Three Cold Rock Ice Creamery stores have been placed in administration after their two franchisees attempted to rebrand the stores within weeks of ending their franchise agreement.
In April, former Cold Rock franchisees Paul Bailey and Tammy Hawkins-Bailey chose not to renew their rights to run three stores in north Queensland.
On May 3, they released a press statement announcing the Cold Rock signage had been painted over and they were creating a new ice-cream brand known as “IF iCECREAM FACTORY”, which would operate from the three former Cold Rock stores.
Cold Rock is owned by the Melbourne-based Franchised Food Company, which also owns franchise brands Mr Whippy, Nutshack and Pretzel World.
According to FFCo managing director Stan Gordon, the move to rename the Cold Rock stores – while continuing to use the Cold Rock concept – is a breach of trademark and IP property rights.
“When one enters into any contract, there are obligations on all parties… The [Cold Rock] ex-franchisees unilaterally decided not to comply with their ongoing obligations under their various agreements,” Gordon said in a statement.
“This resulted in Cold Rock management seeking a court injunction to stop the blatant copying of the Cold Rock system.”
“At the eleventh hour, these rogue businesses were placed into administration in order to avoid the ramifications of infringement of our brand.”
Insolvency firm KordaMentha has been appointed administrators. Gordon said Cold Rock was unable to negotiate with the franchisees before the matter was taken to court.
According to Gordon, Cold Rock was not in any dispute with the franchisees prior to their decision not to renew the franchise agreement, and he was surprised that three months of mediation failed to resolve the issue.
“I think they were very ill-advised. When we went to mediation, some of their mediators were aggressive as hell. They wanted to get to court as quickly as possible,” he told SmartCompany.
“While we are saddened that anyone loses their assets, we have to at all costs protect our brand, not only for the owners but for all Cold Rock franchisees.”
“We remain committed to work with the administrators and the landlords to try to minimise any losses that will be suffered through this transaction.”
Gordon said Cold Rock management was negotiating with the administrators to take the stores back under its control before new franchisees would be sought.
The case highlights the perils of going up against a franchisor, particularly when it comes to branding.
Jason Gehrke, director of the Franchise Advisory Centre, told StartupSmart most franchise agreements contain a provision about the reputation of the brand.