My Bakers Delight Story
Christie Culton, Bakers Delight, Heidelberg
This is my Bakers Delight Story. Lots of my friends, family and also Bakers Delight colleges and fellow franchisees have been asking me what happened. This is it in a nutshell. Please feel free to share this story if you want. I am hoping it answers some of the questions surrounding our decision to close the bakery.
Last Sunday night, a week ago today, after 13+ years with Bakers Delight, I closed my store for the last time, never to return. In the last week I have worked had to have an administrator appointed to wind up the business and help the staff claim their entitlements, and I also applied for personal bankruptcy. It has been a very sad end to my chapter with Bakers Delight. As of today my old store Bakers Delight Heidelberg, remains closed.
I first started with Bakers Delight as a sales assistant in 2001, and after 4.5 years with a franchisee I moved into COBs for a short time, and then on to owning my bakery through the Fresh Franchisee program. Last Sunday I closed the door on that chapter of my life. The last few weeks have been particularly difficult, as my staff were first promised positions with Bakers Delight as they were taking back the store. I was then left to tell the staff 10 days later their jobs were not guaranteed, and that there would be a leasing franchisee taking over the bakery. Finally a week after this, on Friday 3/10, that there won’t be a leasing franchisee take over, and everything has fallen apart. Considering Bakers Delight have known since the start of the year I would not be resigning my franchise agreement, this is a disgraceful way to treat loyal staff of Bakers Delight.
The final straw was last thing Friday afternoon 3/10/14, I was informed there would be no consideration or compensation provided to me at the end of my franchise agreement. With this confirmed, I am officially trading insolvent and could no longer in good faith continue to run the business, 16 days away from the end of my Franchise Agreement.
Below is part of a letter I sent to Bakers Delight for their consideration: (Names Removed)
26th September 2014
Bakers Delight Holdings
Level 1, 293 Camberwell Rd
Camberwell Victoria 3124
This is an extremely difficult letter to write, as I am not by nature an adversarial or argumentative person. Overall I have loved my time with Bakers Delight, and I wish to continue our good relationship to the end of the franchise agreement and beyond.
I also understand it can be difficult to keep track of all parts of a franchise relationship, when many employees are involved and there are numerous changes in Area Managers over the years, and as such the entire story may not have come together for any one person, other than me. I know this letter will be difficult for a number of Bakers Delight Employees I greatly respect and value, however I have to put my case forward, and fight for what is best for my family.
I first expressed my wishes to sell in 2008, and after more than 6 years, I am now at the end of my franchise agreement.
I have been as good a franchisee as I know how to be. I have trained a number of franchisee and bakery manages (6 in total) without any of the normal financial remuneration given to trainers. I have made my time available to speak to dozens of potential franchises. I have assisted with the development of Bakersville, the Welcome to Bakers Delight booklet, the old Merchandising manual and spent many days working with the BD lawyers writing the OHS manual. I have appeared in the Herald Sun, Local Leader and BRW promoting the opportunities provided by Bakers Delight. These are still available online for all to see. I represented Bakers Delight in the Melbourne City Council Food Safety training video, which is still in use, including in Bakers Delights’ own online food safety training. I assisted with the development of the CA used in COBS and then for the first EA for Franchisees in 2011. I have participated fully in the development of staff and provided every assistance to other Franchisees and Bakers Delight when requested. I have been an out spoken advocate for Bakers Delight and COB’s and when it comes to my own problems with the system I have been silent. I have defended Bakers Delight both publically and in private to individuals and also organisations.
After all this, I have come to the end of my franchise agreement with no buyer, and with significant actions of Bakers Delight Holdings contributing to the outcome. Most or if not all outside my direct control.
Major Barrier to Sale/Refinance 1: Bakery Ownership
Originally I was unable to sell, as after **** (ex husband) left the bakery, the franchise deed was in both our names at a 50/50 split. To rectify this without the known whereabouts of ****, we started a breach process that ended in the take back of the bakery, and resale to myself in its entirety. This process took 22 months. During this period, Bakers Delight negotiated ongoing finance with ‘the bank’. It was not disclosed to me until the day before settlement, that this would be at a much higher rate of interest (13%) and that it would be month to month finance, under the understanding it would be refinanced to another institution as soon as possible. I was given no other option at the last minute and accepted these terms with the assurance that it would not be a problem, as I could refinance at more favourable terms in very short order. This was organised by C on N’s first period of maternity leave. I can supply supporting documents if required. The effect of this was to trap me in a loan that not only was punitive in its interest rate, but required me to report to a specialist risk manager at ‘the bank’ every month, and have quarterly reports prepared by my accountant at great expense for the next 5 years. Due to the effect this loan had on cash flow, after 4 separate attempts, including using a broker, and with N’s help, I was unable to secure refinance. This placed extreme financial pressure on myself and the bakery, as has been demonstrated in the last 6 years financial reports. This distress also made the bakery less desirable from a purchaser’s perspective, leaving me in a catch 22 situation.
Major Barrier to Sale/Refinance 2: Re negotiation of the Lease
The next hurdle to sale was the end of the lease period. After the ownership of the bakery was determined, I could not refinance or sell due to the end of the lease being imminent (July 2011). As this was a known fact, we started the process for re negotiating the lease December 2009, 18 months in advance with my first meeting with S on 7th April 2010. At his meeting I expressed my desire to sell, and the need to sort out the lease ASAP, but that the LL had a very specific number in mind and would not be shifted on this. I also let S know the LL was unrepresented by a real-estate agent, and would be unlikely to be in touch with the retail rental sector, or have anyone to give him solid advice. We discussed even at this early stage what the procedure would be if there was a dispute. S then sent the notice of intention to renew (25/1/11), and we did not hear anything until a new lease arrived at BD the week of the lease due to start at a 40% increase. We provided may rent examples on the street, and by early August 2011 I was asking for this to go to an independent assessor, as I know they were not going to budge from the figure they first had in mind. It took another 8 months for this to go to assessment (April 2012 valuer was appointed), and finally in October 2012, almost 3 years after we first started we had a favourable outcome. Thought the outcome was excellent, the intervening 3 years was a period I was still stuck in a punitive loan, unable to sell or refinance, and barley keeping my head above water. Again I can provide details and evidence of this if required.
After the lease was organised, I started to work on both refinancing and also sale of the bakery, In the hopes that one or the other could be concluded quickly. All the sales information was provided to the sales department already, so that was all ready to go. Unfortunately the negotiation period of the lease had eaten up a large part of the first term of the lease, so I was yet again in a difficult position sales wise. All during this time, BD was talking about distressed bakeries selling at the start of their lease periods. I had to sit through these presentation and try not to cry, as I had done everything I could to put myself in the best position for sale, and it was taken from me by the process, fully in control of Bakers Delight.
As I started to try to organise some refinancing, I required a copy of the lease. I finally received a copy by email on 15/11/12, 2 Months after the determination was made by the valuer. This whole time ‘the bank’ was also calling me on a regular basis requesting a copy of the lease. I made 4 attempts to refinance in total, and it was becoming clear that I was not going to be offered any finance, secured only against the bakery, even if it was for ½ the valuation.
Major Barrier to Sale/Finance 3: The Bakers Delight Sales System
During the time I had the bakery for sale, I have had 3 people express interest in the bakery. Two of these were offered terms to go into other bakeries owned by Bakers Delight that I could not compete with, and one was determined to be not suitable to be a franchisee, but I can’t be told why due to privacy laws. Finally today I have been informed that a candidate who is a MSO has been found to take over the bakery in a lease situation as soon as Bakers Delight takes back possession at the end of my franchise agreement. This particular candidate has owned this bakery before, and it was bought back by BD to sell to me in a similar lease situation. It is not inconceivable that another arrangement could have been made with this franchisee to finance the sale of the bakery at the extremely reduced price I am requesting. Furthermore promise and representations made to both myself and my staff are not going to be honoured, and more onerous demands are to be made of both myself personally and financially. This was communicated to me exactly 28 days before my hand over date.
I have worked hard. For the last 4 years K (partner) and I have worked 50 plus hours a week each, with no super, no holidays, no sick leave and supported our family on a total of an average of 50k PA… in total for both of us… Gross. I was back in the bakery within 4 weeks of my C section. worked until a day before I gave birth, even though I had a complicated and dangerous pregnancy. In the last year I have worked through a degenerating back and hip, pneumonia, treatments with harsh steroids and other drugs, blood clots, a diagnosis of small vessel disease causing frontal lobe brain damage and atypical migraines that put me at risk of a stroke. Last year, of our 50k we took home, 17k was used solely on my medical expenses. I think you can imagine the kinds of stress that have been put on us in the last few years, when this is coupled with the other challenges outlined above, I don’t think there is anything else we could have done to change the outcome. It is very difficult when no matter how hard you work, no matter how much you sacrifice, no matter how good a franchisee you are, so many things are influenced to your detriment by the actions of Bakers Delight Head Office. It was all these factors that influenced my decision to not renew my franchise agreement, and there being no reasonable hope of either refinance or sale sealed the deal.
I have to present my case and ask for this consideration for the good of my family. The amount I am seeking is small in the overall Bakers Delight scheme, and would make all the difference to their future. Also without a decent offer, in one month I will have no way to service any of my debts, and as such would currently be trading while insolvent.
I am willing to go through mediation if required, but I would much rather come to a mutually beneficial, amicable private settlement with Bakers Delight. One that preserves the entitlements of my staff, and the good reputation of the bakery. Once mud gets thrown, everyone gets dirty. I have been advised by Bakers Delight representatives, the best way to go about this was to present my case in writing, and so I have written this letter. The amount I am asking for would clear my debts and pay out staff entitlements.
The only part of this letter I have left out is the financial information I provided for them to consider, and my requested response date COB Friday 3rd October. . I was assured by my Bakery Consultant that I would have a response by COB Wednesday 1st October.
Bakers Delights response came at 4:15 Friday afternoon. It was in the form of an undated, scanned letter, which from the information within looked like it had been prepared before the MSO backed out of the lease situation, and had been held over as long as possible to induce distress.
The main points of this letter were as follows… with my thoughts.
“Due to your decision not to renew your franchise agreement we will be exercising our right to purchase the business from you, and are making arrangements to lease it to an existing franchisee”
This deal was quashed earlier in the week, Tuesday at the latest. If any other negotiations were taking place, I had no knowledge of them, as handover was in less than 3 weeks, it was an impossibility to get another franchisee in anyway, according to the statutory waiting periods for paperwork required for a franchisee to take over a business.
“We will be determining the value based on the following: (list of outstanding liabilities)”
That had always been the case; I was requesting a written offer in a timely fashion, with consideration to the difficult circumstances Bakers Delight put me in. This would allow me to fulfil my responsibilities of trading to the end date of my franchise agreement and pay all liabilities. The amount requested was less than ½ the Bakers Delight ‘valuation’.
“We will provide you with an official letter in good time prior to settlement, and reserve the right to change our offer based on these considerations changing”
At only 3 weeks away from D-Day I wonder when is a good time before settlement?? So even if they do offer, they don’t offer???
“Under the franchise code, mediation is an option available to all exiting franchisees and if you so choose, Bakers Delight will cooperate with this process.”
Mediation is always an option, but as I will already be bankrupt and don’t have any other skin in the game (house/car/other assets) I will consider what good any financial settlement will actually do me.
“Please be aware, however, that the individual instances you have experienced which have led to your current predicament are factors that are risks to all small businesses”
I can guarantee you, that if I was a sole trader, and not under the control of Bakers Delight, many things would have been done differently. I would not consider many of the events outlined above as factors that are a risk to all small businesses. The most important of these factors is Bakers Delights complete control over my finance obligations, the lease negotiations, sale of bakeries and end of term provisions.
I am not a disgruntled franchisee, a poor performer, a trouble maker. I am an incredibly disappointed Bakers Delight lover who believes she has been poorly treated through years of loyalty and commitment. If it can happen to me, it can happen to any Franchisee. I honestly believed up until Friday 3/10/14 that we could come to an arrangement, and that we were all working in the best interests of all Bakers Delight stakeholders. I was wrong. I am left disappointed and distraught at the complete lack of empathy for myself and my staff. I can assure you none of us feel like the happy people in the ads now.
I hope my staff will all land on their feet, and I am sure I will have plenty of time to pursue my other interests and talents including an intense interest in the franchising sector and due diligence and website design, as well as spend time with my family who have hardly seen me for the last 10 years.