How a retailer had their business ‘stolen’ from them by a franchise promoter who said they can get a better lease deal

I was contacted a few weeks ago by a retail business owner who wanted to tell their story about how they had their business “stolen” from them.

Their lease was close to being up and the head of a franchise group happened to walk in one day for a chat about business. Thinking he was talking to a colleague, the retailer shared information about the lease and issues he was having in negotiating with the landlord. The conversation ended with no help sought and no offer made.

A couple of weeks later, the retailer was visited by the same person again and told that if he wanted to keep his business he would have to join the franchise group as they had negotiated a head lease for the premises and that trading as part of the franchise was a requirement.

The retailer was given an ultimatum: walk away from the business they had owned for years or join the franchise group. He saw it as no choice as the business was his main asset. He joined the franchise group.

His experience in the franchise group was awful, business went downhill. Product arrived in-store that he had not ordered and was unable to return. He was visited and told to do things in the business he did not want to do. He was forced to pay hefty fees he had not had to pay when he operated independently.

The business went downhill and the retailer eventually sold for a lower than reasonable price. He felt he had no choice but to accept the low offer because the franchise agreement had conditions relating to the sale that made it challenging for him to sell outside the group.

The retailer concedes his naiveté and wishes he had engaged a lawyer immediately on hearing of a lease deal to effectively steal the business from him.

This is the story as told to me. While I am not a lawyer, I suspect the actions of the franchise operator and the landlord were illegal and that the retailer could have taken action. But he was broken and was happy to get out.

This is a cautionary tale.

• Never share lease information unless you are 100% certain of the person involved.
• Never take on a business where someone else holds the head lease as this gives them power over you.
• Never join a franchise when you feel you have been coerced, pressured or threatened to do so.
• If you have been wronged, be prepared to fight at the earliest opportunity to right the wrong.

Industry associations representing retailers ought play a role in monitoring and protecting retailers in this area. When they take money from any franchise group and promote them in journals and elsewhere they offer tacit endorsement. It is incumbent upon them to ensure they understand the values and processes of any such business they endorse in this way.

Yes this story is vague. The franchise group I am writing about is litigious.