MIDAS AUSTRALIA FRANCHISING ABUSE
Franchising is an important and valuable industry. This information is not designed to harm franchising; however, it is designed to highlight a worst-case scenario in franchising.
This information demonstrates the ability of corporate greed in Australia to manipulate weak legislation and the failure of government to empower its own agency, the Australian Competition and Consumer Commission, to act against an immoral, unethical and criminal operator.
The franchisees are the victims and while Midas International in the United States operates ethically and supports their franchisees in a healthy business relationship, unfortunately to date, they have not acted on their duty of care as the Master Franchisor to protect the Australians who bought their brand.
The new Midas is a sophisticated system of financially draining existing franchisees and then replacing them with new franchisees that will share a similar fate. Seventy three percent of the network has disappeared in 2 years.
Sophisticated and complex, deliberately so, and while this has been a gradual process it has become an avalanche of personal disasters for franchisees and their families. Available and utilized methods range from created income streams within and outside of Advertising Funds, abuse of Lease agreements, general abuse of the franchisor's powerful position and the arrogant abuse of a legal system that eliminates justice for those that lack sufficient economic resources to properly build a case. They just walk away.
Subtle intimidation and ruthless threat are common and extortion exists, as does the predatory method of operating in competition with existing franchisees.
Philip Bonney, the new Midas Australia franchisor is acutely aware of the difficulties facing any opposition and continues to aggressively remove outspoken franchisees.
Midas began operation in Australia in 1977. In 1999, Midas franchisees continued to enjoy a quality and ethical relationship with their American franchisor. The spirit of franchising was maintained in the true sense where the entire basis of the relationship was one that worked toward growth in standards, services provided, customer numbers and profitability.
It was a win/win relationship. Consultation, support and training were accepted as a core ingredient. Advertising Fund management and charges were never questioned. An experienced team provided quality support and continuous training. Franchisee input was sought and franchisee representative bodies encouraged.
Communication was open and consistent. The interpretations of franchise agreements were accepted as fair and reasonable for all parties. The network of Midas franchisees and the corporate team were a family.
Advertising was generally, but not only, major television promotions three to four times annually. The brand Midas had an achieved and respected public profile and competitors were envious. The members of the Midas family were proud to wear the name.
Throughout these years franchisee turnover generally ranged from one to three annually. While there was the occasional failure, most sold their franchise for the standard reasons such as retirement, and they moved on.
Prior to 2000, Midas made available benchmark figures to ensure franchisees were able to investigate their own stores profit performance. Midas was involved with and assisted franchisees to ensure that profit was maximized. Generally, a franchisee could achieve a ten to fourteen percent net profit depending on fixed costs such a rent. The vast majority of franchisees were making money.
From the late 1980's until 1998 the American franchisor incurred a loss. Midas Australia staffing had become top heavy and the company store program was too large and under-performing. On the whole, standards had stagnated and in many stores they were crumbling. Midas Inc reacted and Michael McTiernan was appointed as the General Manager of Midas Australia.
The company store program was reduced as was middle and senior management staffing levels. Performance expectations were raised across the board and Midas Australia returned a profit to Midas America while store standards turned a positive corner. At this point in time, Midas America was undergoing its own restructure and seeing the opportunity, decided to sell their Australian franchise.
In 2000 Midas Inc sold the Australian master franchise to Philip Bonney. Initially, it was accepted that the new Australian franchisor would need time to gain a broad understanding of the business, the franchisee network and the market potential. The Midas family was patient and awaited the positive changes that would come from the new management team that had replaced many of the experienced senior people. Change was eagerly anticipated.
CONCERNS BECOME COMPLAINTS:
Following the introduction of Goods and Services Tax, Midas representatives individually went to franchisees and induced them into signing amendments to franchise agreements that allowed them to be charged royalty on GST. This was based on the insistence by Midas that the Australian Tax office had given a special ruling that allowed this to occur and that if a franchisee did not sign he would then not be entitled to a rebate.
The Australian Tax office confirmed that the special ruling never existed. Midas lied and Chris Pappas continued the lie until a new Financial Director in 2003 also unwittingly confirmed that it never existed. Between the introduction of GST and early 2004 it is estimated that franchisees have paid in the vicinity of $1.5M over what they should have paid.
By 2001, franchisees had increasingly become concerned at the lack of advertising. Television promotions had disappeared. Monthly advertising statements became difficult to attain. Averages of three millions dollars were going into Advertising Funds and franchisees wanted to know where the money was going.
When franchisees questioned Midas management they either were ignored or were told it was none of your business. Midas refused to explain how tax credits to Advertising Funds were dealt with or where those credited amounts went.
Franchisee meetings became a rarity and when they were held the previous open format was replaced with an information night. The information consisting of what Midas had done or was planning to do. Franchisee input or general discussion was not a part of the agenda. Franchisees became aware through example that to question Midas was to become a target. These meetings became fewer and it became evident that the franchisor did not want to encourage any exchange of concerns between franchisees.
The ongoing failure to advertise had a serious effect on franchisee profitability. Charges to Funds were being questioned but Midas continually isolated franchisees as the only person with a problem. Support and training began to disappear and direct charges to franchisees were on the increase.
The franchise representative body members, the MDA, were individually under attack. Requests for accountability and justification were ignored and persistence led to further isolation of franchisees and then intimidation and outright threat to terminate franchise agreements.
Midas attributed the decline in franchisee profitability to poor store operations and standards while customer numbers dwindled due to the failure to advertise. New charges continued to be introduced.
Preferred Supplier rebates no longer supported advertising funds and the quality of negotiations with suppliers was questioned. Philip Bonney kept the rebates. Generally it was accepted that preferred supplier negotiations had become focused on the size of the rebate to Bonney rather than benefits to the entire network. The perception of franchising group purchasing power had disappeared, as did loyalty to preferred suppliers.
Maintenance of the Midas Information System (MIS) computer software program stopped while charges increased. Supplier provided price information became the only additions to the system. Franchisees questioned the $200,000 annual payment to Midas for MIS maintenance and were either ignored or advised that Bonney lost money on software maintenance and that if further investigation was required it would lead to a further increase to the charge.
Midas Masters, an in-house promotion, was declared to be a training and marketing tool and was therefore another justifiable $200,000 charge to Advertising Funds. The Masters was accepted by franchisees as no more than a promotion to ensure preferred supplier loyalty and thereby ensure an increased level of rebate back to Philip Bonney. It was not supported and yet Advertising Funds were charged for every store even when the franchisee did not participate.
At the 2004 Midas Conference where the presentations were made only two hundred people attended and they were mostly company employees as only thirty-five franchisees and their wives attended.
Philip Bonney has a passion for Australian Football League and so it was decided that Advertising Funds would sponsor the Pick the Score competition to the complete dismay of the majority of franchisees.
The National Operations Manager, Chris Pappas, was to write to Western Australian franchisees stating that the sponsorship deal was only for one season. Three weeks later in an email to the same franchisees he admitted that Midas were committed for three years. It was another lie amongst the many that had been forgotten. There were more to come.
During this period Point of Sale advertising material and production charges increased dramatically. Direct Mail costs all but doubled.
Yellow Pages telephone directory charges were reduced. The advertisements in Yellow Pages were downsized or removed and the premier positions were lost and in doing that, there was no franchisee input into the decision making process. The Yellow Pages cost savings and the failure to advertise generally, began to destroy franchisee profitability.
From 2002 through to 2004 there was definite marketing activity around fleet and credit deals. Franchisees were already suffering a major decline in profit margin and the cost of these types of transactions only further reduced a low margin and often made this business unprofitable.
Remember, this is combined with the declining customer numbers and an increased need to use parts that were only available from the genuine dealer that always carry a very low margin.
2003 saw the introduction of Midas batteries. These were made compulsory through their addition to Midas System Standards. The batteries were Exide batteries and Bonney had struck a deal. All batteries were to be invoiced by Midas to franchisees and while Midas were adamant that there was no mark-up it was later to be found in a Midas response to the ACCC that once again they had lied.
The batteries cost franchisees more than if they had gone direct to Exide. Exide had paid money to Midas to assist with the marketing introduction of the line. It never happened. Midas were making on the profit of the batteries to Franchisees and then getting Royalty when they were sold. It was a compulsory Direct Debit by Midas from the franchisees bank account when the stock was delivered. The margin on batteries was low and Bonney made considerably more profit without any outlay than did the franchisees that did the work, paid upfront and took the risk.
Direct Debit facilities were in place prior to 2000 to ensure the payment of royalties with only some franchisees that usually had come into the Midas program with necessary ability but borderline finances.
Philip Bonney wrote Direct Debits into all Franchise Agreements and then went about to force all franchisees with existing FA's to sign over to a Direct Debit facility. It was now being used for all transactions. The money was taken usually before a franchisee received an invoice and queries about charges were generally ignored or took many months to resolve.
Midas System Standards was always a critical part of Franchise Agreements. These Standards allowed Midas to ensure that legal link to the FA so there was an assurance that Standards of Service and Appearance were maintained. Any addition to System Standards became a legal addition to the contract.
Pre-Bonney any addition went through a consultative process with franchisees. They were often passed, sometimes varied and sometimes dropped. It was accepted by franchisees that the Midas approach to System Standards was fair and reasonable.
Philip Bonney's Midas continually added to System Standards to their own benefit without consultation with Franchisees. Bonney's legal team now interpreted System Standards and Agreements in a very different way to what had occurred before his arrival. It was now a means to solely benefit the franchisor without consideration of any financial hardship caused to the Franchisee.
Advertising Funds were to see the introduction of new charge categories. WEB and Midas Collateral were introduced and franchisees continued to be refused access to invoices that created any category or justified the increased charges. Fronteer Advertising received a $250,000 annual retainer from the Midas Franchisees Advertising Funds while they were not allocated the funds to perform any meaningful advertising.
It is interesting to note that Midas Collateral appeared on Advertising Statements not long after Midas International insisted that Midas Australia immediately remove Car Care System from Midas logo signage throughout Australia. That was not an inexpensive operation as Car Care System also appeared on the expensive pole signs.
Bonney maintained throughout this period that franchisees never requested an audit of the Advertising Fund. There is hard copy evidence and declarations that substantiate that numerous individuals and groups of franchisees continuously made requests.
A complaint was made to the Australian Competition and Consumer Commission regarding the Midas failure to audit Advertising Funds, as it was mandatory under the Franchising Code of Conduct unless 75% of franchisees notified the franchisor that it was not deemed necessary. The ACCC gave Midas a slap on the hand after receiving Midas's lame interpretation of the FCC that 25% or franchisees had not notified Midas that it was necessary.
Midas eventually conducted the audits and PriceWaterhouseCoopers charged them $5,500. Midas then charged the franchisee Advertising Funds between $40,000 and $45,000.
From mid-2000 Philip Bonney's Midas had communicated to franchisees a vision to improve the network's public profile. No real details were available in the early days; however, this vision was to involve a re-image of store appearances and a consistent standard of systems delivery throughout the network.
Eighteen months later it was found in Disclosure Documents that one million dollars had been taken from Advertising Funds to create the re-image concept.
When franchisees were given the opportunity to view the concept there was general concern at the cost to franchisees. Estimates for the re-image of a store ranged from $30,000 to $60,000.
At meetings throughout Australia franchisees who were dealing with a declining customer base and consequential declining profits were assured that no one would be forced to re-image. In fact, Midas Australia's own legal advice was that no one could be forced. The Franchise Agreement stated that no reasonable request could be refused and surely these amounts of money under the circumstance could not be considered reasonable.
Following a generally unsuccessful attempt to sell the concept to suffering franchisees came an intense and ongoing series of store standards inspections that resulted in warnings being issued to franchisees throughout Australia.
The Midas push to re-image had taken a different turn and everywhere bitter franchisees were being given options of re-imaging or being in default of their contract for poor standards. Franchisees everywhere became aware of the phrase three defaults and you are out.
This too was a period where experienced state managers and support staff were replaced with inexperienced staff whose sole attribute appeared to be a preparedness to obey directions without question, compromise or moral consideration.
Midas has ensured complete control over the destiny of franchisees with the insistence that Midas have control over the Head Lease of stores. This allows them to threaten franchisees with a Notice to Vacate in conjunction with a Notice of Termination and this holds frightening consequences for the franchisee that will then usually capitulate.
Gaining access to Head Lease agreements has been an exercise similar to the introduction of GST and to that of re-image and now their expensive new computer software.
Firstly, they isolate and attempt to force the franchisee to capitulate, if that does not work, they then link it to the Franchise Agreement via an introduction to Midas System Standards and then if that continues to meet a challenge, they force it through as a condition of sale once they have the forced the franchisee out of the Midas network.
Midas stores operate with the use of DOS based computer software called the Midas Information System. Clockwork Computing who holds the liscence created this software.
This is the system that by 2004 was severely behind in vehicle-profiled parts as Midas had charged and continually increased the charges to Franchisees for maintenance but had only performed minimal upgrades. Clockwork had developed a new Windows based version and approached Midas for a commitment but was ignored.
Midas decided that the system was behind the times and set about to introduce a new software system into the network of Midas Franchise stores. They claimed that they had canvassed a number of companies, including Clockwork, and had decided on the Mi-System. They were never to provide details of those tenders and Clockwork denied they had received an opportunity to tender.
Franchisees became extremely concerned when, as usual, Midas began to drip feed information to them but the details were suggesting this would be another expensive introduction. It was to be a potential outlay in excess of $10,000 per store with maintenance costs to soar by an estimated three hundred percent.
Franchisees made it clear that they did not want it and they expressed suspicions that this was to be yet another income stream for Bonney. Bonney insisted and began to authorize the sale of a franchise only when the system was in place or after the purchaser signed a commitment to introduce it.
Franchisees independently organized a demonstration of the new Clockwork program and were impressed. They were also impressed that it would involve no capital outlay and would save approximately $400 per month in maintenance costs.
Franchisees gained legal advise that they must declare their rejection formally in writing and they did. This situation has not been resolved as both Bonney and Franchisees refuse to budge.
In early 2004 Midas acquired nineteen Super Cheap automotive workshops for an undisclosed sum. They were to be transformed into Midas stores. Many of these were virtually next door to, or across the road from, existing franchisees.
When franchisees complained they were offered the opportunity to purchase the offending store. Franchisees who were already suffering financially now had a new competitor, Philip Bonney.
His stores did not contribute to the Advertising Fund or the cost of the 13 Midas free-call number but they shared the phone inquiry and what little benefit that was coming from Funds.
The typical experience of an existing Midas franchisee when in proximity to one of Bonney's Super Cheap purchases, and there were a number of these situations, can best be exampled by Midas Dandenong.
Here the new site was twenty meters (60 feet) from the existing franchisee. After three months of operating side by side the franchisee was given three options by Midas Australia.
Option 1: Purchase Midas next door at a price exceeding 100k and move into that shop.(Midas still had a five-year lease).
Option 2: Continue to compete with Midas next door.
Option 3: Vacate the premises and leave Midas.
The franchisee at Dandenong was given 24 hours to decide. Disclosure Documents were requested but Midas were evasive. Eight days later the franchisee received a fax titled Vacate the Premises and they did.
Previous to 2004 Midas had vigorously resisted the creation of a Franchisee Representative Body. Midas had successfully undermined the previous MDA. Intimidation of delegates and a consistent refusal to acknowledge the body saw it self-destruct.
Following franchisees joining the Australian Franchisees Association and complaints to the ACCC, Bonney then decided to form his own Midas Franchisee Council. The voting for state delegates was via the Mi-System computer software that had been rejected and only franchisees that had not stated they wanted to sell were allowed to vote. It was a farce and a puppit Council had been achieved.
Franchisees made requests of their MFC delegates for the first meeting with the franchisor and, with few exceptions, received no feedback. For the second meeting they were not given even that opportunity.
The MFC was proving to be as lacking in significance as the previous Marketing Committee who accepted they had been created to rubber stamp previously made Midas decisions and offer an appearance of good franchising to an inquisitive Australian Competition and Consumer Commission.
What could not be explained in the early days of Bonney is why? Why not build the business and ensure the growth of franchisees and have a successful consistent royalty stream. The failure to advertise, increased charges, intimidation, general contempt for franchisees and a determination to ensure franchisees became insolvent. Why?
Answer: Churning and the associated techniques are considerably more profitable. An agreed estimate suggests that Churning produces something in the vicinity of five times more profit for the franchisor.
Churning is the art of turning over franchisees after they have been financially drained. An investigation of Midas Australia will reveal a pattern of designing a system that intentionally sends a franchisee into insolvency. The franchisor maintains and attempts to convince the poor franchisee it was his own fault, and then offers to save the day by buying or re-selling the franchise.
Bonney can make as much as $200,000 on the buy back. In this process many innocent franchise purchasers loose their entire life savings, their retirement money, and even their homes that they mortgaged to try to keep their business going.
There are many tragic stories of bankruptcy and broken homes because the marital partners could not stand the strain created by this franchise system. Depression and health problems usually follow.
The franchisor ensures that the following prospect is suitably qualified to enter the program. Suitably qualified meaning they have enough money to be a worthwhile target. Through this entire process the royalty stream and every other income stream is maintained.
Churning is extremely profitable. Consider that over sixty percent of franchisees have been in the Midas program for less than three years. Consider that it is estimated that at least seventy-three percent of franchisees have been turned over in just two and a half years.
One of the associated effects to the Midas network relates to the effect that churning has had on Suppliers. Midas credibility has been lost with many suppliers as often, while Bonney profits, the supplier is left with the debt after a franchisee becomes insolvent.
Suppliers have become less than confident when dealing with Midas franchisees and often monitor the performance of a Midas customer.
Following Bonney's purchase of Midas Australia, franchisees have seen a steady flow of senior management and support staff come and go. National Marketing Managers have averaged one year with Midas. They, after all, have been at the forefront of Advertising Fund complaints and franchisees believe that they escape to protect themselves from any legal repercussion.
There is not one senior management person or state manager remaining employed by Midas Australia today that was employed in the first roll out of the new Bonney team in 2000. The majority of positions have been filled a number of times in four years and resignations abound in the history of Philip Bonney's Midas.
The total of experience of all senior management and state managers today equates to less than that of any individual pre-Bonney.
Figures produced by Midas Australia show that the average net profit on a franchise in 2002 was just $5,227. So how do you sell a franchise on this basis? The official Philip Bonney web site suggests that the average net profit for an Australian Midas is $82,000.
2003 saw Philip Bonney move into his new home at exclusive Toorak in Melbourne. The rumored cost of his abode was between $3M and $6M.
In 2004 we have seen an increase in open hostilities and a coming together of franchisees although there is an inherent difficulty as we continue to see massive franchisee turnover.
With new franchisees unknowingly joining the network they are naturally quiet as they become educated and then experience the actual Midas system as opposed to what they were promised. Warnings, Notices, Breaches' and Terminations keep the Midas solicitors busy.
Following what appears to be a fleeting involvement by the ACCC and Midas International and the unprecedented involvement of the media, namely Peter Switzer in The Australian and Paul Barry on the Nine network's A Current Affair, Midas have developed an appearance of a change in direction.
Previously sought after advertising has been promised and there have been assurances of better relationships between franchisees and the franchisor. Support has been promised. Franchisees have no long-term confidence that this will last longer than any investigation.
Philip Bonny is acutely aware that franchisees are now talking Class Action to gain compensation for massive financial losses and the sad effects on the health of many that the stress of being a Midas franchisee has caused.
Existing franchisees want compensation for the lost value of their business and the lost revenue that Midas is clearly responsible for. Past franchisees want compensation for everything they have lost, including the hard work of years that was taken from them and in some cases the terrible effects that Midas franchising has had on marriages.
It is envisaged that senior Midas management, past and present will be included as respondents. Midas International must act on their duty of care to avoid their inclusion.
Most of the more blatant lies By Philip Bonney's Midas Australia have been directed at franchisees; however, Midas International and the ACCC have also been on the receiving end.
Both the ACCC and Midas International were assured that the complaints were from only one poor operator that typically wanted to blame someone else for his own failings. Then they were assured that there were only three, and then, a mere handful.
The ACCC and Midas International accepted all of these numbers even though there was a definite trend upward that seemingly went unnoticed. Now Midas International may have been slow on the up take but the ACCC were receiving complaints from many more than a mere handful and have no excuse for accepting the lie.
The ACCC were told by Midas Australia that the reason they had trouble with Advertising Fund auditing was that Midas International had left the fund in disarray when Bonney purchased Midas Australia. KPMG are on record as stating that the previous franchisor had immaculately maintained what was then a simple process of accurately managing the Funds. And yet the ACCC did not ask anyone, they just accepted the lie.
Franchisees sent to the ACCC hard copy from Midas to Franchisees that contradicted the information that Midas provided to the ACCC in relation to Midas Batteries and yet the ACCC have not acted against a deliberate lie to the Commission.
The stupid lies to franchisees that have been found out or contradicted by Midas are literally in the hundreds and too many to repeat but one example is the recent meeting in Brisbane where franchisees were informed by Chris Pappas, National Operations Manager and chief bully, that they would be contravening a Federal Court Order if they communicated with Ray Borradale.
Another good one was when franchisees were told that Advertising Funds were audited monthly or how about the special ruling from the ATO that never existed and that allowed Midas to charge royalty on GST.
Now the Midas Battery lies were an insult to franchisees where Midas maintained they were not marking up the cost of Batteries and that the Batteries were actually superior to Exide's standard range. What about the one where Bonney told franchisees that he could not advertise to the level of the previous franchisor because Midas USA paid for the advertising. That was a good one. To list all the lies would add fifty pages at least to this information so we leave it there.
A Mere Handful of Examples of Midas Franchising:
(It should be noted that the following experiences are severely abbreviated.)
Ron & Lala came to Australia from Indonesia and borrowed from his mother to purchase Midas Bayswater in December 2002. Due to his complete lack of industry and customer service experience he was unable to gain normal finance. He purchased the store on the basis of projected figures supplied by Midas and a reassurance that he would receive adequate training and support.
Midas would not provide the actual profit and loss figures for the three years prior. It was later discovered that the projected figures supplied had no foundation. They had never been achieved and there was no sales trend to indicate they were achievable.
Ron Utoyo's training was inadequate and he received minimal support. He was failing quickly and when an office support person was sent to the store and reported that he never had a chance, he knows nothing, she was told that it was not her concern.
The official statement of Ron Utoyo contains a long list of unusual actions taken by representatives of Midas and he was in continual difficulty operating the computer, partly because of ineffective training and partly due to acknowledged problems with the program.
In February 2003, just ten weeks after he had entered the Midas program, he received his first Notice of Breach from Midas. In May 2003 Ron Utoyo received a visit from Chris Pappas, National Operations Manager. Pappas was screaming and threatening to cancel the Franchise Agreement, have Ron Utoyo jailed and/or deported over an invoice problem that Midas stated was a deliberate attempt to avoid royalty.
To avoid this he was given the option of paying a $20,000 penalty, which was later reduced to $10,000. When Pappas returned to Philip Bonney his statement was we got the little geek. They then had a celebratory drink. The invoice problem that Ron Utoyo had was a recognized problem and experts attest that they would have expected Ron to fail to understand how to rectify the situation.
The State Manager, who was a witness to the entire incident, resigned and has agreed to testify to these facts in any Court.
During the time Ron Utoyo has been in the Midas program he encountered continual intimidation and questionable charges without consultation and with a refusal by Midas to discuss or justify those charges.
Ron Utoyo was on the verge of insolvency and expected to fail any day. He would loose his business, his home and the money loaned to him by his mother. When Ron had the opportunity to salvage some money through the sale of the business, Midas insisted that they would not authorize the sale unless he signed an agreement that removed his right to any action against Midas while leaving Midas the option to pursue him. He refused initially but eventually was forced to sell his business at a considerable loss. Ron Utoyo was set up from the beginning and the actions taken by Midas were designed to drain him quickly.
Chris & Rebecca May:
Rebecca and I have three children aged 5, 10 and 11. I purchased Midas Mona Vale in June 2003. I had no background in either small business or the automotive industry but was assured that the training Midas would provide (then $6,600, now $15,000), and the support I would be given would assure me of success. The reason I bought a franchise was because I knew I would need training and support.
After I had signed the Franchise Agreement I was advised that the agent had overlooked the CPI increase and that now my rent was to be considerably more than I had been planning on. I tried to talk to the agent who hurriedly said that Midas had accepted the increase and I should talk to them.
I then talked to a lady at Midas who said they had apparently been unsuccessful in negotiations with the landlord. I emailed Chris Pappas as this was just not an acceptable way to start a business and they were the people that held the head lease but he does not negotiate.
No sooner had I moved in and sales plummeted. The reasons for this, I now believe, were many, and whilst I may be uncertain as to the real cause, I am certain that Midas have no idea at all, because they have never taken the slightest interest. And in fact when I did go to them for help and advice with marketing, support was deliberately blocked.
Add to the worry of trying to run a newly acquired business that was running at a loss, what seemed to me to be an orchestrated conspiracy to remove me from the store, and you would have to wonder what the benefits of owning a Midas franchise were. Within three months of taking over I had received my first Notice of Termination and this was before the Lease issue could be resolved.
Bear in mind that this Notice of Termination would mean I would lose everything I had invested, and possibly more, my home. At the time I was never given a reason for the Notice unbelievable though that may sound. As far as I understood it, it was because sales were down and Midas believed I was taking money that I did not declare. They then claimed the shortfall in the royalties based on the previous year's figures.
Later I was to find out that the Notice of Termination was in fact, based on a complaint by a customer who had claimed to have not received an invoice for a cash job. Just prior to this matter reaching Mediation, some six months later, Midas was then claiming a penalty of more than $20,000.
I had given the customer an invoice, and had Midas taken the trouble to ask me, I could have reprinted it from the computer; or, in fact they could have printed it out themselves because complete sales data was transmitted daily from Midas Mona Vale to Midas Head Office. Why did they not bother to ask?
At Mediation, when it became clear who the customer was, although Midas did not volunteer the name until I deduced who it was, I then realised what the true circumstances were. Midas had sent in a Private Investigator to entrap me.
During mediation Midas dropped the claim. At mediation Midas agreed to help me but apart from one short visit by their state manager, I have not seen any help only an escalation of intimidation and threat from their lawyers.
The above is one incident. The whole sordid story could fill volumes. The business continues to lose money every week and all Midas say is that it is my own fault. They have continuously ignored my pleas for advertising even though I was paying into an advertising fund. The effect of the stress on my health, and that of my wife and family, has been enormous.
After about six months I became aware that most franchisees were not making money and that many were becoming vocal in their complaints about Midas. Almost everyone except new franchisees were complaining about the lack of advertising and the many existing, and continuously introduced, Midas charges.
It also appeared that many were too afraid to say anything but I decided that I had nothing to lose as Midas obviously intended to destroy my family and me. I was also to become aware that there were amongst the Midas franchisees the favored few. The franchisee at Midas Pymble did let it slip that he did get advertising from the advertising fund but when questioned, Midas denied it.
My franchise agreement has now been terminated and I have been given until the 31st of August to vacate the franchise. I had been a Midas franchisee for a little more than one year and this experience has been hell and it seems that my family and I will continue to pay a devastating price for many years to come.
Will we recover? At my age it will be a terribly difficult thing to achieve. I cannot understand how they can be allowed to get away with what must be a fraud when it does to even closely resemble the accepted reasons that people buy into a franchise.
Midas continue to send me weekly invoices for royalty that are almost double what they should be but as I have been terminated I stopped sending them sales figures. I do not understand how and why they calculate these royalty figures.