A disgruntled long-term franchisee is set to face off against ASX-listed pizza giant Domino’s and boss Don Meij in Federal Court.
On Monday, The Courier Mail reported that Perth-based fast-food veteran Frederick Aloysius Mario White had alleged the chain of misleading and deceptive behaviour, causing the profitability of his three outlets to plummet.
The accusations stem from Domino’s 2014 decision to roll-out pizzas for the meagre price of $5, and the chain’s supplier agreements, which White suggest forced him to buy ingredients at “unreasonably high” marked-up price of around 18 per cent.
According to reports, White is also accusing Domino’s of misrepresenting likely sales and providing misleading sales returns at a second or “split” store it opened close to his Balcatta outlet.
In an announcement posted to the ASX on Monday, Domino’s and Meij confirmed that the litigation was likely to progress.
“Domino’s Pizza Enterprises Limited (DPR) expects to be served shortly with Federal Court proceedings by an Australian franchisee,” it said.
Cause of friction
While the pizza giant said it was disappointed that negotiations had come to this, Domino’s also said it wasn’t a complete surprise.
“We refer you to our previous public announcements on our efforts to improve the standards of our franchisee network, a program that started two years ago. We have shared that these efforts would likely lead to some franchisees being unhappy with DPE and choosing to leave the network,” Domino’s said.
“We also flagged some of those franchisees may choose, as an attempt to achieve leverage to bargain with us, to take legal action or to raise the threat of litigation through the media. This is one such case in our view. Therefore, we are disappointed, but not surprised, by this action by an Australian franchisee which we do not consider represents the relationship with our wider franchisee community.”
Domino’s sued by star franchisee
It’s certainly an interesting turn of events for multi-unit franchisee White, who was formally awarded the Domino’s South Pacific Manager of the Year as well as third runner up for global Domino’s Manager of the Year. Even Meij himself was singing his praises back in 2015 with a post on Facebook.
However, the relationship turned sour. According to The Courier Mail, the 20-year Domino’s veteran alleged Meij told franchisees at a 2013 roadshow that the brand would be cutting its $4.95 offer. However, just months later, a new price point of $5 was instilled.
Based on this, White is reportedly claiming that Domino’s engaged in false and misleading conduct and unconscionable behaviour, breaching the franchise code of conduct by failing to act in good faith.
However, Domino’s, while yet to be served with the formal legal proceedings, has rejected the claims emphatically.
“The matter relates to a commercial dispute between DPE and the franchisee which has been the subject of discussions with the franchisee for some time,” the company said.
“While DPE is disappointed that the franchisee has chosen this path of litigation, from the information available to it, DPE considers the franchisee’s claims to be without merit, and in fairness to our investors and franchisee network it is important that we defend the claims.”
The latest Domino’s litigation comes after former Surfers Paradise franchisee Tim Yervantian settled his $6m claim last year for an undisclosed amount.