From shop owner to living in a caravan park: The struggle of franchisees

By Frank Chung

Former Eagle Boys franchisee Andrew Kynaston with his son. Photo / Supplied
Former Eagle Boys franchisee Andrew Kynaston with his son. Photo / Supplied

In late 2010, Australian pizza chain Eagle Boys was in dire straits.

Mildura store owner Andrew Kynaston had driven four-and-a-half hours to Adelaide for an emergency meeting between head office and other struggling franchisees - more than 40 of which were already up for sale.

The father-of-two recalls his disbelief when one senior executive asked him why he had bothered to make the trip.

"You're going to have to close down soon," he claims he was told. "You might as well leave the meeting now."

But it was the words of an assistant manager Kynaston says he will never forget.

"I told them, if I close the shop I'm going to lose my house," he said. "[The manager] said to me, 'So what if you lose your house? You can buy another one.' That crushed me. I was a mess the whole drive back."

Kynaston had taken out a A$400,000 loan in 2009 against his riverside home 55km away in the small Victorian town of Colignan to start his Eagle Boys franchise.

After it went under in 2011, the bank repossessed the house he had bought at age 20, leaving him living out of a caravan park across the road from his failed business.

"It killed me mentally to lose my home," he said. "It was our pride and joy. Everything went haywire. I split up with my wife, my son was confused, his school grades were affected. It was just a big mess."

We were bringing in A$11,000 to A$12,000 per week, [but] our break-even was about A$17,000. I could have made more money sitting on the beach.
Andrew Kynaston

Kynaston says revenue wasn't a problem, but crippling franchisee fees, high costs, lack of advertising support and a series of loss-making special deals dictated by head office made it impossible for the store to turn a profit.

"We were making good money. We were bringing in A$11,000 to A$12,000 per week, [but] our break-even was about A$17,000," he said. "I could have made more money sitting on the beach. I was led to believe it was a going to be a cash cow."

In its first week of opening in late 2009 the store brought in A$30,000, and Kynaston says he did nearly A$1 million in the first year.

Almost immediately, however, problems began. Some items such as pizza ovens were only provided second-hand, while other equipment for rolling and balling dough, for example, wasn't provided at all, forcing him to shell out of his own pocket.

Andrew Kynaston lost his home and now lives in a caravan park. Photo / Supplied
Andrew Kynaston lost his home and now lives in a caravan park. Photo / Supplied

Kynaston says "ridiculous deals" such as cheap Sunday delivery and ice cream promotions ate into profits, and constant menu changes confused customers and pushed up costs.

"They tried to introduce gourmet pizzas, and of course we had to carry the costs involved in holding that stock," he said. "You have to throw out prawns after a day."

He claims head office failed to provide advertising support that was supposed to be included as part of the store's 12.5 per cent fee, opting instead to aggressively chase franchisees for payments.

"They just took as much money out of the franchise as they could," he said.

"Another franchisee, his oven broke down, so he didn't pay his fees that week because he wanted to get it fixed. They rang him up and had a go at him. He said, either I can pay the franchise fees and close shop, or I can fix the oven."

After struggling to work out a deal with Eagle Boys that would have kept the business afloat, including reducing his fees for a set period, he was forced to call it quits in 2011.

A lot of people in my situation who invested in Eagle Boys have gone bankrupt or lost their houses. It would be nice for something to help some of these people restart their life.
Andrew Kynaston

"We were running the risk of running the business while insolvent," he said.

"I didn't want to go to prison. I said to them, if you're not going to help us get this shop going, we're going to have to close. They didn't even bother to ring us back. They only rang us because the internet ordering was still switched on."

Kynaston is one of many mum-and-dad Eagle Boys franchisees who have lost everything. He argues "it's only fair" those franchisees should receive something as part of the sale of the business, which went into voluntary administration last month.

"A lot of people in my situation who invested in Eagle Boys have gone bankrupt or lost their houses," he said. "It would be nice for something to help some of these people restart their life."

Only now, five years on, has he begun to rebuild. He now works in coffee sales and has an 18-month-old daughter with his new wife - but still lives out of the caravan park.

"[Going bankrupt] messes you up," he said. "There's no one out there to help you. When someone's house burns down, the community gets together, neighbours help out.

"But when you lose your house through business, there's no one.

"You're stuffed for several years afterwards. Even lawyers want several thousand upfront just to look at it. They're quick with 'no win no fee' if you have a car accident, but no one wants to take on the bank or Eagle Boys."

Eagle Boys' administrators SV Partners have been contacted for comment.

- news.com.au

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