Franchises back in BoQ hands

…15 of the current 56 outlets have either handed back the keys, sold out or been ousted by the bank for poor performance. They, in turn, have been replaced by staff managers as a consequence of the misfiring expansion in NSW…bank is also being sued by at least seven of its former franchisees who are seeking millions of dollars in compensation for what one former owner described as "deceptive and misleading conduct" in regard to the way they were originally encouraged to take on the owner-managed branches.

The Sydney Morning Herald
April 13, 2009

Franchises back in BoQ hands
Danny John

MORE than a quarter of the Bank of Queensland's troubled franchised branch network in NSW is in the hands of head-office managers as the bank seeks to turn around the prospects of its owner-managed business model in the state.

The original operators of 15 of the current 56 outlets have either handed back the keys, sold out or been ousted by the bank for poor performance. They, in turn, have been replaced by staff managers as a consequence of the misfiring expansion in NSW.

The Brisbane-based bank is also being sued by at least seven of its former franchisees who are seeking millions of dollars in compensation for what one former owner described as "deceptive and misleading conduct" in regard to the way they were originally encouraged to take on the owner-managed branches.

Six of the cases are slowly winding their way through the NSW Supreme Court and another one is in the Federal Court. The next hearings are scheduled to take place in June.

The system of franchising out bank branches is unique to BoQ, which has used the model to rapidly expand its retail network to 280 outlets since 2001. It has also been converting a majority of its old staff-run and corporately owned branches to owner-managed branches. Former NSW franchisees, though, have been angered by the bank's comments last week at its half-year results that in effect sheeted the blame to them for the financial failure of their branches.

One former owner who ran a branch in Sydney told the Herald that it was an almost impossible task to make the outlets pay based on the revenue, loan generation and fee-earning business plans that were originally put in place.

The result was that a number of owners were considered to have become "unfinancial" and breached their five-year contracts with the bank.

"They kicked us out the door with nothing, but you still have to pay all the debt [involved in setting up and running the business]," said the former owner, who did not want to be identified because of the impending legal action.

A bank spokeswoman said BoQ was defending the various actions but that she could not comment about the cases as they were before the court. But she pointed out that two of the bank's top-five performing owner-managed branches in the country were in NSW.

BoQ disclosed last week that it plans to close 11 of the 56 branches because of the downturn in the already sluggish NSW economy, poor selection by head office of some of the owner/managers and the subsequent under-performance by the franchisees.

It is understood that several of the 15 outlets that have been taken back in house and run as staff branches are among those listed to be shut down.

The bank has set aside $11.7 million in its latest interim accounts to cover the costs of re-organising the NSW network, which stretches from Wollongong in the south, Dubbo in the west and Tweed Heads in the north.

Thirty-five of the branches are in greater Sydney, while the bulk of the NSW network has been operating for more than three years with only five branches added to the total since 2007.

http://business.smh.com.au/business/franchises-back-in-boq-hands-20090412-a3yt.html


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