General The Mad Butcher - Sir Peter Leitch QSM

[bruce]

Unsustainable does not equal fraudulent so not sure what legal argument the liquidators would base their case on.

Fair question.

People do not go into franchises unless they are told they will make a profit. That can be assumed. So if the franchise is unsustainable then they are lying about the potential profit and it is fraud.

I knew of Mr Morton during his Nosh days - heard not so nice stories. A friend had a MB franchise and it didn’t finish well. He has no time for MM, and felt sorry for Sir Peter.

I do not know Morton, but I know people who do. I have not heard anything good about the guy.

One franchisee, who had been longstanding and very successful, got so disillusioned by the way Morton was running it shut his doors, pulled down the signage and opened in his own name.

Morton claimed he was competing against the franchise, which is in breach of the franchise agreement. It was a provincial town and there was no other Mad Butcher franchise.

So when it got to court Morton claimed the chain was selling online...FFS. They haven't opened a new store anywhere for a long time. I think that case is still before the Court, as things usually do until somebody runs out of money.

Also getting harder and harder to.operate these kinds of stores with the number of supermarkets around offering sharper deals usually and getting picked up with the main shopping run.

The Aussie Butcher franchise seems to be going quite nicely.

The supermarkets, especially Countdown, present less quality for price than the small butchers and fruit & veg shops.

That is how the Mad Butcher got his start. We always shopped at a Mad Butcher store but gradually noticed the quality dropping and the prices going up. So no point in going, just buy at Countdown.

Now we are in a different suburb with a Fruit World and Aussie Butcher next door to each other. They both do a roaring trade.

So where did the Mad Butcher go wrong?

I heard that the chain used to get massive discounts on bulk buys and pass that on to the shops. Morton stopped all of that.

Profit margins are always tight in business, so a franchise has to justify its fees by increased income. Economics 101.

 

[playdaball]

Check out the Aussie Butcher in New Lynn, great meat and friendly service

 

[bruce]

Check out the Aussie Butcher in New Lynn, great meat and friendly service

Snap

 

[bruce]

Actually, and on the point of franchises, there seems to be quite a lot of comment about them recently.

If I recall they got very popular during the 1980's, especially after 1987 when there were a lot of redundancies and people looking to buy themselves a new job.

Then came the immigration surge about 20 years ago and many Chinese people especially needed a business in which to invest.

Things have changed in that large redundancy cheques are rare compared with back then, and we have become a low wage economy so margins are much tighter.

So outfits like Muffin Break, Starbucks, Esquires and Colombus are not necessary if you are a genuine barista or chef and can find yourself a commercial space.

If you are a genuine chef or barrista, you don't need a franchise. The main advantage Muffin Break had was the ability to score a prime spot in a mall.

However if you take the new mall in Newmarket as an example there are plenty of spaces for a coffee shop in malls, you don't need a franchise to get you one.

Also Muffin Break has gone the way of so many other franchises and has been sold more than once between corporate outfits. You can tell by their shite coffee, although they make a respectable muffin many other small coffee shops do as well, with better coffee.

So economics 101, where is the space in the budget to pay a franchise fee?

The increasing corporate role in franchises, with their brain dead executive types, is an ominous sign IMO.

 

[playdaball]

Franchises dictate where you buy product from. You maybe able to source products cheaper elsewhere but part of the agreement states that one has to purchase via suppliers , after HO has brokered a deal. Being in a mall can be a pain too as you have to remain open when the mall is operating- 7 days a week And in the case of a coffee shop at night - not good for a cafe

 

[playdaball]

Snap

Rueben is the owner

 

[gREVUS]

just touching on supplies coming via the franchise. We have a chain here in Vic called bakers delight. The Franchisor wanted to increase their profits so they created a company that made donuts, they then forced every franchise to take them under their supply agreement, whether they wanted them or not. The donuts, dont really go with the rest of the product line, and if anything they compete against existing products. It certainly is not a product you would go to a store like that to buy.
As such the profit for the franchisor goes up, but for the individual franchisee goes down. The corporate makes money because they write the rules. I know that prior to Covid there was an investigation started by the Aussie Govt into the contracts being sold for franchises and that they were looking at making changes to make the agreements more equitable.

My point is it maybe something as simple as being forced to sell bread a MB store that could break the business (i dunno if they do that btw, not having been to a NZ butcher in a very long time)

 

[bruce]

Franchises dictate where you buy product from.

Not necessarily.

They can and often do, but it depends on the contract. I think Hell Pizza is into that trick.

There are also "contract" businesses such as courier companies, which are usually not franchises (except e.g. Fastway). They rip the shite out of their "contractors". You have to buy everything through them, fuel, phones, uniforms, and the bastards click the ticket on the whole lot.

I was in a franchise that was quite straight up. There was no need at all to buy anything from them. However they controlled all the advertising and had strict rules as to how you could operate. Regardless lots of people, including me, did very well in that franchise.

However over time when competitive pressure came on the head franchisee started unilaterally changing the contracts. I had to write to him a few times raising breaches of contract. He asked if I had a million dollars ready to sue him.

So I just kept those emails because they were an admission of guilt.

There were strict penalties for walking away from the franchise, including surrendering your phone numbers, clients list and operating in the same areas, and also a cash payment.

So when I was ready to walk I pulled out the emails, and gave the jerk two weeks to comply or I was walking. To comply would have cost him millions so he complimented me and wished me well, before anybody else got the same idea.

I see a courier took NZ Couriers to court and won his initial case, but I think they appealed. Those bastards have been at it for years. I don't know how it turned out. Most people just cut their losses and walk away.

 

[the borg]

Reading all the comments.. same conclusion Neoliberalism did all this.. allowed certain companies and banks to get too rich and powerful and too much political influence.. just ask John Key opened up the country for the rich Chinese to exploit the housing, horrendous amount of loans from Aussie banks etc. . and everyone falls for competition is good... there is never real competion, just to satisfy people let them open a similar business then swallow them up later.. the elite owners are to rich and powerful now... unless people can come up with an original idea...

 

[bruce]

there is never real competion, just to satisfy people let them open a similar business then swallow them up later

The big weakness of textbook capitalism. Lots of investment capital waiting for a home so it is often used to create large monopolies.

When I was a kid you bought groceries from a small grocer. There must have been thousands in New Zealand. Now your choice is two chains, or an Indian owned dairy where the poor bastards inside are working for half the minimum wage.

 

[Woofa]

Not necessarily.

They can and often do, but it depends on the contract. I think Hell Pizza is into that trick.

There are also "contract" businesses such as courier companies, which are usually not franchises (except e.g. Fastway). They rip the shite out of their "contractors". You have to buy everything through them, fuel, phones, uniforms, and the bastards click the ticket on the whole lot.

I was in a franchise that was quite straight up. There was no need at all to buy anything from them. However they controlled all the advertising and had strict rules as to how you could operate. Regardless lots of people, including me, did very well in that franchise.

However over time when competitive pressure came on the head franchisee started unilaterally changing the contracts. I had to write to him a few times raising breaches of contract. He asked if I had a million dollars ready to sue him.

So I just kept those emails because they were an admission of guilt.

There were strict penalties for walking away from the franchise, including surrendering your phone numbers, clients list and operating in the same areas, and also a cash payment.

So when I was ready to walk I pulled out the emails, and gave the jerk two weeks to comply or I was walking. To comply would have cost him millions so he complimented me and wished me well, before anybody else got the same idea.

I see a courier took NZ Couriers to court and won his initial case, but I think they appealed. Those bastards have been at it for years. I don't know how it turned out. Most people just cut their losses and walk away.

Funny - I used to own a hell Pizza some 15 years back now. Was fully managed and making good money then the franchisor got greedy (er) and forced me to buy product from them namely cheese this time. I sourced my own cheese which was superior quality for a literal 50% less (including the storage facility I had to pay for to store it in bulk). If you can imagine cheese makes or breaks that model. We had many run ins and yelling matches (most of the others just toed the line like good minions) before I said you know what.. I don't really want to be a pizza boy for life and sold as quick as I could. Moral of the story - #NOtoeverbuyingafranchise.. dealing with another persons (group) greed is too hard. Was a good lesson in life.. own 3 other businesses now and much happier with my own destiny in my/ our hands.

 

[bruce]

Franchises are not just small businesses. Many law and accounting firms are franchises. Same issues there, after a while they question what they are paying for.

 

[wizards rage]

Franchises are not just small businesses. Many law and accounting firms are franchises. Same issues there, after a while they question what they are paying for.

Franchising gives a new business support, a brand name and marketing you can use to grow into a profitable business. Your paying to increase your chances of success in a new business.

The problem comes once your established and have got a good reputation and then your paying for something you no longer need...

 

[bruce]

Franchising gives a new business support, a brand name and marketing you can use to grow into a profitable business. Your paying to increase your chances of success in a new business.

The problem comes once your established and have got a good reputation and then your paying for something you no longer need...

IMO it all depends on the franchisee.

The one I was in had been going for decades, and was very successful. It was set up by a guy with support from smart, practical people, they knew what people wanted, they knew what accountants would recommend, they didn't make outrageous promises. It had an excellent reputation.

People had been there 20 years and still thought it was worth their while.

Slowly things changed. The original guy, who is still there, became too difficult to work with. His staff, who were well paid, gradually got sick of him and moved on.

He became arrogant, got a bad reputation as an employer and got very high staff turnover at his head office. None of that affected the franchisees...at first. We paid scant attention to it because we were happily making a dollar...or three.

Then the increase in online advertising like Uber came along. Not just Uber, they are a dime a dozen, Goodnest, Builders crack, Airtasker. This guy could see that affecting his massive franchise business and started to panic.

His situation is no different to long standing taxi companies like Blue Bubble. Uber must have hit them hard, but they chose to compete, and still are.

In my franchise the owner started ripping things into the contract, so affecting the bottom line of guys like me. I had enough so walked.

Most of the guys I worked with have left as well. He has had trouble replacing us. I think he will collapse, eventually.

The thing is that going alone wasn't easy until I got things together with marketing. Now I would never go back to a franchise.

However I am very experienced in small business, many people are not. Especially if they have come from a 40 hour a week job.

I think there is still a place for good franchisees, but it is more difficult now, and too many sharks in the tank.

 

[Whiteknight]

IMO it all depends on the franchisee.

The one I was in had been going for decades, and was very successful. It was set up by a guy with support from smart, practical people, they knew what people wanted, they knew what accountants would recommend, they didn't make outrageous promises. It had an excellent reputation.

People had been there 20 years and still thought it was worth their while.

Slowly things changed. The original guy, who is still there, became too difficult to work with. His staff, who were well paid, gradually got sick of him and moved on.

He became arrogant, got a bad reputation as an employer and got very high staff turnover at his head office. None of that affected the franchisees...at first. We paid scant attention to it because we were happily making a dollar...or three.

Then the increase in online advertising like Uber came along. Not just Uber, they are a dime a dozen, Goodnest, Builders crack, Airtasker. This guy could see that affecting his massive franchise business and started to panic.

His situation is no different to long standing taxi companies like Blue Bubble. Uber must have hit them hard, but they chose to compete, and still are.

In my franchise the owner started ripping things into the contract, so affecting the bottom line of guys like me. I had enough so walked.

Most of the guys I worked with have left as well. He has had trouble replacing us. I think he will collapse, eventually.

The thing is that going alone wasn't easy until I got things together with marketing. Now I would never go back to a franchise.

However I am very experienced in small business, many people are not. Especially if they have come from a 40 hour a week job.

I think there is still a place for good franchisees, but it is more difficult now, and too many sharks in the tank.

Thought about getting into a franchise of late, think I will pass and find something else to do instead going on what I have read on here

 

[gREVUS]

Thought about getting into a franchise of late, think I will pass and find something else to do instead going on what I have read on here

i think like was mentioned above, its no different to any business, do your homework, read the contracts thoroughly, then get a contracts lawyer to read the contracts with an eye for all the shit that can go wrong. If they are promising the world, you know its all shit. If they tell you lots of good stuff but it aint in the contract, ignore it except as a warning that things are already looking questionable.
Go in with open eyes and a view to eventually getting out, and what that would take and cost, and keep that in mind the whole time your in business.

I have friends who have made a career owning franchises, from a record store to baking to tinted glass, that have always done well. But they go in eyes open and always with a view to getting out. They never thought of themselves as bakers, always business people looking to make a buck.

Protect yourself first and foremost.

 

[Dixpat]

I have a franchise in the financial area, have had for 8 or so years and it has given me & continues to give me a very nice lifestyle - I pay 18% of my profit before tax to the franchisor.

Not all franchises are rubbish!

 

[bruce]

i think like was mentioned above, its no different to any business, do your homework, read the contracts thoroughly, then get a contracts lawyer to read the contracts with an eye for all the shit that can go wrong.

Good point, but here is the rub.

The cost of a decent contract lawyer to read through sometimes 50 pages of contract is substantial, like in the thousands. Even then they can get things wrong believe me.

You might say you can sue your lawyer then...lol

Lawyers are very good at reading contracts they often deal with e.g. property transactions. That is because they know what to look for. However many of these franchises are industry specific and they can put fish hooks in that may not be obvious. Remember these franchises know how to slip things in the fine print.

That is where an accountant is important. They count beans, and and can pick financial trends up in their sleep. So just my IMO and IME an accountant is the important person. They will charge you money, but they will demand to see books and records. That starts to sort the men from the boys.

If somebody is offering you a franchise, and they cannot produce books, it doesn't mean not to touch it. They might just be slack pricks or they might be burying cash. It also might mean the franchise is a total dud. So you always want to know why the franchisee is selling.

Also in my game I get many people offering me to take over their business, as opposed to a franchise. My first question is operating records, not financial records.

That is work diaries, hours spent on jobs and the like. It is amazing how many people don't keep that. If that is their answer, then unless they can show seriously good financial information I am not interested.

That is where an accountant comes in. If they are prepared to discuss books, let them tell your accountant.

Also, the key ingredient is what you are getting for your money. The answer with many franchises these days is not enough.

I agree there is a need for good franchises, and the do exist, but too many these days are just not worth it.

 

[gREVUS]

Good point, but here is the rub.

The cost of a decent contract lawyer to read through sometimes 50 pages of contract is substantial, like in the thousands. Even then they can get things wrong believe me.

You might say you can sue your lawyer then...lol

Lawyers are very good at reading contracts they often deal with e.g. property transactions. That is because they know what to look for. However many of these franchises are industry specific and they can put fish hooks in that may not be obvious. Remember these franchises know how to slip things in the fine print.

That is where an accountant is important. They count beans, and and can pick financial trends up in their sleep. So just my IMO and IME an accountant is the important person. They will charge you money, but they will demand to see books and records. That starts to sort the men from the boys.

If somebody is offering you a franchise, and they cannot produce books, it doesn't mean not to touch it. They might just be slack pricks or they might be burying cash. It also might mean the franchise is a total dud. So you always want to know why the franchisee is selling.

Also in my game I get many people offering me to take over their business, as opposed to a franchise. My first question is operating records, not financial records.

That is work diaries, hours spent on jobs and the like. It is amazing how many people don't keep that. If that is their answer, then unless they can show seriously good financial information I am not interested.

That is where an accountant comes in. If they are prepared to discuss books, let them tell your accountant.

Also, the key ingredient is what you are getting for your money. The answer with many franchises these days is not enough.

I agree there is a need for good franchises, and the do exist, but too many these days are just not worth it.

i thi k rather than an either or, it ismore a case of use both professional services, to be as informed as u can be.

 

[bruce]

i thi k rather than an either or, it ismore a case of use both professional services, to be as informed as u can be.

Most people looking at a franchise are spending a lot of money. The cost of a lawyer for many is a major issue.

I don't know, because I have never tried it, but the cost to read a 50 page, pedantic contract would be in the thousands, not hundreds.

However, to prove your point, 100%, I sped read a contract on my own, many years ago. I got most of it, except one clause...a doozie .

It said roughly:

The management can change any of the terms of this contract at a weeks notice.

So in other words the contract was toilet paper. This was, and still is, a major NZ company.

Like I said I don't know how much a lawyer would have cost me, because I was already spending over $50000 to get into the business. Over three years in that business I made absolutely nothing...I was down $50000 when I left although I paid the rent and living expenses along the way.

Could I guarantee 100% he would have found that clause? Absolutely not.

I am very experienced in reading legal documents but the sentence was hidden in a section full of irrelevant content, deliberately designed to be missed.

and further...ladies and jellybeans...the punchline is the clause actually cost me nothing...because I lost the money from fraud...total fraud. They ripped me off while actually breaching the contract anyway.

What I should have done was get an ACA accountant. I got conned into using a book keeper that was on the take from the company.

Also, contracts in NZ are toilet paper. I had reams of documents that showed this company was guilty of theft. They have been doing it for years, and probably still are. So much for contracts.