Nando’s Australia slams franchisee exploitation reports

By Nick Hall | 29 Jul 2019 View comments

Nando’s Australia has slammed recent reports that paint a troubling picture for the peri-peri chicken chain.

The South-African born fast-casual franchise has faced ongoing pressure after news.com.au revealed that 44 franchised restaurants had ceased trading over the last three years.

The aftermath has seen former franchisees accuse Nando’s of engaging in aggressive tactics.

According to NewsCorp’s The Advertiser, Nando’s demanded franchisees undertake expensive store upgrades in order to renew their agreements. Those who couldn’t afford the updates were forced to walk away with nothing.

In other cases, the brand was accused of preventing franchisees from selling their outlets, forcing them to sell their restaurants back to the franchisor for a fraction of the price.

However, on Friday, the under-pressure franchisor had enough.

Nando’s Australia response

In a statement posted to the Nando’s Australia Facebook page, the peri-peri chicken franchise rejected allegations of wrong-doing. Instead, the brand revealed that contrary to reports, a number of new franchised outlets had been secured and opened.

“Nando’s Australia continues to operate on a blended franchise and company-operated restaurant model that has seen the renewal of franchise agreements in recent years and the opening of new franchised restaurants,” the statement read.

In response to concerns over the expensive store upgrades, which reportedly reached into the hundreds of thousands, Nando’s Australia cited competitive dining sector as an underlying factor.

“Our aim is to always be at the forefront of fast-casual dining in Australia. This means delivering a relevant and compelling customer experience in a competitive environment, setting the Nando’s brand up for success and making us fit for the future,” Nando’s said.

“To do this our offer must not only be uniform with high brand recognition, but also inviting enough to attract new customers and retain existing customer loyalty.”

Nando’s Australia said it invested heavily in store refurbishments, which had resulted in a boom in sales and performance.

“Nando’s has invested tens of millions of dollars in its new build, relocation and refurbishment strategy to ensure we are delivering the best possible restaurant experience for our customers and continue to lead the way in the fast casual dining space to support the ongoing and continued profitability of the Nando’s brand,” the statement read.

“Many of our franchisees have been keen to invest with us, both in refurbishments and new restaurant openings, and together we are enjoying the benefits of improved sales and performance. Over 90 per cent of our customers are now able to enjoy this experience across the Australian Nando’s network and our brand is experiencing its highest network sales to date.”

Ongoing developments

While the strong sales announcement is a welcome boom for the fast-casual chain, it will do little to alleviate tension among the former franchisee network.

In Friday’s statement, Nando’s Australia went on to suggest that refurbishment costs and timings were explicitly discussed with new franchisees from the outset.

“Each incoming franchisee is required to seek independent legal advice and provide a signed solicitors certificate confirming this advice has been received,” Nando’s said.

“During this initial stage discussions around potential refurbishments, including timings and estimated costs are also discussed with prospective franchisees. Our preferred process is that each refurbishment or relocation is evaluated and assessed individually to ascertain suitability and conversations with franchisees are conducted within a structured process allowing them time to review their options and seek external advice.”

Since it was posted on Friday, the Facebook statement has received over 150 comments, many accusing the chain of exploiting franchisees.

“Pathetic Nando’s. Your franchise owners have been very clear – you’ve ripped people off big time,” one user wrote.

With potential class actions lawsuits set to hit fellow franchise chains Domino’s and Michel’s Patisserie, Nando’s may be the next brand to face a lengthy legal battle.

Possible action

Michael Fraser, director of franchisee advocacy group, Franchise Redress said he was currently in talks with a number of Nando’s franchisees.

“The next key step is putting them in a trusted WhatsApp group so we can communicate with them all at once. Our intention would be to have a lawyer review the complaints to assess the possibility of a group solution,” Fraser told Inside Franchise Business.

The director believes that the string of recent class action proposals may encourage more Nando’s franchisees to come forward.

“The announcement of the Domino’s class action and potential Michel’s Patisserie class action helps build the confidence in franchisees from other systems to come forward as a group and seek redress. One might say, it is having a Domino effect,” Fraser said.

“Nando’s won’t be the last group to come forward, there will be more scandals yet to come from well-known brands, about wage issues and failing franchisees.”