Australia’s best known franchisee, Jack Cowin, plans to take legal action against his KFC franchisor, Yum! Restaurants Australia for what he considers unconscionable conduct.

Cowin’s company Competitive Foods has been in a battle with Yum! since the franchisor gave notice in 2003 that his longstanding franchise agreements in WA and NT would not be renewed and the Rockingham store closed in 2007.

Over the last two years extensions to the agreements were granted by Yum to allow the businesses to be sold to new franchisees.

However Cowin has questioned the franchisor’s actions in effectively terminating a successful franchise business and is now taking the issue to court.

Cowin has accused Yum! of unconscionable conduct, saying it thwarted his attempts to sell the franchise rights to 46 KFC outlets in Western Australia and the actions of Yum! could lead to the closure of his stores.

Yum! has rejected Cowin’s allegations, describing them as “baseless and without merit”.

Competitive Foods now has 15 out of 46 stores out of licence and according to the spokesperson, the stores have been granted extensions on a monthly basis.

Issue of regulation

The issue of whether or not good faith should be encased in franchising legislation has been ongoing; the Federal Government has rejected the idea and this was subsequently take up in various state parliaments including WA and SA.

The spokesperson for Competitive Foods said the franchisor has been emboldened by the provision of good faith not getting up. We have the resources to take this on but lots of franchisees would have packed up and left.

The case is worth noting for a couple of reasons.

First, it’s unusual that Cowin is both franchisor and franchisee. Cowin’s Competitive Foods is the biggest restaurant franchisor in Australia, operating KFC restaurants in WA under franchising agreements with Yum!, plus hundreds of Hungry Jacks stores.

Second, there’s the fact that the businessman has been valued at $618 million – meaning he’s not only an atypical franchisee, but he’s a powerful figure in the Australian economy.

Competitive Foods operates a number of businesses including Hungry Jacks stores, and KFC restaurants in WA and NT. Cowin has been a vocal supporter of state-based legislation and the inclusion of a good faith clause in franchising regulation.

At GMH Legal, we have assisted our clients in establishing and growing their franchises businesses. Should you have any Franchise related queries, please do not hesitate to contact our Principal Partner, Mr George Hanna on (02) 9587 0458.