Foodco hits back at media claims of franchise churning

By Sarah Stowe | 29 Sep 2021 View comments

Foodco has hit back at media claims the business is churning franchises and putting marketing funds to use for franchise recruitment.

The franchisor of hospitality brands Muffin Break and Jamaica Blue has issued a firm rebuttal of the claims made in an article on Monday 27 September in the Sydney Morning Herald and The Age.

The article alleges Foodco is “signing up franchisees to failed sites despite a decline in both businesses, in a bid to bolster its profits”.

According to the news report, inside information was provided by franchisees, an anonymous employee, and a former Muffin Break franchisee, Pranav Patel.

Patel claims to have walked away with nothing after failing to make any money from operating a Frankston store he purchased in 2016.

“The business we ended up selling back to the franchisor for the rent we were behind in,” he told SMH/The Age. “We got nothing.”

A spokesperson from Foodco told Inside Franchise Business Executive, that Pranav Patel had purchased the Muffin Break store from the previous franchise owner, not from the franchisor.

”Foodco strongly refutes any allegations that it is conducting its business in any way that is detrimental to our franchisees or their livelihoods. It makes no commercial sense for this to be the case as Foodco, through its companies Muffin Break and Jamaica Blue, is the tenant for the majority of its franchised sites.

“A franchisee who is not successful and unable to pay their rent creates an immediate liability for Foodco. It is clearly in our mutual interests to have successful franchisees.”

The spokesperson said the claim that the marketing fund had been misused was incorrect.

“The recent franchisee recruitment campaign was entirely funded by Foodco and not paid for by the marketing funds.”

Foodco confirmed it’s marketing funds are independently audited on an annual basis as required by the Franchising Code of Conduct.