Fishy franchise

2014-06-22 15:00

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A number of funders who traditionally finance franchises have distanced themselves from the Old Fashioned Fish And Chips franchise group and its associate companies, City Press has found.

Since early 2011, the chain of franchises, an imprint of Traditional Brands, has garnered bad press related to its handling of deposits paid by would-be franchisees who had changed their minds.

The National Consumer Commission had to step in for some of these franchisees, and Old Fashioned Fish And Chips – led by founder and chief executive Emilia de Sousa and her family – got kicked out of the Franchise Association of SA (Fasa), the only recognised industry representative body.

Fasa chairperson Ian Jacobsberg confirmed the termination of Old Fashioned Fish And Chips’ membership this week.

Fasa executive director Vera Valasis said the association elected not to renew the membership because the franchise “contravened Fasa’s code of ethics and failed to resolve a number of disputes between itself and franchisees”, and it brought “Fasa and the franchise industry into disrepute”.

In 2010, Gugulethu Moloi and her daughter paid an initial R100?000 to the franchise, according to a complaint filed with the commission. After a long struggle, they were given a totally different franchise, for which they had to pay more. But funding became a problem, and the Molois quickly learnt that Traditional Brands had a bad reputation with funders.

City Press has seen an email from a potential funder rejecting Moloi’s application, stating: “Unfortunately, we do not work with Emilia de Sousa or any of her affiliated companies, and hence we cannot assist in this application.”

The funder cited a series of stories by the Sowetan newspaper, as well as a recent court ruling where the North Gauteng High Court cancelled a franchise agreement between De Sousa and a franchisee after finding various irregularities with the agreement.

According to the complaint sent to the commission, one funder who showed an interest in financing the Molois’ venture requested financials for a pilot store in order to gauge traffic, and have a peek at the books, but Traditional Brands made excuses for not providing this information.

“I have evidence of what was sent to me,” said Moloi. “It is utterly shocking what these people do and how they run their business. I immediately sent a letter of demand for my refund after multiple visits and camping on their doorstep.”

Traditional Brands said it was investigating these claims.

Two years ago, Bongani Mabena, a pharmacy student, was interested in a franchise and asked for an indication of its financial position.

Mabena said many numbers were given to him verbally, but he never received anything in writing to ensure that everything was in order.

Old Fashioned Fish And Chips requires a minimum deposit of R150?000 to ensure the franchisee will get their desired area of trade, a five-year contract and the start of negotiations with the landlord of the preferred property.

Mabena, who had paid a partial deposit of R40?000, asked for a refund, but has not received it.

De Sousa said she kept deposits to pay off outstanding rent left behind after errant franchisees were kicked out after failing to pay irate landlords.

As she signed surety “because their [franchisees] records are not strong enough” for the landlords’ liking, De Sousa said she was left holding the can.

She dodged questions on would-be franchisees like Mabena and Moloi, who pulled out before a shop could be opened, before finally saying: “I do not know about Bongani and those others, but there have been people in the past who pay a deposit, then go to the banks and get finance, then spend it on other things. Later, they come back and want their deposits back.”

De Sousa said those with a big gap in time between paying the deposit and the time they asked for their deposits back must furnish her with letters of rejection from the banks or other financiers. She added that she was careful about refunding deposits because she had been a victim of fraud herself.

Old Fashioned Fish And Chips’ distribution arm is pursuing a case against a former employee who had embezzled cash from the company.

De Sousa wants the National Consumer Commission to show her where her franchise agreements conflict with the National Consumer Protection Act and to give her an exemption. From there, she would take the matter to Fasa.

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