Pizza Hut sues franchisees for $400k for ‘abandoning’ store, couple say they were duped

An Adelaide couple sued for $400,000 by Pizza Hut say they were left contemplating suicide after the fast-food giant bankrupted them financially.

An Adelaide couple who were sued for $400,000 by fast-food giant Pizza Hut claim they became financially bankrupt and contemplated suicide after the store’s previous owners tricked them into buying a bankrupt franchise.

Jasbir Kaur Singh and her husband Ranjodh Singh Joshan bought the Salisbury franchise in 2017 for $130,000, but Pizza Pan Group Pty Ltd, the franchisor of Pizza Hut in Australia, alleges she “abandoned” the store just two years into a contract. one of each.

“It affected me in every way: financially, mentally, my family,” said Joshan, who described the allegation that they left the store as “completely false.”

“It has broken me in points. It’s like there’s always something hanging over your head. I have nightmares at night, I don’t know what’s going to happen. They deceived me, I felt that they took advantage of our situation.”

The company filed a lawsuit against the northern suburban couple in 2019 seeking $395,392.63 in damages plus legal costs and interest, most of it comprising $313,232.91 in fees that Pizza Pan says it would have received if they had continued to operate the franchise during the years. 10 full years. until December 18, 2026.

Court documents allege that the Joshans “left the establishment” on October 25, 2018 “without prior written approval” from the company, in breach of their franchise agreement.

Two weeks later his company was discharged.

In their defense filed last month, the couple allege that the franchise agreement gave them “the right, but not the obligation” to operate the establishment for up to 10 years, and further allege that Pizza Pan “deceived” them into believing that the business was viable.

They are now suing Pizza Pan along with the previous owners of the store, Sanjay Ganpatlal Patel and Varunkumar Virabhai Patel, who allege they breached the Australian Consumer Law and the Franchise Code of Conduct by misrepresenting weekly sales figures.

Ms. Joshan says that she and her husband were living in Perth in 2016 when they started looking for a new business opportunity.

Her husband, a truck driver, wanted to change careers after an accident, while she worked in community mental health.

A family friend who lived in Adelaide told them about the sale of the Salisbury Pizza Hut franchise and introduced them to the Patels.

According to the cross-claim, the Patels told the Joshans in a meeting that the store was generating $9,000 in weekly sales plus $1,000 in unreported cash sales, with operating expenses of about $5,000 to $5,500 per week.

Pizza Pan agreed to a franchise business plan drawn up by Ms. Joshan that stated the “worst case” weekly sales revenue would be $8,600 per week.

But Ms. Joshan says it was clear “within the first three months” that the store was not generating anywhere near that revenue.

The cross-claim alleges that Pizza Pan knew full well that the store was not making any money, as it was “required to enter all of the store’s financial information into a centralized computer system controlled and monitored by PPG,” and that the franchisor incurred “misleading and misleading conduct”. for the silence.”

“In the 18 months I ran the store, the highest we did in weekly sales was $8,300, the average was between $5,000 and $6,000,” he said.

As the business bled, she was forced to take a part-time job, working night shifts in addition to 70 hours a week managing the store.

“I was working 100 hours a week,” he said.

“My husband was totally devastated. We end up using all of our savings very quickly to pay the bills. Within six months he was on the verge of breaking down. That was the first time I started communicating. [to Pizza Pan] this is not working, what are my options?”

She says she desperately tried for a year to sell the loss-making store or return it to the company, which adamantly refused.

“I don’t know how many emails I sent, at one point I said if they’re not going to give me permission to close the store or take it over, I’m at a point where I can’t do anything. , [I will commit] suicide,” he said.

“They didn’t want to terminate my contract, they didn’t want to take over the store, I couldn’t find a buyer because the local people knew the situation very well, there was no solution.”

Finally, he was able to find an independent pizzeria owner willing to take over his lease and purchase his plant and equipment.

“I bought it for $130,000, I was happy to take $21,000 because it was giving me my life back,” he said.

Ms. Joshan says that when she met with a Pizza Pan representative at the store to return Pizza Hut corporate items, including menus and training manuals, he made a startling statement.

“No one has made a profit from this store in 10 years,” the man allegedly said.

The matter is being heard in the District Court of South Australia, after the Joshans successfully won a 12-month legal battle over court choice.

Pizza Pan originally tried to sue the couple in NSW.

They argued that this was a violation of the Franchise Code, which requires franchise disputes to be heard in the state where the business is located. Pizza Pan’s logic was that this was not a franchise dispute as it was personally suing the couple as guarantors.

The matter went all the way to the New South Wales Court of Appeal, which ruled in his favor last September.

Adelaide lawyer Mark Gustavsson, who is representing the couple, said Pizza Pan was being “ruthless.”

“Pizza Hut are being absolute thugs, it’s cruel what they’re doing,” he said.

Ms. Joshan and her husband have already been forced to sell their home to pay ongoing legal fees and have no way of raising $400,000.

“I have nothing to sell,” he said. “I already lost my house in this fight.”

The Patels declined to comment when contacted by their attorney.

Pizza Pan has been contacted for comment.

The matter returns to court on May 23.

frank.chung@news.com.au

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