My name is Graeme Brown. My wife and I are successful business people, running a profitable business within the milk industry for a number of years. We are also successful property investors. When it comes to business and investments, we do our due diligence. We did not, nor could we have, expected the treatment or conduct that we experienced at the hands of Bakers Delight.
In January 2001, my wife, Anne, and I decided to look into opening another business. Due to strong advertising in WA at the time, we decided to investigate becoming franchisees of Bakers Delight.
On the 5th February 2001, my wife and I attended a seminar held by Bakers Delight. At this seminar the Regional Manager of Bakers Delight (WA Branch), told the group that in the event that a Bakers Delight store did not make the forecasted profit levels as represented by Bakers Delight, or began to make a continual loss, Bakers Delight would buy back the underperforming store from the franchisee.
On 13th February 2001 my wife and I lodged an application to become Bakers Delight franchisees, following which I did a two-day orientation in a Bakers Delight bakery. On the 20th February 2001 my wife and I undertook an assessment by a recruitment company in Subiaco to determine if we were suitable to become Bakers Delight franchisees. We were officially notified of our acceptance into the Bakers Delight system on Tuesday, 6th March 2001. My wife and I then signed agreements prior to starting training, and paid $8,200.00 (incl. GST) for induction and insurance
We started our training on 13th March 2001. The bakery that we trained in did not have the Point of Sale (POS) system so our training was incomplete.
In April 2001 a Bakers Delight representative showed us three sites. One of these was the North Perth site. This representative told us that Bakers Delight were prepared to pay $600,000.00 for the North Perth Site, if it had an operating bakery, and that they had first right of refusal regarding it. In discussions with Bakers Delight representatives prior to our purchase of the North Perth Site, representations were made regarding both the expected turnover of the North Perth Store and the actions that Bakers Delight would take in repurchasing the North Perth Store should it not make the estimated levels of turnover and thus not be profitable. On three separate occasions Bakers Delight representatives told us that the North Perth Store would turnover at least $15,000.00 per week.
In early May of 2001 we decided to purchase the Bakers Delight North Perth store. As we were setting up the store, Bakers Delight organised everything, at our expense. Despite our requests, Bakers Delight have still not satisfactorily accounted to us for the expenditure of our money – we have still not been provided with a full reconciliation of the set-up costs, including tax invoices.
We opened Bakers Delight North Perth on 28 June 2001.
Our story is about misrepresentation. Bakers Delight made representations to us that the North Perth Store would make a minimum level of weekly turnover and would be profitable.
Bakers Delight represented that if this proved not to be the case, they would repurchase the North Perth Store immediately from my wife and I, as was their standard policy. Bakers Delight even made representations to my bank that the store would turnover at least $14,000.00 per week, and that if it failed to do so, Bakers Delight would, as they had done in the past with the Warwick and Wanneroo stores, buy it back from the franchisees. This made the risk acceptable to our bank, who was not one of Bakers Delights recommended lenders.
The North Perth Store never made the levels of turnover that Bakers Delight represented it would. The store was unprofitable from the beginning, and despite our requests, was not repurchased immediately when it became clear it was commercially unviable.
From week one the North Perth Store only turned over $8,200.00 and this soon, dropped back to just over $5,000.00. The turnover levels of the North Perth Store never reached anywhere near $15,000.00 per week. Due to the stress caused by this, my health began to suffer. This resulted in me collapsing on Saturday the 21st July 2001, whilst working at the North Perth Store. In the ensuing few weeks I collapsed several more times, and underwent tests to determine the cause of my health problems.
I was diagnosed with severe depression resulting from the poor performance of the North Perth Store, and told to sell out or die in the shop. My wife and I knew that we had to get out of Bakers Delight immediately and so we met with the WA Regional Manager on 27th August 2001, to discuss the sale of the North Perth Store due to my health issues. They agreed to help me put the store on the market.
On 28th October 2001 we received an offer from another franchisee for $250,000.00. Noting that we had setup the store just 4 months before, paying $409,934.83, we had to refuse so we could cover the debt we now had from the bank. We struggled on, suffering staggering financial losses.
The next offer did not come until 22nd December 2003; from a purchaser who was introduced to us by Bakers Delight, and offered to purchase the North Perth store for $260,000.00. Due to our financial situation and my deteriorating health we could not refuse. Settlement occurred on 4th March 2004.
The North Perth Store never turned over close to $15,000.00 per week whilst my wife and I ran it, as there simply was insufficient demand in the North Perth area at the time to achieve such turnover figures.
For anyone thinking of buying into Bakers Delight, you need to talk to former franchisees. Not just to the ‘happy’ franchisees that Bakers Delight direct you towards. Do your homework, find the ones who owned stores previously, and talk to them about why they are no longer in the system.