High Court orders winding-up of The Franchise Group

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1:00 am, June 9, 2008
High Court orders winding-up of The Franchise Group

By Claire Shoesmith

The High Court has issued a compulsory winding-up order for The Franchise Group after its owners failed to secure a company voluntary arrangement (CVA) because of a lack of insurance.

Les Dyson, the group's former chief executive, confirmed the order had been issued and as a result his plans to take on the master franchise for the UK had been put on hold.

He said the size of the potential claims the company is facing from disgruntled former partners had led the group's insurer AIG to pull out and that talks with several other insurers had come to nothing. Without professional indemnity insurance the company could not operate, he added.

In March Dyson told Crain's he was buying the UK master franchise of The Franchise Group for an undisclosed sum and that he planned to take the group forward in a “very different” form. Last week he said he could not be sure he would now proceed with the purchase.

The Franchise Group, formerly based in Knutsford, charged a minimum of £35,000 for “franchise partner” courses designed to equip people to recruit franchisees for client businesses. Earlier this year it admitted to having cash flow difficulties, ongoing legal disputes with some of its former franchise partners and to being investigated by the Department for Business.

Failing model

Tony Urwin, head of the northern office of the Franchise Development Service, said he was not surprised the group had failed.

“The model of using inexperienced consultants and perhaps overselling the franchise concept would lead to failure,” he said.

Dyson quit as chief executive of The Franchise Group in early February just five months after he and chairman Jeff Smith took over the company. While Dyson was to take on the UK master franchise, Smith was going to focus on expanding the company overseas. There were plans to float shares in Toronto.

A new website promoting The Franchise Group's business is simply a public relations exercise to show people that The Franchise Group still exists, Dyson said, adding that he had nothing to do with it.

Crain's called the Manchester office number given on the website and was told that The Franchise Group was not based there.

COMMENTS? cshoesmith@crain.com