$600,000 Baskin-Robbins ‘nightmare’ hits franchisees
A Queensland couple who poured a fortune into two Baskin-Robbins ice-cream franchises say they've been left $600,000 out of pocket after an "excruciating" struggle with the brand.
The pair, who spoke to news.com.au anonymously, said they invested around $300,000 in their first Baskin-Robbins store in West End in Brisbane in 2014 followed by around $200,000 for a second store in Rosalie in the city in 2016 - but they claim they were sold the stores based on "incorrect sales figures".
They allege they were told the West End store would make $11,000 to $12,500 in sales per week, which would account for 10 to 12 per cent of the rent, but in reality, they only made an average of $6000 to $7000 even after winning a Local Store Marketing Initiatives Award in 2015.
They say they were also told they could make $8000 to $10,000 a week in sales in the Rosalie outlet - also representing 10 to 12 per cent of the rent - but they made just $4000 to $5000 on average and the franchisor "stopped responding to emails" when they questioned the discrepancy.
The young parents also allege they were not refunded the "significant" cost of sales for multiple promotions run nationally - such as monthly buy one get one free flavour of the month promotions - and they were forced to accept a new tub pricing model in late 2018 with little warning and no disclosure document, which significantly increased costs for them. They say not all franchisees had to adopt the model, and they were not given an option to opt out.
Under the Franchising Code of Conduct, the couple allege they should have been provided a disclosure document, which they did not receive. They say the new model also meant they had to pay royalties and advertising funds upfront, while previously they paid at the end of the month, and they ultimately ended up paying more.
But a Baskin-Robbins Australia spokesperson told news.com.au the company refuted the claims made by the franchisees.
"The claims are incorrect and are detrimental to our many hardworking franchise business partners across our network," the spokesperson said.
"We have every interest in helping our franchise business partners to succeed. We provide in-depth training when they join our network and continue to provide ongoing support to give them the best opportunity to run a successful business.
"Baskin-Robbins is transparent and realistic with our franchise business partners.
"We do not provide 'sales figures' on what stores can expect to generate but rather 'projections'.
"This is pertinent in this case, as the Rosalie and West End stores were new sites."
The spokesperson said Baskin-Robbins was "committed to supporting franchisees through challenges" and one "solution" was the tub pricing model, which "incorporates royalty and ad fund fees to help manage cash flow".
"The model is welcomed across the network, including by our most successful franchise business partners," the spokesperson said.
'YEAR OF STRUGGLE'
After deciding the new model was unsustainable, the pair decided to sell both of their stores from January 2019 and eventually received an offer of just $25,000 for each after a "year of struggle" - but were told Baskin-Robbins would charge them $10,000 for transfer fees, $10,000 for training fees as well as other fees for legal, refurbishment and landlord costs, which would mean they will actually lose money.
Both stores are now closed, leading to job losses for 25 staff members, but at the moment, the lease for the Rosalie outlet is valid until April 2021 and July 2024 for the West End Store.
They also claim problems within the company are widespread and several other Baskin-Robbins stores are also now for sale.
"We were excited to take over the business, but I can't tell you how much frustration we've gone through," one of the franchise partners told news.com.au.
"The figures they promised were never achieved, and what can we do now? We're stuck in a situation with long-term leases."
He said the couple had "lost so much money" but were better off than other franchisees as they both had jobs outside Baskin-Robbins and had appointed staff to run the stores on their behalf.
"It's such a dire situation. I know other people who are actually working in their stores must be feeling a lot of pain," he said.
The pair said they had also tried to negotiate a rent reduction with their landlord, but Baskin-Robbins took too long to authorise the deal and it was later withdrawn.
They said even franchisees at top-performing stores were struggling, and since joining the brand in 2014, the cost of goods had gone up year by year up by almost 26 per cent - a figure that soared to more than 82 per cent under the new model.
"There's no way we can survive it in a management model," he said, adding mediation with Baskin-Robbins had failed.
His partner said they were "enthusiastic investors" who had done "six months of research", and the stores were "sold as a fantastic opportunity and a great investment option".
"From then on it has only been downhill. The brand tagline is 'We make people happy' but they don't make their own people happy which is quite sad," she said.
"Every year, sales were lower than the previous year. But what we're really upset about it the way we were treated - almost like pawns, with decisions thrown at us without any consent from us.
"The price increases year after year have been completely unsustainable."
She said the "excruciating" saga had taken a personal toll, and the pair had filed complaints with the Australian Competition and Consumer Commission and the Office of Fair Trading.
"It was quite intense - I'm a new mum and I was already trying to juggle work and a young family and having to look after stores," she said.
"There was a lot of pressure with costs constantly increasing, which was very, very tough for me - I almost had a breakdown because you can't just change a business model overnight when a lot of people's lives depend on it.
"I'm a very passionate believer in the brand and I've done my best, but over the last two years, every single month I've been putting in my own funds for it to be a sustainable business."
The franchise partner said she knew of many other stores that were also on the market, but owners were struggling to sell at the same amount they had invested, let alone for a profit.
"We're now at the point where we will sell to whoever wants to buy it, but it's a very difficult retail market … We've spent more than half a million dollars and counting, and these stores give us basically zero," she said.
"We're wondering why we've done all this for a brand when nothing comes back to us - we've lost money we'll never get back, and we've been left with nothing but a poor experience. I wish this never happened to us."
She estimates the pair have been left around $600,000 out of pocket - which doesn't include the hours of their own time they have also invested into the businesses.
"We are coming out of this with huge mental stress - it has been a very distressing experience, it is a nightmare honestly," she said.
But the Baskin-Robbins spokesperson defended the company's conduct.
"Baskin-Robbins has a more than 30-year history in Australia with a reputation as a responsible franchisor, upheld by our commitment to the Franchising Code of Conduct and underpinned by goodwill," they said.
"We are currently celebrating growth in most of our stores. This is made possible by our mutually beneficial partnership with many happy, hardworking franchise business partners.
"We are currently seeking an appropriate and efficient franchisee to take over operation of the Rosalie and West End stores. We thank the community for its support."