BoQ in second franchise dispute

Instead of writing $4 million of business, Mr Ramsay says he was averaging $367,400 a month. He also says that, in the seven months to March last year, only two of 33 BoQ branches in NSW and the ACT were lending enough to break even.

http://www.news.com.au
March 23, 2007

BoQ in second franchise dispute
Richard Gluyas

ALLEGATIONS of deceptive conduct against the Bank of Queensland by a second disgruntled franchisee are providing an unwanted backdrop to the bank's $2.4 billion merger proposal with Bendigo Bank.

BoQ has said the Federal Court claim, aired earlier this week in a directions hearing, will be "vigorously" defended.

The bank is offering 0.748 of its own shares and $5.50 in cash for each Bendigo share.

Bendigo chief executive Rob Hunt said this week there had been a number of alternative approaches but no rival offers since BoQ unveiled its proposal on Monday.

He said he was aware of some of the issues raised by the BoQ franchisees, and said they would be examined to see how they affected "value-creation".

However, the Bendigo chief said he had not formed any overall view.

Leicester Ramsey, the former owner of BoQ's Campbelltown branch, has alleged BoQ made false and misleading statements that resulted in him borrowing $697,000 from the bank to pay for a franchise fee and associated working capital and fitout costs.

Mr Ramsay says in his statement of claim that BoQ referred him to Graham O'Kell, the owner of BoQ's North Parramatta branch, as a typical example of a successful bank franchisee.

Mr O'Kell allegedly told him the break-even point for an owner-managed branch (OMB) was $4 million in loans a month, that he had been able to repay his borrowings in six months, and there was no reason why Mr Ramsay "could not achieve the same result".

But according to Mr Ramsey, he was never told by BoQ that Mr O'Kell had been allocated part of a broker book of loans that BoQ had split among some of its franchisees after it stopped using brokers in 2004.

This represented a "significant financial benefit" that would not be available to him.

Instead of writing $4 million of business, Mr Ramsay says he was averaging $367,400 a month.

He also says that, in the seven months to March last year, only two of 33 BoQ branches in NSW and the ACT were lending enough to break even.

Mr O'Kell did not return a telephone call yesterday.

A BoQ spokesman said the bank would "'vigorously defend" the Federal Court case.

Chief executive David Liddy has often said the OMB business model is an outstanding success, arguing that disputes are a normal part of operating a franchise business.

He told The Australian earlier this week he was confident the bank would successfully defend any claim.

Mr Ramsey's allegations are similar to those raised by the former owners of BoQ's Castlereagh Street branch, also in Sydney, in the Industrial Relations Court.

At a directions hearing of Mr Ramsey's Federal Court claim on Tuesday, lawyers argued about the production of documents by Mr O'Kell in response to a subpoena.

The case resumes on March 28.

http://www.news.com.au/business/boq-in-second-franchise-dispute/story-e6frfm1i-1111113207058


Risks: Bankruptcy was inevitable the moment the contract was signed, Banks, Banks collude, Blame the franchisee, Blue chip, Business model had never created adequate investor returns, Cannon fodder, Cat's-paw, Conspiracy to commit fraud, Conspiracy to market and sell a doomed to failure franchise, Deceit, Deceptive business practices, Earnings claim made, Excuse du jour, Financial failure of first franchisee a material fact to the second, Follow the money: franchising re-distributes (not creates) wealth, Franchise banker, Franchisor picks up stores for a song, Fraud, Fraud is widespread, Fraud victims many times do not step forward, Fraudulent misrepresentation, Industry in disrepute, Regulatory capture breeds its own incompetence, Regulators only pick on those who can't defend themselves, Shills, Symbiotic relationships (industry, banks, lawyers), Tip of the iceberg, Trap for the trusting, Unconscionable conduct, Australia, 20070323 Boq in

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