Kleenmaid Guaranteed Profit

Maroochydore, Australia - Kleenmaid was selling franchises with a "profit guarantee" of $150,000 as late as february according to reports on news.com.au.

An ex employee reports KleenMaid was under financial strain back in mid 2008 when it is claimed that staff were locked out of one corporate owned store for failing to pay rent.

 A Brisbane franchisee, Mr Merv Kennedy, claims that the franchisor lied to them during a meeting 5 weeks ago where franchisees were told "We are in good shape, our banks are behind us, our staff are happy, we are fit and healthy, all the rumours are untrue"   (read full report here)

If existing franchisees struggle to obtain the truth, what hope did potential franchise buyers have in discovering that the "profit" guarantee was in effect, worthless?

In another article at the courier mail Mr Kennedy describes how he is "borderline broke" and has lost $600,000. This latest franchise collapse is particularly interesting for those involved in franchising in light of the "profit guarantee" and some franchisees are beginning to come out of the woodwork, making comments about management and franchisee turnover.

 So far, the medias focus has largely been on what customers have lost in terms of paid for appliances. This is keeping the story in the news perhaps more than it would be if the losses were only felt by franchisees. In fact the franchisee's story is realtively under reported in comparison to the stories of customers without Kitchen appliances.

 Professor Frank Zumbo has taken the opportunity presented by the KleenMaid debacle to write an article in the Sydney morning Herald calling Minister Craig Emmerson to urgently act upon the recent Senate Inquiry recommendations and address what he describes as a dangerous "policy vacuum".

What would the senate inquiry have made of a franchisor who gives profit guarantees just weeks before entering voluntary administration?

I believe we shall hear a lot more about Kleenmaid activities in coming weeks. Hopefully the spotlight can shine a little more on the plight of franchisees and  highlight (again) to Government that sitting on the Inquiry recommendations for months on end, specifically monetary penalties for breaches of the code, could see this kind of franchisor dishonesty escalate under current economic conditions.