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Alex J.
Alex J., Solicitor
Category: Law
Satisfied Customers: 3496
Experience:  Solicitors 2 years plus PQE
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I entered into a franchise agreement with a mobile network

Customer Question

Hi,
I entered into a franchise agreement with a mobile network back in April this year. The were recently taken over after going into a pre-pack administration. We did not sign a new franchise contract with the new owners but they have continued to operate the franchise under the same agreement since May when they took over. The agreement states that we should be paid commissions on a monthly basis but we have not been paid since August. The August payment was for commissions earned May-June but then we have received nothing since. As far as I understand they are in breach of contract so would I be able to claim against them for all my costs in setting up the franchise including shop fit, ongoing rent & rates plus any other associated business costs & then end the agreement?
Submitted: 12 months ago.
Category: Law
Expert:  Alex J. replied 12 months ago.
Hi
Thank you for your question and welcome.
My name is ***** ***** I will assist you.
When the pre pack administration occurred was your agreement novated to the new owner?
Kind regards
AJ
Customer: replied 12 months ago.
No, but we had a conference call from the directors to say that everything would continue under the new company as before. The new company purchased the full assets, trading names and continued with the same trading names. The new company were also the one's that paid us the first time.
Expert:  Alex J. replied 12 months ago.
Hi, Thank you. Do you have any thing in writing where by they have accepted the service from you or acknowledge the existence of the old terms? For example them paying you once could be evidence that they accepted the terms of the old contract. On that basis you may be able to sue to recover unpaid commissions on the basis that they let you provide the services and previously accepted your invoices. How much are you owed?
Customer: replied 11 months ago.
The provide phone stock, price books and Point of sale material and did make payment the first time so I see that as acceptance of business on the old terms. The amount owed is not a huge amount but the fact is they are no longer providing hardly any support in terms of new point of sale and withholding the payments is the last straw. Can I not sue them for my costs of setting the business up as well?
Expert:  Alex J. replied 11 months ago.
Hi, Thank you. You could sue them for breaching the franchise agreement, but they will likely allege you have already recovered the set up costs, if you have been trading for any period of time. How long did you trade with old co for? Kind regards AJ
Customer: replied 11 months ago.
Only since April this year and sales have been very low due to lack of support from them. I have not even earned £1000 from sales.
Expert:  Alex J. replied 11 months ago.
Hi,
Thank you.
When you signed up to the Franchise Agreement, what were you capital commitments? How much would you be seeking to claim?
Kind regards
AJ
Customer: replied 11 months ago.
I have spent a total of £30,000 on the shop fit and have ongoing costs of insurance and lease agreements of at least £2,000 which I am unable to get out of. The rental will cost me £26,666.64 over the 3 years and business rates of £10,678.74. This comes to a total expenditure of £77,345.38 that I would have put into this business by the end of the 3 year term (lease has a 3 year break clause).Would I be able to claim the whole £77,345.38 or just the £30,000 for the shop fit?
Expert:  Alex J. replied 11 months ago.
Hi,
Thank you.
I do not think you will be able to claim back the business rates, but you may be able to reclaim your set upcosts.
What you need to prove is the following:
(i) The terms of the agreement were accepted by the new co;
(ii) They have breached these terms by not paying commission or providing any Franchise Support (which I presume you still pay for?)
(iii) You lost capital/set up costs have arisen from their breach.
Can you tell me what correspondence you have had with them? Have you sent a formal demand for the commission?
Kind regards
AJ
Customer: replied 11 months ago.
I have email correspondence from the new company under the old company domain name and trading name stating that we are franchisees and various details about products, prices, deals and commissions. I also have price books branded under the old company and new company all sent since the new company took over. Therefore, I would think that this proves they have accepted the old terms.I do not pay an ongoing franchise fee but they are making it impossible to trade without current price tickets or point of sale and this is effecting the business.I have had a phone call from one of the directors since stating that they no longer wish to continue in retail and asking me what I think would be a reasonable amount for them to compensate me. I asked for all my money back but he said he would at most be able to get me £20,000. This was last week on Wednesday when he was going into a meeting with them. I was told he would call me after the meeting but have heard nothing since.I have sent quite a few emails asking when the self bill invoices are due to be sent since the last payment in August but I either get told they are being worked on on the email is just ignored. I have not sent a formal demand but feel that due to the breach I should be owed a lot more as I do not feel I can continue the relationship with them.So, I can claim everything including the rent but not the business rates?
Expert:  Alex J. replied 11 months ago.
Hi,
Thank you.
Yes - if you are going to allege that new co is liable under the contract, then you should claim every loss that is a naturally occurring consequence of the breach. It will then be for a court to decide if any of the losses cannot be claimed.
If they did offer the £20k would you accept this, considering the company may be discontinuing retail?
Kind regards
AJ
Customer: replied 11 months ago.
I am not sure I would now that I know that the court may award me more.
Customer: replied 11 months ago.
With them being in breach of contract do I have to issue a formal demand for payment first before issuing the claim or are the various email requests for payment enough already?
Expert:  Alex J. replied 11 months ago.
Hi,
Thank you.
You need to send them what is known as a letter before action, this is letter explaining they are in breach and claiming for your losses. You should claim every loss you can think of that is reasonably foreseeable - and let them rebut the claim.
If you get a solicitor to write the letter they are more likely to take it seriously as it has the added gravitas that you have been advised and know your rights.
When I say a court will ultimately decide what you can claim, that is simply the case it is for the courts to have the final decision on what losses can be awarded, so you may as well present to the court everything that you can reasonably prove arose from the breach of contract.
Kind regards
AJ
Customer: replied 11 months ago.
Are you able to act for me on this?
Expert:  Alex J. replied 11 months ago.
Hi,
Thank you.
Unfortunately we cannot act for people, in that regard.
You would need to instruct a solicitor local to you as they are under pinned professional indemnity insurance. If they do anything wrong you will always be able to claim against their insurance.
I am happy to talk through any aspect of the claim if you wish?
In the mean time the Law Society can recommend a solicitor close to you - www.lawsociety.org.uk
Kind regards
AJ
Customer: replied 11 months ago.
They have made an offer of £20,000. Do you think I would be sensible to accept this offer?
Expert:  Alex J. replied 11 months ago.
Hi Thank you. Your total claim was £70k? Have you tried making a counter offer? £20k is something and if you want to start to draw a line under this and not let it cost you any more time and money then I would take it. If genuinely think it is not enough then I would counter offer - Does £20k even cover your unpaid commission?
Customer: replied 11 months ago.
The commission owed is kind of balanced out with what I owe them for stock. How the self bills work is that they should produce them monthly and then commission owed is shown along with stock purchased. If the balance is negative I pay them & if it is positive they pay me.Therefore, I am not too bothered about commission but was using the fact that they are supposed to produce the self bills monthly as a breach of contract.
Customer: replied 11 months ago.
I said £30k and they came back with £20k
Expert:  Alex J. replied 11 months ago.
Hi, Thank you. Maybe £25k is the magic number here? Baring in mind you asked for £30k, £20k seems like a good offer though - if you want to draw a line under this then accept it - others it can't hurt to make one more counter offer. If it were me I would get the money as soon as possible.

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