Operating a fast-food franchise can be challenging and franchisees do not always succeed.
That business truth is laid bare in a lawsuit filed last month in B.C. Supreme Court.
Court documents outline a strained relationship between the operator of a former Freshslice Pizza franchise in Richmond and the Burnaby-based franchisor.
The dispute in question relates to former Freshslice franchisee Mohd Rafi Zamani, who is suing franchisor RF Franchising Inc. and a related leasing corporation (S.A. Leasing Ltd.) after the franchisor terminated his franchise agreement.
Zamani seeks a series of declarations and damages related to what he calculated is $130,000 in lost goodwill, as well as any profit that Freshslice has been making by operating his franchise since July 16, according to his notice of civil claim.
Freshslice said in its Jan. 13 response to Zamani’s notice of civil claim that there was no loss of goodwill and there are no profits from that franchise’s operations since the franchisor took over.
It added that it terminated Zamani’s franchise agreement for cause: “repeated findings of substandard operations.”
Some of Freshslice’s accusations, in its response to Zamani’s lawsuit, is that Zamani told staff to save money by reducing the amount of ingredients put on pizzas, that he wrongly left dough on a table at room temperature and that he did not add extra staff on a day when there was a big promotion.
None of the allegations has been proven in court and the litigants disagree on many specifics.
For example, Zamani claimed he signed a franchise agreement with franchisor RF Franchising Inc. in December 2022 and that his 1420258 BC Ltd. signed a sublease agreement with S.A. Leasing Ltd. ten months later for the location.
Those contracts allowed 1420258 BC Ltd. to own and operate a Freshslice location at 3866 Bayview Street in Richmond, starting in December 2023, Zamani’s lawsuit alleges.
Freshslice counters that it did not grant Zamani the right to own a franchise, but rather simply the right to operate a Freshslice Pizza-branded restaurant at the location.
The two sides also disagree about the franchise’s financing.
Zamani alleged in his lawsuit that he paid $310,000 to sublease the franchise, $52,500 for an initial franchise fee and $25,000 for inventory. Of that $290,000 was to be financed by the franchisor.
“RF did not provide financing,” Freshslice said in its response to the lawsuit.
“Financing from RF was not a material term or condition of the franchising agreement or any agreement between RF and [Zamani’s numbered company] at all.”
Without going into each of the many disagreements, the crux of Zamani’s lawsuit is his claim that Freshslice acted in a way that kept him from being able to sell the franchise to the highest bidder.
One offer Zamani alleged was for $465,000, but a condition was obtaining historical financial statements for the franchise location – something he said in his lawsuit that Freshslice did not provide soon enough.
Freshslice denies this.
When that potential sale fell through, Zamani allegedly found second and third offers to buy the franchise, for $280,000 and $295,000. Both of those potential sales also fell through, he alleged.
Zamani said in his lawsuit that, on Oct. 11, RF Franchising offered to buy the franchise for $40,166.55 and sent Zamani a cheque. He said he did not cash that cheque.
Freshslice responded that the franchise agreement gave it the option to buy the franchise after a certain amount of time had elapsed.
“The formula for calculating the purchase price was provided for in the franchise agreement,” it said.
No court date has yet been set.
Freshslice’s lawyer Vincent Li told BIV in an email that “generally speaking, we will next be exchanging evidence and having potential witnesses examined on said evidence (outside of court). We likely won’t see trial dates set until after examinations.”
