Watchdog probes franchisor Taste
• National Consumer Commission to investigate firm after complaints of failing to honour contractual obligations
The National Consumer Commission is investigating franchise manager Taste for breaches of agreements with franchisees across the country.
The National Consumer Commission (NCC) is investigating franchise manager Taste for breaches of its agreements with franchisees across the country.
The commission had sent the Starbucks and Domino’s Pizza franchisor a notice that it was being investigated signed by NCC commissioner, Ebrahim Mohamed on May 26. At the time, the company’s share went into freefall of 29.4%. On Monday, it settled at R1.45.
The notice did not provide any details.
“The NCC is investigating Taste Holdings as a franchisor,” said spokesman Trevor Hattingh. “We have received about seven complaints from different franchisees, alleging the franchisor is not honouring its contractual obligations in terms of their franchise agreement.”
Among the complaints the NCC had received was that Taste had negotiated franchise agreements that were valid for 10 years, but neglected to negotiate property leases for the same period, leaving franchisees without trading premises when leases expired.
“[Franchisees] are [still] expected to pay monthly franchise fees and royalties,” said Hattingh. “Another common complaint against the franchisor is that it compels franchisees to procure meat, for example, from a designated supplier whose prices are higher than prices for such products that are available in the market.”
The franchisees approached the commission after requests to meet Taste to resolve the issues were allegedly ignored, Hattingh said.
Taste sells franchising rights to some of its brands — including Domino’s, Maxi’s restaurant and NWJ Jewellery — for up to R2.3m.
Franchisees pay royalties of up to 7% of turnover and 5% of turnover for their contribution to Taste’s marketing fund.
The notice was signed three days before Taste released dismal results for the year to February, showing its headline loss had widened 57% to R93.9m. Its share had declined markedly days before, shedding 14.3% between May 22 and 29. Most of the decline was observed from the day Mohamed signed the certificate to the date of the results.
The JSE’s issuer regulation department said it was assessing the matter and would respond on Wednesday.
But Taste CEO Carlo Gonzaga said his company received the notice only on June 19.
“It is bereft of details,” he said. “We have contacted the NCC telephonically and in writing on numerous occasions since June 19 and have not been able to obtain further details, let alone respond to allegations or complaints,” Gonzaga said.
The investigation certificate did not mention the complainant, the nature of the complaint, or which of Taste’s entities were involved. “As such, any more information remains unknown to us. Any information you have, has not been communicated to us by the NCC.”