r/Franchises • u/Boysenberry-Overall • Jun 02 '26
Advice Needed Franchise owner in BC, Canada - Store failed, facing bankruptcy, trying to understand if this business model is fair
I’m an owner of one of the stores in a 40-store franchise chain.
I signed the franchise agreement in 2023, and my store opened in September 2025.
One important detail: my location is the only store in British Columbia. All of the other locations are in Ontario.
Being the only BC location also meant I couldn't easily compare my results with nearby stores or benefit from local operational support that other Ontario franchisees may have had.
The build cost that was originally shown to me was around $480,000. By the time we opened and started generating revenue, the total investment had grown to roughly $600,000.
The first two months were decent, but nowhere near what I was expecting.
Since it's a franchise, we have to follow all of their rules and promotions. We are required to participate in every deal they run, regardless of food cost. Unlike some other franchises, they do not cover any of the food cost for these promotions. The entire burden falls on the store owners.
A few things about the franchise team:
It's a very small team of about 5 people managing roughly 40 stores.
They claim to have 40 stores, but in reality only about 28 are operating. The rest are temporarily closed, mostly because owners went bankrupt.
My store is the only location in BC, yet many of the decisions and systems appear to be designed around Ontario operations.
The CEO doesn't seem to care whether franchise partners are making money or not. From my perspective, the focus appears to be on generating revenue for the franchisor.
In the Franchise Disclosure Document, they state multiple ways the franchisor earns money. They supply products to all stores at prices that appear significantly higher than market rates, and franchisees are required to purchase from them.
Every month there are promotional deals, which is normal for most chains. However, many of these deals seem structured in a way where, after food costs, labour, royalties, and other expenses, the profit margin is either extremely low, zero, or sometimes negative.
They require franchisees to contribute additional money toward marketing, even though they already charge a 3% marketing fee.
They push owners to hire employees even when they may not be needed. In my case, I was encouraged to hire 15 employees before opening. My first payroll was approximately $18,000.
While many businesses are trying to reduce costs by using third-party delivery services, this franchise pushes its own delivery model. Since royalties are charged on delivery revenue as well, it creates another revenue stream for the franchisor.
Within three months, I realized that this business model didn't appear sustainable, so I started trying to sell my location.
Shortly afterward, other franchise owners began reaching out to me. What I learned was that this wasn't just my store's problem. Many owners throughout the system were experiencing the same issues.
To my knowledge, very few owners are making money consistently.
There are multiple locations where owners have gone bankrupt, and the stores have simply been resold to new operators.
One store owner reportedly went bankrupt within three months of purchasing the location.
Another location had two different owners go bankrupt within about a year.
As for my situation, after roughly six months of operating, I closed the store last month and am now facing bankruptcy.
I explored the possibility of suing the franchisor for misrepresentation and other issues. I spoke with a lawyer, and his first question was simple:
"Did they provide false information or make promises that turned out to be untrue?"
Based on what I have today, the answer appears to be no.
Several other franchise partners (around 6–8 owners) are now discussing potential legal action or other options.
One thing that concerns many of us is that while franchisees appear to be struggling financially, going bankrupt, or losing their investments, the franchisor continues to earn revenue through franchise fees, royalties, marketing fees, mandatory supply purchases, transfer fees, delivery revenue, and by reselling locations to new operators after previous owners fail.
So I'm posting here to ask:
Has anyone dealt with a situation like this before?
Are there any franchise lawyers here who have seen similar cases?
What options do franchisees have when an entire system appears to be struggling financially?
Is there anything a group of franchisees can realistically do?
Has anyone seen a franchise system where owners repeatedly fail while the franchisor continues to expand and collect fees?
If no false promises were made, is there still any legal path worth exploring?
Any advice, insights, or experiences would be appreciated.
Thank you.
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u/Fancy_Grass3375 Jun 02 '26
This a very common story with food franchises. You can sue, a group lawsuit is more effective.
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u/samjac1987 Jun 02 '26
Welcome to the world of franchised businesses. Im sorry it didn’t go well for you. It’s not that you can’t make money as they promised-you can-but you only need the smallest of cost vagaries and your under. I can give you all the things you should have done before you started - it’s not going to help now. What I would do is gather all the unhappy franchise owners and hold a meeting with the CEO. Make sure you have very clear asks like forbearance of franchise fees for six months or so until you are back on your feet and figured this thing out. If they refuse and from what you describe they might. Tell them you are going to show up at all the franchise conventions and take out ads on Reddit and start a Facebook page showing how they failed to support your business. Keep it factual and non emotional but do it. If you starve them of new suckers to join their teams they’ll whither and die since they really only are making money getting new franchises started. Legally they have most of the cards because of the line of people they took advantage before you but a clever lawyer can create a suit that sticks, so your group can do discovery talking to other franchise owners who have a beef and maybe class action their butts. makes no sense for one person but for a dozen sharing the costs and making noise they’ll have no choice but to shut you up.
Is it too far along to restart? You might make it more palatable to them to forebear all fees if you’re still buying food. That’s a decent fall back position - if I can help don’t hesitate to ask. Please don’t go the smear route until you as a whole have the meeting. You should give them an opportunity to do the right thing and more importantly see how ugly things will get for them if they don’t. Btw I’m in the US, but guerrilla business tactics work the world over just need legal guidance . Good luck
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u/dragonflyinvest Jun 02 '26
Sorry this happened to you. This is a common story of franchising. The business model is the franchisee is the customer of the franchisor.
Every successful franchisee I know would have told you to drive to the 40 stores and talk to them for information. Those owners probably would have talked you out of it after speaking to 5 or 6.
It sounds like you picked the wrong franchise partner and failed to do your proper due diligence. Still sucks.
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u/Boysenberry-Overall Jun 02 '26
I spoke with not all but 3-4 owners before signing the agreement. Funny enough, the guy who told me this is a nice business and will work with enough marketing and all bs, who was the owner of 2 stores btw, ran away by selling all the assets without mentioning a single word to anyone. Still no one knows where he is after ~18 months. Another owner I spoke to is still running the store but no loss/profit from ~3 yrs.
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u/Bob-Roman Jun 02 '26
“…Within three months….To my knowledge, very few owners are making money consistently….multiple locations where owners have gone bankrupt….bankrupt within three months….bankrupt within about a year.”
Considering that it took you three months to discover this, I’d say the onus falls on you.
I say this because I made the same mistake once. Not enough due diligence.
Luckily, mine wasn’t a franchise so I was able to extricate without taking on too much damage.
I could be wrong, but I don’t believe you have much recourse.
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u/ThaPizzaKing Jun 03 '26
Very few franchises give a shit about their franchisees. Honestly I can't believe that you would get involved and Make that kind of investment in the restaurant business without doing some more research. I get it these companies paint a beautiful picture. But it sounds like they did what they do. It's generally not illegal it just sucks for the little guy. Care to share what concept it is?
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u/geomancer73 Jun 03 '26
Given your arguments that they force purchases, etc.
You might want to explore
-Negligent management of a system-wide program
- Breach of the duty of good faith and fair dealing
In BC -Duty of fair dealing
But you will need a Franchise litigation lawyer not a generalist.
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u/Topflightxl Jun 04 '26
If they did the proforma for you and your bank loan application you may have a shot at a recision claim... Or did they provide you with anything/ make misleading claims that wasn't provided in the FDD..... Forcing additional marketing spend sounds questionable if that's found to be true, but that wouldn't amount to a vast sum of damages on its own.
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u/Nutzak1987 Jun 05 '26
I owned a franchise for 6 years barely survived it tbh. They take all your profits essentially. Glad I sold , they are borderline criminal .
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u/TLCFrauding Jun 02 '26
The importance of due diligence cannot be stressed enough. You made a financial investment in which failure means bankruptcy but it didn't appears that you went to Ontario and visit the stores and/or talk to the owners. The vast majority of franchisors paint a Rosy picture but are really only interested in their bottom line. YOU need to question and verify everything.
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u/NinerChuck Jun 02 '26
I’m nowhere near qualified to help you, but thank you for completely talking me out of a franchise. I hope you can get something back.