Franchise business based on successful doggy day care model goes into liquidation
PUBLISHED: 06:00 12 November 2019 | UPDATED: 08:21 12 November 2019
A spin-off of an award-winning dog care business has been put into liquidation after becoming embroiled in a legal row.
The Canine Creche Group Ltd (CCGL), which had sold franchise models to clients across East Anglia was ordered to be wound up in June following a petition by a creditor.
The business offered franchisees the chance to run a business based on the successful Suffolk Canine Creche, which was set up in Martlesham by businesswoman Candace Rose.
Although Suffolk Canine Creche has continued to prove popular with pet owners - picking up multiple awards - the franchise model has faced problems.
Three franchisees - for both the dog walking and doggy day care models on offer - said they left the agreements, claiming they had been sold an unrealistic vision of how their business would perform. They said the franchise model failed to deliver the profits they had been expecting. Other franchisees have left but not commented on their reasons.
Suffolk Canine Creche said the decision to place CCGL into insolvency was to avoid security costs which it had to pay as part of court proceedings. A spokesman said it had instigated the proceedings to recover money from a former franchisee - but as the security costs were greater than the outstanding amount "it would be foolish to progress the case".
The spokesman added that CCGL owed no other money and the company learnt from the experience, including introducing more robust selection processes for franchisees.
Under the original agreement, day care franchisees paid £42,500 to CCGL, which entitled them to use its business model, as well as access to help sourcing a site, planning permission and licenses.
And while most said the initial support was helpful, many have questioned advice given. One said they had been recommended a "massive site" which left them with rates that were "absolutely crippling us".
Others criticised the franchise payments, which required £300 a month to be paid for a "business coach" plus extra towards a marketing budget and 5% of the takings each month.
Helen Whight, who paid £6,000 for a dog walking franchise, said she had been predicted to make £26,000 in the first year by charging £20p/h for walks, but by the time costs were taken into account, her profit was just £160 for the 12 months
The franchisees have now parted ways CCGL following the winding up order led by franchisee Dilan Davda.
Mr Davda had sought to buy a cluster of franchises, which would have seen him run five day care centres in towns including St Albans, Stevenage, Harpenden and Colchester - but after several months the relationship broke down. After opening the first franchise, Mr Davda, 43, wrote to Mrs Rose asking for a break of several months to resolve personal matters. But CCGL claimed he was looking to quit the agreement and sent him an early exit invoice, first for £46,500, then reduced to £20,000 plus VAT.
Emails show disputes about the contract and the obligations of both parties.
When Mr Davda, who had already paid £75,000, including deposits, for the franchises refused to pay the exit fee, CCGL took him to court.
But his solicitors issued a defence and counterclaim, arguing the agreement was written with terms that "created ambiguities". They said there was no requirement for Mr Davda to open all the franchises within one year, nor was there any requirement to pay an exit fee.
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The counterclaim said Canine Creche made a "wrongful demand" for an exit fee.
It added that CCGL wrongdoing "destroyed the relationship of trust" and sought damages of £78,000 plus interest.
The court had not made a decision on the damages but ordered CCGL pay Mr Davda £4,800 in costs in March 2019.
Having not received any payment, Mr Davda's solicitors filed a winding up petition, claiming the company was "unable to pay its debts".
Mr Davda said he took the action to "send a message".
CCGL's latest published accounts for September 2018 showed it had assets of £35,000 but owed creditors £47,000.
Meanwhile, CCGL tried to move its franchisees over to a new company called Canine World. While some agreed, others refused. Ms Whight said: "We all said 'no, what's going on here'."
She said she had already been looking for a way out "and this was my get out clause".
'The court system failed us'
A CCGL spokesman said the legal dispute happened a year ago involving a franchisee who it said owed the company £25,000.
"As claimant we began court proceedings to recover the loss having exhausted other avenues the court system then required a security that was greater than the outstanding amount, which meant it would be foolish to progress the case - sadly the court system failed us," the spokesman added.
"To conclude the matter an offer was made to the respondent to write off our debt and settle costs of £4,200 (which the court ordered us to pay) in return for an amicable parting. The respondent declined via our solicitor, so the strategic decision was to place the company into insolvency owing £4,200 costs. The company owed no monies to any other party and we severed relations with the respondent."
The company said it had learned lessons for its new business, including adjusting its profiling for franchisees to match that of our current successful operators and made our selection process even more robust.
"We have declined 16 people in 2019 who do not reach the standards of our criteria," the company added. "We are delighted with the new franchisees who are in the process of securing and opening their new sites and feel confident that they will make a positive contribution to the animal industry across the UK."
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