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Did Benjys tell its traders the truth?
EMBATTLED sandwich chain Benjys faces damning evidence of alleged negligence towards prospective franchisees, as one of its former directors questioned whether it had been 'dishonest' and 'unethical'.
In a devastating internal memo obtained by Financial Mail, Andrew Quail, former franchise director of the company and now head of business services for the British Franchise Association, voices serious concerns over the viability of the Benjys franchise model.
The private communication addressed to Quail's colleague Peter Duckworth and dated August 17, 2004, suggests that Benjys might be misleading potential purchasers by failing to provide sufficient information about businesses up for sale and glossing over problems with particular sites.
The document states: 'To sell shops with this little data, we are obliged to be economical with the truth. We don't offer details of any particular difficulties or circumstances relating to individual shops.'
It continues: 'My concerns about the way we go about this border on wondering if we are being dishonest? There would certainly be people who would consider our approach unethical.'
Until leaving Benjys in October 2004, Quail headed the retail side of the franchise operation, working alongside Duckworth, who oversaw the sale of Benjys van franchises.
The sandwich chain has been under fire, with a handful of stores closing and a number of franchisees of both the retail operation and the mobile van franchise, Benjys Delivered, angry over the cost of goods supplied by the company as well as what they claim were aggressive sales tactics used to get them on board.
Van franchises require an investment of £15,000, while shop franchises are offered for £150,000. The group, which says it has 68 retail sites and 116 vans selling snacks on the road, lost £3m in the past year, according to its latest accounts.
Ian Rickwood, Benjys chief executive, fiercely denied that the company had ever withheld information from franchisees and suggested that Quail had since retracted his views.
He said: 'We are satisfied all of the points raised are inaccurate and without foundation. We give every shop accounts going back three years, with every single cost documented. To suggest that we didn't run a model simply isn't true.
'There are certain things that Andrew [Quail] did not understand about this business - he's a franchising expert, not a retail expert. Saying that we did things irresponsibly is just not the case.'
Quail and the British Franchise Association refused to comment on the memo. The association is believed to be probing complaints about Benjys, which is a member of the BFA, and would state only that it was honour-bound to investigate any concerns raised about its members.
The war of words between Rickwood and disgruntled franchisees recently spilled over into a full-blown legal battle when Benjys issued a number of writs, accusing some current and former franchisees of breaking franchise agreements and others of fraud. The franchisees have responded by forming groups and are preparing counter-claims that are expected to be filed at the High Court in coming weeks.
Kamrul Hassan claims he was provided with only one year's set of accounts when researching his investment in the Duke Street store in London's West End last August. The outlet went into administration at the end of the year, leaving Hassan, from Romford, Essex, £200,000 out of pocket. He is now pursuing a legal claim.
Hassan said: 'I'd run two Snappy Snaps franchises in the City for ten years, so I understood franchising. But from the first week, the sales were poor and, after three months, I had to call in the administrator.' Rickwood said Hassan was provided with complete information on taking on his franchise.
'We actually gave him three years' accounts, as we do all franchisees,' he said. 'Duke Street has reopened and sales have improved already.'
When Rickwood took over Benjys in 2000 with the backing of venture capital group ECI, Richard Raworth was parachuted in as chairman.
Raworth, father of newsreader Sophie Raworth, who recently replaced Anna Ford as the face of BBC's One O'Clock News, resigned as chairman of corporate disaster recovery group Guardian IT after accounting discrepancies were found in its 2001 financial statements.