Coffee Club sued by franchisee who says chain ‘ruined’ him

 

THE former franchisee of Coffee Club at Robina is suing the iconic chain for more than a million dollars claiming the company set him up to fail.

Jeremy Swift, who had operated the popular outlet at Robina Town Centre for 15 years, walked away from the business this week claiming high rents, refurbishment costs and other imposts had left him with nothing.

Mr Swift is now suing The Coffee Club Franchising Company in the Federal Court for breach of the Franchising Code and misleading and deceptive conduct.

"I just do not want this to happen to any other small business person," Mr Swift told The Courier-Mail. "I have a wife and two daughters but have been financially ruined. I have had to sell our house to keep the business going but have now walked away."

Sign at the Coffee Club Robina this week.
Sign at the Coffee Club Robina this week.

Mr Swift, who before buying the Coffee Club franchise at Robina in 2005 was involved in construction management, said at the end he was paying 19 per cent of his turnover in rent when to make a profit Coffee Club accepted it had to be no more than 14 per cent.

He said Coffee Club, which was the lessee over the shop, had offered to negotiate with the landlord about reducing rent but this had not been successful. "I have sent numerous emails over the years to Coffee Club regarding the need for rental relief but this has fallen on deaf ears," he said.

In the past 14 months, almost half a dozen southeast Queensland Coffee Clubs have shut their doors, including Wilston Village, Sherwood, Nundah and Broadbeach (after 21 years) as the chain struggled to gain traction in an increasingly saturated market.

Mr Swift said Coffee Club's decision to open an outlet called First Avenue in the same shopping centre for eight years had then seriously impacted on his business.

"First Avenue was a very similar concept to Coffee Club and they even sold Coffee Club branded products and exact items," said Mr Swift. "They opened that shop even though I had the right of first refusal to operate any other Coffee Club outlet in the centre."

Coffee Club Robina franchisee Jeremy Swift and his wife Sharon.
Coffee Club Robina franchisee Jeremy Swift and his wife Sharon.

He claimed First Avenue drew away his customers by accepting Coffee Club VIP discounts, offers and promotions. "The similarities were such that customers, the lessor, suppliers and even Coffee Club head office staff confused the stores," he said.

He said Coffee Club also had attempted to enforce overinflated refurbishment costs onto the business. "These were minor cosmetic front of house works only," said Mr Swift. "But they attempted to charge $276,000 for 10 days work. They failed to provide fixed quotes while refusing to sign the lease renewal resulting in months lost on the lease as I refused to sign off on their excessive estimate price."

Mr Swift said he then engaged his own contractors who gave an estimate of only $157,000 for the works. "The Coffee Club' own contractor price was then revised and came in just under my contractors' best prices," he said.

According to a statement of claim lodged in the Federal Court, Mr Swift also alleges losses were caused by unreasonable markups on food estimated to be in the order of 14 per cent of total sales.

The shuttered up Coffee Club at Robina this week.
The shuttered up Coffee Club at Robina this week.

Minor DKL Food Group, which operates the Coffee Club chain, has denied Mr Swift's claims.

It said the company negotiated a lease at Robina that represented fair market rent at the time of renewal. "Given the turnover of The Coffee Club Robina at the time of the lease renewal, the landlord QIC would not have agreed to a rent discount," it said.

Minor denied the opening of the First Avenue store had affected Mr Swift's sales and had "ensured a competitor was not able to open in direct competition to the Robina store." In reference to Mr Swift's claim that the company overinflated its estimate of refurbishment costs, Minor said the estimate was realistic given the scope of the works. "The Coffee Club revised the scope of works to reach agreement with franchisee," it said. Minor also denied the company enforced unreasonable mark ups on food and said it "used its buying power to secure high quality products at lower prices." Coffee Club says it will reopen the Robina outlet on January 2 with a temporary operator.


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