Insolvency Filings, Australia's Franchisors
The list below is of Australia's franchisors that have become insolvent. The data is gathered from Prof. Buchan's dissertation. The study finds a number of problems for franchisees. Buchan, a franchise and legal scholar, observes, Buchan observes, "It is rare for franchise agreements to contain clauses that allow a franchisee to terminate it if the franchisor becomes insolvent."
However, the list is not comprehensive of all Australian franchisors that have failed from 1990 to 2005. Buchan writes, "Franchisees disappear from the public records when the franchisor’s business fails. This makes it very difficult to identify these franchisees and the issues which affect them. This report documents the results of the first empirical research that has been conducted of the effect of franchisor failure in Australia on franchisees."
When the Franchisor Fails: A research report prepared for CPA Australia by the University of New South Wales (pdf, 44 pgs), Appendix 1. Page 14 lists the information sources for this list.
| Brand | Problem |
| A1 Mobile Radiator Repairs | 1999 |
| Century 21 | 1998 |
| Collins Booksellers | 2005 |
| Cut Price Deli | 1995 |
| Danoze Direct Retail | 2005 |
| Data Vault Services | 2005 |
| Delifrance Australia (Australian arm) | 2003 |
| The Furniture Wizard | 1999 |
| Great Australian Ice Creamery | 1998 |
| ie Networks | 2005 |
| Juice Station | 2005 |
| Kernels Popcorn | 2005 |
| King of Croissant King | 2002 |
| Lloyd Scott Enterprises | 2001 |
| Mini Tankers International | 2003 |
| Mobile Computer Cleaning | 2003 |
| Modern Garages | 1999 |
| Mystic Crystals Franchises | 1999 |
| NoRegrets | 2002 |
| Nrgize Nrgize | 2005 |
| Offi ce Support Services | 2004 |
| Old Papa’s Café | 2002 |
| On Time Copy Centre | 2000 |
| Only $2 Only $2 | 2005 |
| Party Land | 2005 |
| Personal Actions | 2003 |
| Photo Safe | 2004 |
| Rugs Galore | 2002? |
| Sam’s Seafood | 2005 |
| Simply No-Knead | 2000 |
| Snow Deli | 1990 |
| Soils Ain’t Soils | 2003 |
| Speeds Shoes | 2004 |
| Synergy in Business | 2002 |
| Tokyo Joe’s | 2003/4 |
| Top Snack Foods | 2000 |
| Traveland | 2001 |
| TRIMit | 2001 |
| Wonderland of Pets | 1996 |
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After nearly 20 years as a commercial lawyer in private practice, Jenny Buchan became an academic at the University of New South Wales. Both as a lawyer and as an academic, her focus has been on franchising. This has led to her ongoing research on the challenges that franchising, as a relatively new business model, poses for insolvency law.
Franchisor failures in Australia
There are some things to be aware of in franchisor failure:
A failure by legislatures to address franchisor failure is the single biggest weakness in the franchise model.
Jenny Buchan, Australia
Add to the Australian list ...
Klein's Jewellery.
If Gloria Jean's Coffee cannot fix the levels of rent that make many of their franchises unviable then they will be next. We, and the ACCC, have seen a large number of their franchisees fail due to high rents. It wasn’t considered a big deal but now it is catching up with the franchisor just as it did with Klein’s.
What we have here is another situation where a franchise financial model that appeared to be viable in the past; didn't cut it because no one took the time to consider the effects of rental growth and renewal increases.
Franchisees will be told to target something below 10% of gross but then they have to accept that a new business cannot achieve such a figure initially. By the time they grow the business they then have to factor in increases. Sometimes it works but in shopping centres it often doesn’t.
In Australia the ACCC regulate franchising where we see a failure to provide effective protection to franchisees. This can be directly attributed to the influence of the FCA on our lawmakers and their fear of negative impact upon an industry that generates $130B to the Australian economy.
The ACCC, through the Trade Practice ACT, should offer some semblance of fair trading in rental agreements but shopping centres have even greater influence then the piddling $130B produced by franchising. So there will be more; many more, that follow the same path as franchisees in shopping centres get sucked into the void along with their franchisor.
Who is at fault
Those who sign such agreements should take most of the responsibility unless they spoke to an accountant or financial adviser. If the advice was bad then they probably got what they paid for.