Kicking up a stink over firm

"We are in debt with no income from this and it's just basically soul destroying. They might have been successful at selling their concepts, but not successful at fulfilling their obligations as set out in our contracts."

thisischeshire.co.uk
January 15, 2007

Kicking up a stink over firm
Stephen Bailey

SEVERAL angry businesspeople regret paying £20,000 each to buy franchises from a Warrington firm.

They believed they were investing in great business opportunity - selling perfumes and aftershaves from vending machines in pubs and clubs.

But instead they have found themselves out of pocket - and their complaints have sparked an investigation by the Department of Trade and Industry.

They have been interviewed exclusively by the Warrington Guardian.

The bought franchises for First For Fragrance, which was owned by businessman Malcolm Hague from Stockport Road in Thelwall before it was sold in August.

His next-door neighbour, 31-year-old Michael Anderson, acted as the sales manager in some deals.

It had head offices in Cadishead and St James Court off Wilderspool Causeway and is now based on an industrial estate in Leigh under new ownership.

The business plan for the firm, which the Guardian has obtained, claims it has been franchising since 2002 and has had huge growth in sales - although the company was only set up in 2005. It revealed minimum expected operating profit was £39,780 a year.

The Guardian has spoken to around 10 FFF franchisees and only one said he was making a worthwhile profit - most have barely covered their costs or still do not have the machines.

One of the numbers given out as an existing franchisee for prospective franchisees to contact turned out to be Brynn Morgan - a former employee of Michael Anderson at Tan Kwik, a company which was wound up in the public interest.

Rob Williams, a former firefighter from Worcestershire, bought his franchise in December 2005.

He said: "Malcolm Hague told us that they were a family business and we would have no worries with them.

"Mike Anderson introduced himself as the sales manager and told us that they had been into miniature fragrance vending for a long time. It started as a hobby at first and had taken off in a big way.

"He reassured us that their specialist marketing team would easily be able to find about 30 to 40 venues from which we could choose to have our 10 machines sited.

"It took months to site all our machines. We later learned that corporately owned chains of nightclubs, pubs and leisure centres would never be available to us as the decision had already been taken by many that they didn't want them.

"The business doesn't work and there is very little in commission for site owners. Turnover is negligible and it costs more in petrol to service the machines.

"We still have six machines in venues with four in our garage. A further two will have to come out due to a refurbishment. One venue doesn't want the machines back because they don't do any business.

"We, and the many other franchisees we know, are giving the DTI every assistance with their investigation."

The Milton Keynes franchisee asked not to be named. She has worked in the marketing environment for years and her husband has owned several successful businesses.

She met Malcolm Hague and was then introduced to Mike Anderson at the Cadishead office.

The franchisee said: "I just understood him (Anderson) to be very involved. He seemed to be the closer of deals. He took us through everything and told us how wonderful it was and how well every franchisee was doing."

She thought she would have a say over the locations and get them moved - but she said not a single machine was moved despite her complaints.

She only got six machines and after driving up to Warrington to demand the others was given another four - one was broken, and the other three had missing parts, "If I have earned £20 a week I was lucky. It's absolutely devastating because we took out a loan because I had given up my job," said the franchisee.

"We are in debt with no income from this and it's just basically soul destroying. They might have been successful at selling their concepts, but not successful at fulfilling their obligations as set out in our contracts."

Peter Wright, a civil servant, had the franchise for Cambridgeshire.

He said: "Unfortunately, I liked the sound of it. It sounded like a golden opportunity to do something constructive with the money."

He had an initial chat with Malcolm Hague and another employee.

He said: "What they told me sounded like it was a booming business, that it was going fine, and that all the franchises were successful. They had never had a failure, Malcolm Hague told me. They said turnover would be somewhere in the region of £70,000."

He got eight machines in about two months and the other two after three to four months.

He said: "The biggest problem for me was the location. They were dreadful. I said they were dreadful from the word go. Small, pokey nightclubs at the end of nowhere. I suggested betters ones and they never moved them. This was my whole bug bear with them."

"They said if it wasn't doing well I could be expecting £10,000 a year profit. And if it was doing well, the sky was the limit.

"But in reality I will be lucky if I make £1,000 a year profit. It's more of an irritation than a business."

Malcolm Hague responded to the franchisees.

He said: "There's a DTI investigation going on, I have got to be careful with what I say, if there's an investigation I don't want to prejudice myself by saying anything out of turn.

"At the end of the day, when we got the vending machines in, we couldn't guarantee an amount of money per machine or anything like that.

"I assure you if a franchisee had a problem with where the machines were located we worked tirelessly to reposition these machines but at the same time there was quite a lot of apathy with people saying it's not coming in, what do I do?

"They didn't have the ability, maybe, to run their own business.

"Everybody was sold a package that had the ability to work. If they came to us for help we gave as much help as we could give.

"We did have some companies we could go to for locations but what works in one town doesn't necessarily work in another town."

He claimed the business was sold because it was so successful.

"I am shocked and disappointed with what's happened," he said "but presumably the DTI will have their investigation and it will all come out in the wash."

Mike Anderson, who is now in property development, responded to the franchisees.

He said: "It's coming up to nine months since I was last involved in the business.

"I seem to be getting the impression these people are incapable of running a business and they blame anyone they can, even the people that help them and try to assist them.

"We have given them all the assistance they needed as far as we are concerned. These people just don't know want to get off their backsides and work, they want everything doing for them, and that's not what franchising is about.

"They have got the equipment and the stock to make money, but they want everything handed to them on a plate, and that's what I stand by.

"It's a business model, when people have been given a model it's really up to them to make the business. That's my opinion."


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Risks: False earnings claims, Blame the victim, Government investigation, Anonymously quoted investor, United Kingdom, 20070115 Kicking up

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