Legal Matters

by Simon Lord

last updated 10/06/2015

Home services franchisor ditches brother, repays franchisees

by Simon Lord

last updated 10/06/2015

10 June 2015 – Mr Green has responded to a series of negative articles by terminating a master licence agreement held by the franchisor’s brother

Mr Green franchisor Julian Smith has taken the unusual step of making a public statement about the termination of his brother Dean Smith's master franchise agreement. The action has been taken after a series of articles by Christchurch Press journalist Martin van Beynen were published on the Stuff website alleging that Dean Smith had failed to provide support new franchisees in Christchurch, Wellington and Rotorua. All the franchisees were immigrants.

In his statement on the Mr Green website, Julian Smith advises

‘As per the regional owner’s manual a regional owner when considering the sale of a franchise is required to submit a franchise application to myself, included with that application should be a customer list, an equipment list and a security check form.

A regional owner is not permitted to sell a new franchise unless a). He has sufficient work for the new franchisee and b) he does not have any existing franchisees who require work.

Once I am satisfied that these (and other) conditions are met a franchise agreement is prepared and issued, that agreement is forwarded to the regional owner for signing, the document is then returned to me for signing and final checking.

A fee is payable to me in respect of those sales.

Unfortunately Dean during 2014 circumvented this process and sold five franchises to residents of Christchurch and in 2015 sold a further franchise to a resident of Rotorua.

He at no time advised me that he had sold these franchises preparing the documents himself obtaining payment for the franchise depositing that payment into his bank account in full.

No payment for any of the above franchises was received by me.

This is a clear breach of many of the conditions of his licence agreement.’

Money Repaid

The statement goes on to say:

‘I was first made aware of the sales late last year when I was contacted by one of these franchisees who had concerns, I immediately visited that person at his home and viewed the documents, documents that had not been prepared by me.

Subsequent enquiries revealed the existence of the other affected parties.

The monies paid by the prospective Christchurch franchisees has been repaid by myself with the assistance of a loan from the BNZ. ($80,000)

The monies paid by Savio will be repaid in full by me also.’

Brand Damage

Mr Green logoMr Green has 21 regional owners and 168 franchisees around New Zealand. Julian Smith says, ‘Unfortunately the unauthorised actions of one regional owner have caused damage to a well known, well respected, and long serving brand. It has affected the businesses of all of the hard working regional owners and franchisees, we have been accused of being scammers, and the media have unfairly painted a picture of a franchise system that is not what it purports to be.

This is far from the truth, we would not survive as a franchise business if we operated in this manner as a group we are all horrified with what Dean has done an no other owner would even consider doing this to any prospective franchisee who has entrusted Mr Green with providing them with an income to support themselves and their families.

We have subsequently tried working with Dean to resolve the situation amicably (as he has existing franchisees in Wellington) but have been unable to obtain cooperation.

Dean’s licence to operate as a Mr Green regional owner has been terminated and we hope that this incident has been closed.'

The Articles

Since December 2014, Martin van Beynen has reported several times on issues relating to the actions of Dean Smith. The articles make interesting reading as a study of how issues are reported in the media and handled by the franchisor.

18 December 2014 - Franchisee fed up as assurances fall flat
5 May 2015 - New recruits to Mr Green franchise want out
9 March 2015 - Mr Green franchise owner backs errant brother
10 June 2015 - Mr Green owner Julian Smith ditches errant brother

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