Midas Australia Franchisees Consider What Next after Christmas Bankruptcy
MELBOURNE, Australia (Blue MauMau) - On Christmas Eve, franchise owners received notice that its franchisor, Melbourne-based Midas Australia Pty Ltd had placed itself under external administration with the Australian Securities & Investment Commission the day before.
The Midas trademark is owned by Illinois-based Midas International Corp. In 1976 Midas opened its first Australian franchise in Launceston. It sold the franchising firm in 2000 to the current Australian operation. Its Website says, “The change of ownership to Australian hands has meant the beginning of a new era for Midas. Whilst retaining strong ties with the USA, new store designs and management is focused towards the customer and the franchisee.”
But relations with franchise owners have not been so stellar. The Australian Securities & Investment Commission received allegations of fraud from Midas' franchisees and concerns of insolvency but declined to investigate. Several of the chain's franchise owners have also taken the firm to the Federal and Supreme courts.
Midas Australia Pty Ltd is one of three Midas franchising firms on the continent. Although the master franchise agreement that allows Midas Australia to franchise Midas was not publicly available, Australian franchise academic and bankruptcy expert, Jenny Buchan observes, “Administration most likely is a breach of the [franchising] license for the master franchisor Midas Australia, entitling Midas U.S.A., the parent franchisor, to withdraw the right to use its trademarks, and thus to sub-license to another firm the ability to use its trademarks."
An Australian newspaper, the Age, reported yesterday that franchise owners are uncertain as to their future. One franchise owner was angry that in its last few days of solvency the franchisor closed his store over an unpaid debt. In regard to leadership, the article goes on to state, “Franchisees were also told today that Midas' majority owner, Tasmanian businessman Philip Bonney, had been removed as the company's chief executive and was replaced by Tim Hickey.”
Buchan, also a lecturer at the University of New South Wales, comments that there may be a way out for Midas' troubled franchise owners. “I understand that the Australian franchisees may have a clause in their franchise agreements that permits them to terminate their franchise agreements if the franchisor becomes insolvent,” she says. “That could mean individual owners are free to be independent auto repair shops.”
The chain has dwindled from roughly 130 stores five years ago. Its Website says it now has 90, of which 30 are franchised.
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