Horror Stories of Franchisees Struggling with Personal Debt

Recent stories in the media have revealed the horrific reality of owning a franchise. Many franchisees complain that the lack of support from their franchisors have led to the demise of their businesses and, consequently, their own personal solvency.


Included among the former franchise owners who have come forward with concerns about franchising are those from Red Rooster, Oporto and Gloria Jeans.


Both Red Rooster and Oporto are owned by Craveable Brands. The struggle for franchisees is highlighted through a conflict of interest between the two brands as they both run similar businesses, yet have been typically situated in a location near each other. Franchisees of Oporto and Red Rooster stores have said that due to the parent company’s unfair business practices, they are “on the verge of bankruptcy”.


In a seven-year period, franchising company Retail Food Group (RFG) opened 1000 new franchises and closed 1100. RFG owns Gloria Jeans, Donut King and Michel’s Patisserie, to name a few. Robert Verni, who was a Michel’s Patisserie franchisee, said he was forced to empty his kids’ bank accounts when his business collapsed. This ‘churn and burn’ business model exploits the finances of franchisees and is causing personal debt issues for many Australians.


With the rapidly growing number of business failures in Australia, and the tendency for business failures to be closely linked to personal debt crises, more Australians are seeking bankruptcy advice and administration than ever before. If you would like more information about how Insolvency Services Australia can assist you with all solvency concerns, then please contact us on our 24/7 expert advice line on 1800 003 883.


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