Franchise Termination

Metaphysicist

Hi,

Hope I can get some help. I was sold a franchise with fake promises and projections. The franchise has now been terminated due to my company going through dissolution, which I was not aware of. When I found out that my company had been struck off, I immediately notified the franchiser and I was told that it was not an issue. I advised the franchiser that I could reinstate the company but was told it’s easier to open a new company, which I had already done. There was also a £2.7k balance outstanding which was being disputed due to the site not being refurbished as promised. Franchiser has said I am in breach of contract and terminated the agreement. The franchiser tricked me and then used the contractual agreement clause to terminate my agreement. I am not fussed about the site as it was not making enough money anyway! I want to sue the franchiser for foul play, fake promises and selling me a site battered when it was stated it would be fitted out. I want financial compensation for the time, effort and energy I put into the business. I would like advice on how to proceed.

The franchiser has now taken control of the site and has told me that they will let me know what happens now. The franchiser advised me they would email by Friday and no email has been received yet. I would like to teach these fraudsters a lesson. 

Kind regards 

Hoenir

Metaphysicist said:

The franchise has now been terminated due to my company going through dissolution, which I was not aware of. When I found out that my company had been struck off, I immediately notified the franchiser and I was told that it was not an issue.

Why weren't you aware? 

Metaphysicist

@Hoenir My accountant was away. Year one of trading accounts was due next thing I know my business account was frozen and that is when I called the bank and they told me what had happened. Thanks 

Metaphysicist

I would also like to add that when I applied to open a new business account with the newly formed company I needed proof of the company's trading address to be updated to the new company's name. The franchiser obliged and sent it to me. This shows they never knew of the clause which could terminate the agreement, and they used that at a later stage.  

Devongardener

Do you mean your company was struck off at Companies House?  You would have had to process that yourself as owner, it’s not something you wouldn’t have been aware of. 

Metaphysicist

Devongardener said:

Do you mean your company was struck off at Companies House?  You would have had to process that yourself as owner, it’s not something you wouldn’t have been aware of. 

Company got struck off for late filing. I was not aware and this process is pretty common and vastly being used now. 

Savvy_Sue

I'm struggling to understand this. DS1 runs a company which is registered to our address. He uses an accountant to keep his affairs in order. 

There are regularly letters from HMRC to the company advising that X, Y or Z is due, or at one point that something was late being filed. It's DS1's responsibility to ensure that stuff happens: if something is late he gets on to the accountant to find out why. 

Being struck off for late filing doesn't happen in a matter of weeks: as far as I can see it would take AT LEAST four months. 

It sounds as if you're not keeping on top of correspondence being sent to the company. 

Your dispute with the franchiser: did you take legal advice on the terms and conditions? Are you sure they are acting illegally? 

Metaphysicist

Savvy_Sue said:

I'm struggling to understand this. DS1 runs a company which is registered to our address. He uses an accountant to keep his affairs in order. 

There are regularly letters from HMRC to the company advising that X, Y or Z is due, or at one point that something was late being filed. It's DS1's responsibility to ensure that stuff happens: if something is late he gets on to the accountant to find out why. 

Being struck off for late filing doesn't happen in a matter of weeks: as far as I can see it would take AT LEAST four months. 

It sounds as if you're not keeping on top of correspondence being sent to the company. 

Your dispute with the franchiser: did you take legal advice on the terms and conditions? Are you sure they are acting illegally? 

I was advised by accountant I have couple of months to file hence why I thought I was ok. Randomly I find out my company has been struck off and there was a marker on companies house warning me I have a period of time to file or the company will be struck off. This was year one’s filing and it was late. Phoned companies house to explain the situation was advised no stress easier to open a new company. I then did that and informed the Franchisor about the situation and was advised it’s fine and the new formed company will be swapped over to the Franchise agreement. One week later this was not adhered to and I was informed via email that that my agreement is in breach and has been terminated with immediate effect. Hope that clears it up. 

Annisele

Metaphysicist said:

Phoned companies house to explain the situation was advised no stress easier to open a new company. I then did that and informed the Franchisor about the situation and was advised it’s fine and the new formed company will be swapped over to the Franchise agreement.

Are you saying that Companies House advised you to open a new company? That's very odd. So odd that I wonder if perhaps you misunderstood.

It's also very odd that the franchisor said that the agreement with your old company could be "swapped". To offer a new agreement for your new company, sure - but any assets your old company had now belong to the Crown.

Who entered into the original franchise contract? Was it you as an individual, or your (now dissolved) first company? If it was the company, then you as an individual have no rights at all in relation to it. The franchisor would have had no choice but to terminate the agreement, because the entity it had contracted with no longer exists.

Metaphysicist

@Annisele

Thank you for your feedback; the situation is quite intricate and not as aggressive. The franchisor is currently in talks to settle with me. Regards.