Failed Burger Edge franchisees ordered to pay over $100,000

By Nick Hall | 20 May 2019 View comments

The owners of a failed Burger Edge franchise in Brisbane have been ordered to pay more than $100,000, a magistrate’s court has ruled.

Franchisees Campbell Swinton and John Thompson purchased the Queens Plaza business for $95,000 in 2013, paying an up-front cost of just $1000.

However, the court heard the pair struggled to operate the franchise almost immediately, requesting a 12-month extension to pay the remaining $94,000.

After rent fell into arrears, the lessor locked the premise and the business could not operate.

Burger Edge franchise rent concerns

Swinton and Thompson, who operated as guarantors for the Burger Edge franchise through their company Jupiter Ventures, argued that the $94,000 sum was a not a debt owing, as the closure of the business effectively terminated the contract.

In their submissions, the former franchisees alleged that Burger Edge took possession of the business and had “not properly calculated its loss”.

However, Issam Soubjaki, director of Burger Edge Franchising produced a series of text messages and emails between the two parties from 2015 to 2017, which revealed that the pair was aware of the rent issues.

The messages also revealed the franchisor had attempted to obtain financial information from Swinton and Thompson in an effort to re-sell the ailing business, and mitigate loss.

This information was not provided at a time when interest in purchase of the business was shown by potential buyers however, and thus, no re-sale of the business eventuated.

“Mr Soubjaki tried to assist the defendants re-sell the business but was thwarted in these efforts when no adequate financial information was forthcoming from the defendants,” Magistrate Anne Thacker said in her findings.

Payments

Throughout the hearing, Swinton and Thompson referred to payments made to Burger Edge, including $45,000 for franchisee fees, $3500 for application fees and $4500 for training fees.

The magistrate acknowledged that while Swinton and Thompson had certainly made these payments, none directly related to the initial $94,000 sum.

“That may be so but there is no evidence that the parties intended these monies were to form any part of the purchase price of the business or be subtracted from the business purchase price of $95,000. Accordingly, I must disregard this assertion,” Magistrate Thacker said.

Ruling

Thacker ruled that that final payment was subject to the rules of mitigation of loss.

The magistrate court found that Soubjaki had adequately attempted to help the pair re-sell their business, placing the guarantors liable.

Thacker ordered that Swinton and Thompson pay the remaining $94,000 to Burger Edge, in additional to more than $37,000 in legal costs.