolutley NOTHING to do with franchising and is n no way connected to the above mentioned problems.

[garyk]

I think franchises in the main are unworkable anyway, Ive posted on another forum a short list (spending more time I could make it much longer) as to why franchises are not as good as most people think.

[CatherineL]

I'm sorry you had a bad experience. I've just sold a franchise. It wasn't that I wasn't making any money, I was, but they treated me like dirt and tried to stop me from growing. At one point, nobody was getting paid, (many of the payments were collected centrally) and it was a struggle just to pay the wages and put food on the table. I couldn't pay my suppliers - I'd invoiced plenty, but I just wasn't getting paid. On top of that, they were putting me under pressure all the time to grow more, take on more staff, get a bigger premises. I really don't know if they ever stopped to consider how I was going to pay for those things.

So, I stopped paying the franchisor their fees until the cash started coming in. It took them three or four months to notice I hadn't paid them. They were not nice about it at all - they couldn't seem to see that I couldn't afford to pay them because I wasn't getting paid. The worse thing was - I wasn't allowed to chase up the debts that I was owed myself. One franchisee sent a solicitors letter to one of her debtors, and they stopped her from doing any more work.

Eventually, they recruited more staff to chase up debts and things improved. I was able to pay back my fees to them, but it didn't stop the bad treatment, by a couple of managers in particular. I tried to complain, but it was their word against mine.

In the end, I just lost all motivation - I was miserable, and I knew I had to get out. I thought I would feel free, but they're still giving me hassle, even now.

I really wouldn't recommend franchising to anyone. It's not the same as having your own business, because you're not in control - they are, and the franchise agreement which most, if not all franchisors gets you to sign ensures that they can do anything with you that they choose.

When we signed the agreement they said it wasn't worth the money on getting a solicitor to read it, as they wouldn't change anything anyway. They also told me that an ordinary solicitor wouldn't understand it, and there was only one specialist franchise solicitor, and they used them themselves. How naive I was to believe them.

I was even more stupid upon leaving - they told me that if I used my own solicitor, it would take too long, and the sale wouldn't go through in time for the new franchisees to start training. So both myself and the purchaser did not have our own solicitors. Part of the sale agreement stated that I would not be allowed to sue them after I'd sold. Now with all the hassle i'm getting, I'm really regretting signing that part.

Instead of taking the franchise route, I would highly recommend anyone starting a new business to take a business course, or read up a lot on starting a business. Some of the courses may be expensive, but it will cost you a lot less than spending the cash on a franchise.