Breakaway Angus & Robertson franchisees to face off with REDgroup in court this week

A group of former Angus & Robertson franchisees will face off in court this week with the administrator of A&R’s owner REDgroup Retail as both groups dig in on whether the group is legally entitled to break a franchise agreement with its collapsed parent.

The groups will meet in the New South Wales Supreme Court on April 13.

In a surprise twist to the saga, the rogue group of franchisees has claimed that an A&R representative “actively encouraged” them to “properly de-badge” as A&R franchisees after they decided to scrap their franchise agreement last week.

The group has also alleged that A&R is “seeking orders which could mean that people who do not wear A&R clothing could be put in jail.”

Group spokesperson and former franchisee, Maree Fiztpatrick, says while her store was not encouraged to remove materials in her store that relate to A&R – such as internal and external badging, business names and promotional literature – other company representatives had encouraged some of the breakaway stores to de-badge.

She would not be drawn further on the claims.

“Our focus is on that we have a legal right to terminate our agreement,” Fitzpatrick told SmartCompany.

But a spokesman for Ferrier Hodgson said this morning he was not aware of any A&R representative encouraging the breakaways to de-badge.

He describes it as a “bit extreme” the group’s claim that individuals who do not wear A&R clothing could face jail.

“The point is that the breakaway group has stopped paying franchise fees,” the spokesman says, adding the court action is intended to get guidance on whether the breakaway franchisees are legally entitled to terminate the franchise agreement rather than seek other fees.

“Until we have that answer from the court, we are urging the franchisees to continue displaying A&R signage and to continue trading according to the franchise agreements.”

In a statement, the breakaway group said it was “surprising that a company that is [in] administration would seek orders to compel unwilling small business owners to work with them.”

It would be more appropriate for funds to be spent on supporting the remaining business or paying staff entitlements to the hundreds made redundant, the franchisee group added.

On Friday, Ferrier Hodgson partner Steve Sherman said that based on legal advice he had received he was “convinced the franchisee group’s actions were baseless”.

He added that at “no time has Angus & Robertson breached the relevant franchise agreements” and that “the administrators would be seeking recovery in the courts – as required by law.”

“In order to protect the interests of the unsecured creditors and to preserve the integrity of the REDgroup companies, we have commenced proceedings seeking confirmation that the terminations are invalid and unlawful and that the franchise agreements remain on foot,” Sherman said.

“We will also be seeking orders for recovery of the arrears owed to Angus & Robertson under those agreements.”

But the breakaway group says that it has a “right to terminate their relationship with a failed parent company”, adding it simply wishes to “continue in business as independent and profitable bookstores.”

“We regard the application as being without merit. We look forward to having the matter determined when it is before the courts on April 13 and we will not be entertaining any delays.”