Icecream store franchisees left in dark
The owners of 25 icecream stores that were once part of the Wendy’s Supa Sundaes group now face an uncertain future as they contemplate whether to trade as independent operators.
The mall-based kiosk counters collectively rebranded to Shake Shed & Co last year without permission from Singapore-based Global Yellow Pages, which holds the franchisor rights to the Wendy’s Supa Sundaes and Wendy’s Milk Bar brand in New Zealand and Australia.
The store owners say they were encouraged to rebrand by former New Zealand Wendy’s master franchisee Chang Xi, who operates Cone Enterprises New Zealand and Shake Shed & Co New Zealand with cousin Zhenyu Zhong.
Xi owes Wendy’s $6 million which he must pay in full by 2020 following a recent out-of-court settlement.
The $6m figure is understood to be the total value of the New Zealand Wendy’s business.
According to a document obtained by the Herald, franchisees which rebranded to Shake Shed & Co would be released from their franchise agreements with Wendy’s and free to trade under the new brand once Xi had paid $2.5m by December.
The remaining $3.5m is due in instalments until payment is complete by 2020.
Franchisees say Xi has refused to disclose whether the payment was made — and therefore are unsure if they will be able to revert back to the Wendy’s umbrella.
However, the franchisees say they would prefer to trade independently if they cannot revert to the Wendy’s name.
When contacted by the Herald ,Xi would not specifically say if he had paid the first instalment, although he implied he had done so.
Representatives from Supatreats Australia and Global Yellow Pages were unable to comment.
This week, Cone Enterprises and Shake Shed & Co went through hearings in the High Court at Christchurch to be liquidated on request of creditors. The amount owed to creditors was not revealed.
The matter, however, was resolved and the companies were not placed into liquidation.
One Shake Shed & Co franchisee told the Herald the franchisees no longer wanted to be part of the Shake Shed brand.
He said they regretted rebranding from Wendy’s and feared for the future of their businesses under agreements with Xi.
The source said since they had found out about legal action against Xi by Wendy’s parent company, they questioned his motives and why their supply costs had increased.
The franchisees say they were told by the parent company they had to source icecream from an Australian supplier, but it turned out they didn’t.
They claim their other food costs subsequently increased by between 7-15 per cent. Xi has denied claims made by the franchisees. He said food costs had not gone up.
He also said he did not take money from franchisees as had been claimed.
“We did not take money from franchisees’ accounts to pay irrelevant costs. The money coming from their accounts are for franchise service fees, and marketing contributions which they agreed to
At the beginning we didn’t mind changing because it gave us hope but the situation is getting worse and worse. Shake Shed & Co franchisee
pay,” Xi said. “On the contrary, we managed to have the icecream price reduced for the stores.”
The franchisees say they have approached the Franchise Association of New Zealand but were told because they were not members they couldn’t receive any help.
“At the beginning we didn’t mind changing because it gave us hope but the situation is getting worse and worse,” one franchisee said.
In June last year, Xi organised a conference in Taupo with all of the franchisees and suppliers outlining plans to change from Wendy’s to Shake Shed.
Thirty one of the original 33 Wendy’s stores rebranded to Shake Shed last year. Today, there are just 25 of those stores left, and seven have closed down.
“[Xi] told us we needed to sign a contract under Shake Shed and franchise agreement so we could work against Singapore in the court and we said OK,” said the franchisee, who wished to remain anonymous.
Xi eventually told franchisees he had bought the Wendy’s business in New Zealand but refused to show any proof of the deal, said the franchisee.
“He increased all the prices of our main product. He said because of distribution, increases to wages and tax, the suppliers and distributors increased the price.
“We feel frustrated because we believed they needed to increase the price because of inflation . . . but found that was not the case.”