Posted by Elizabeth Gore-Jones
on 30 January 2015
CASE STUDY 2
In a recent matter, our franchisee client was suffering great financial hardship in the operation of its franchised business. It had been suffering this loss for some time and it could not turn the franchised business around to stop the financial haemorrhaging.
The franchisee had for many months been trying to negotiate with the franchisor to have it released from the franchise agreement. However the franchisee owed the franchisor alot of money for ongoing franchise fees it had not paid and also for an initial loan given by the franchisor to enable the franchisee to purchase the franchised business.
Those negotiations were not progressing and the debt was growing. In addition to the debt owing to the franchisor, the franchisee also owed rental to the landlord and other money to suppliers.
When the franchisee called us it was ready to close the doors and face individual bankruptcy (they had given personal guarantees) and a liquidation or winding-up of the franchisee company.
What we did
We worked through each debt with the franchisee and worked out the risks associated with each debt and what would happen if the franchisee didn't pay.
We undertook negotiations with each creditor including the franchisor. These negotiations centred around payment plans, agreements to waive part of the debt owing and so on.
What happened
Within 2 weeks an agreement had been reached with the franchisor to waive part of the debt and accept a smaller sum in full and final payment. As the franchisor was the largest creditor this placed us in a better position to negotiate with other creditors.
The franchisee and its directors avoided bankruptcy and liquidation.
What we can learn
Sometimes it is very difficult to negotiate for yourself. This is especially so, if you have a franchisor who seems to have all of the power, you are stressed and/or panicking and if you do not know your rights or the options available to you.
Franchising lawyers deal with matters like this all of the time and it may be worth the investment in engaging a franchising lawyer to assist you.
There are however no guarantees this will be the outcome with your matter.
CONCLUSION
Sometimes it feels as though all hope is lost. Seeking the help of a professional experienced in franchising law may open your eyes to options you did not know were available to you. Sometimes you need someone else to be your voice to negotiate an outcome for you.
Whatever your reason you should not hesitate to contact us to discuss your matter to see if we are able to assist.
