Naked truth

Author: None
Publisher:
Publish Date: 2006-06-01
Features: "1·2·3" Franchise "Trap" Investigation - By reporter Liu Hua, Hangzhou - The headquarters of the commercial brand "1·2·3 Wan Tu Speed Li" is located in Hangzhou. It has a considerable reputation in the national franchise industry, with its franchise stores once spanning over 100 cities and more than 200 new franchise stores opening each year. The main business is restaurant chains. However, in contrast, the number of franchise stores that go bankrupt each year is also around 200. In July 2005, 30 franchisees filed over 20 lawsuits against the China headquarters of Wan Tu Speed Li Franchise Company, accusing them of commercial fraud in their franchise operations, with the total amount involved being approximately 20 million yuan. However, Wang Hongyan, a lawyer from Zhejiang Wanma Law Firm, the defendant's legal representative, told the reporter that the company has no illegal issues and that the current disputes are all "sowing discord" by its competitors. So, what is the truth?
20 Lawsuit Cases "Joining the Wan Tu Speed Li franchise is the most regrettable thing I've ever done in my life." said Chen Jun (a pseudonym) from Wenzhou. In 2003, Chen accidentally saw the company's advertisement—"Join a beautiful and fast-food store for only 20,000 yuan, easily become a boss." Unemployed at home, Chen immediately invested 38,000 yuan to become a franchisee. But soon after opening, he found that business was extremely slow, and some customers openly criticized the poor taste of the food. He frequently sought help from the company, but the company ignored him. Two and a half months later, Chen's store was forced to close.
Xiao Lijun also deeply felt the pain. He was once the agent for the "Beautiful and Fast Food" franchise project of Hangzhou Wan Tu Speed Li Co., Ltd. in Ningbo and had lost over 500,000 yuan in this project. "I joined the franchise on March 27, 2003. At that time, the company's salesperson said that as long as investors invested 20,000 yuan, the company would assist with everything except store rent and business license. They promised to provide a series of services for franchisees, from big things like branding, technology, service, and planning to small things like store location selection and employee training. The project's profit margin was over 60-70%, and with a daily turnover of 1,000 yuan, the cost could be recovered within 6-8 months. But to this day, the cost has not been recovered, and the business has been in a loss." Xiao Lijun believes that the company claims to be an international franchise brand, and its suitability for small-scale entrepreneurship is the main reason that attracts franchisees. However, the company's commitments after opening, including follow-up services, are just empty promises. As a result, many franchisees have closed down.
According to business registration records, the company was established in Hangzhou in May 1999 with an investment of 70,000 U.S. dollars from three natural persons. A knowledgeable source disclosed that the company has developed nearly 1,000 franchise stores nationwide, with only over 200 remaining.
The agent of the franchisees, lawyer Peng Qingmin from Shanghai Minlian Law Firm, believes that Wan Tu Speed Li is suspected of commercial fraud. Peng Qingmin stated that the company's business scope includes production, sales, and consulting services, but its business license does not specify engaging in franchising. However, the colorful advertisements printed by the company claim that the Wan Tu Speed Li International Franchise Group originated in Taiwan and entered the mainland in 1999 to engage in franchising. But according to the "Pilot Measures for Foreign Investment in Commercial Enterprises" promulgated by the State Council, the company's business license does not allow it to engage in franchising.