KFC shop forced shut by US parent company

“This strategy is trying to take advantage of a void in Australian law that allows this kind of behaviour, which ironically is outlawed in many parts of the US,” Mr Cowin said. “If a franchise agreement expires, the franchisee must simply close the store, no matter how profitable or successful it is. The franchisee does not even have the right to compensation for the loss of business.”

The West Australian
November 19, 2007

KFC shop forced shut by US parent company

Daniel Hatch

Yesterday, KFC Rockingham was doing a roaring lunchtime trade. Today, it is empty: Shut permanently because the US food giant will not renew its franchise agreement with Competitive Foods Australia, which operates the 46 KFC stores in WA.

The 40 staff have been promised jobs at CFA’s other restaurants including Hungry Jack’s and yesterday said they felt reassured that they would not be unemployed so close to Christmas. But the closure is a forerunner to a bigger battle which has politicians worried about the future of tens of thousands of franchise businesses around Australia.

CFA chief executive Jack Cowin said the owner of the KFC name, Yum International in the US, had seized on the expiry of the 20-year franchise agreement at the Rockingham store as part of a bid to take over CFA’s WA and Northern Territory franchises.

“This strategy is trying to take advantage of a void in Australian law that allows this kind of behaviour, which ironically is outlawed in many parts of the US,” Mr Cowin said. “If a franchise agreement expires, the franchisee must simply close the store, no matter how profitable or successful it is. The franchisee does not even have the right to compensation for the loss of business.”

The State Government has announced an inquiry and Brand Labor candidate Gary Gray has promised to take the matter to the Federal minister after the election on Saturday. He said franchisees needed protection through legislation similar to that in the early 1980s to protect petrol station owners from oil companies.

It is cold comfort for store manager Kevyn Middleton, 55, who has been with CFA for 25 years and will spend Christmas in Darwin, away from his family, because that was where the company had a job available. “It’s a bit of disaster (for Rockingham), it’s disappointing a giant can put their foot down on us and force us to close,” he said. “I’d like to see the law change so these things can’t happen and we can get on with what we’re doing.”

Mr Cowin said he would not bow to pressure from Yum to sell the KFC network at less than its market value. “On one hand, Yum have said they wanted to take over the Rockingham store at zero cost but on the other, they weren’t prepared to extend the agreement to even allow negotiations to occur,” he said.

The West Australian contacted Yum International’s headquarters in Louisville, Kentucky, yesterday but the company was not available for comment.


Brought to you by WikidFranchise.org

Risks: Multi-tradename franchisors are often the most ruthless, Expropriation without compensation, Franchisor keeps best sites for corporate stores, Franchisor must approve new buyer, Franchisor takes store and converts to corporate, Franchisor association not trusted by politicians, Renewal of contract denied, Assets sold for fraction of cost, Bullying, Call for franchise law, Appropriate franchise law, Cross-default provisions, Disclosure laws: 10 per cent solution, Disclosure laws: false sense of security, Australia, 20071119 KFC shop

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License