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When it is difficult to let go of a hired brand name

By Dominic Omondi | February 14th 2021
A steers and Debonairs Pizza outlet on Wabera Street, Nairobi (PHOTO: Jenipher Wachie)

A name can be worth a fortune. And fortunes are worth fighting for, in some extreme cases even worth dying for.

Often times, it is not easy to let go of a globally-recognised brand that is a source of riches for franchise holders.

That people can easily kill for a brand is a lesson well known to Polycarp Igathe, currently the group chief commercial officer at Equity Bank.

In his previous posting as managing director of Vivo Energy, the company that distributes and markets Shell-branded fuels and lubricants in Kenya, Mr Igathe had a brush with death.

That was in 2017 when he attempted to de-brand a Shell petrol station in Naivasha run by then Nominated Senator Paul Njoroge for what Vivo termed mismanagement of the outlet that left it without sufficient fuel.

When Igathe went to implement the order he found the owner at the station, angry and not willing to budge an inch.

“Munakuja hapa kuharibu pesa yangu (You come here to destroy my money,” shouted Njoroge, pulling out a pistol and firing some shots.

The money in question was the brand name Shell.

A British multinational energy company, Shell is one of the oil and gas ‘super majors’ and the fifth-largest company in the world on revenue.

Its yellow and red scallop logo is a magnet for most motorists, with many believing that it has the best services.

Kenyan courts are paved with tales of bruising battles between brand owners and franchise holders with the former decrying the reputational damage to their name.

One such franchise is Steers and Debonairs, popular for grilled chicken and other fast foods.

If these brands will not vanish from the streets of Nairobi, they will have to find a new franchise holder.

This is after their South African owner, Famous Brands Ltd, accused the Kenyan operator, Hoggers Ltd, of not meeting certain minimum global franchise standards and failing to pay monthly royalties.

Hoggers has since been placed under administration following a long streak of financial distress.

Famous Brands does not only want the court to allow it to terminate the agreement, it also wants to de-brand some of Hoggers’ outlets.

But Hogger’s administrator Owen Koimburi told the court that without the Steers and Debonairs trademarks, “the company has very low chances of survival.”

He said de-branding would see Hoggers lose its goodwill.

“The administrator contends that if the court allows the application by Famous Brands, it will greatly prejudice the company as its main business is anchored on the franchise agreements,” said High Court judge David Majanja in a judgement.

Mr Koimburi added that de-branding would defeat the purpose of administration, which is aimed at resuscitating the restaurant, adding that the company had started making some progress as revenues went up.  

Andrew Blackbeard, the franchise manager, said they made the decision to terminate the agreement following poor performance, which led to a decline in brand reputation.

“In August 2019, Famous Brands entered into a conditional agreement with the company to purchase the seven Steers and Debonairs Pizza outlets the company was running in Kenya. Unfortunately, the agreement fell through as the company failed to satisfy conditions precedent,” said Justice Majanja. 

The franchise agreement between Hoggers and Famous Brands was to end on February 28, 2024.

Hoggers operated seven food outlets including Debonairs Pizza Muindi Mbingu Street, Steers Muindi Mbingu Street and Debonairs Pizza Ngong Road.

Others are Steers Ngong Road, Debonairs Pizza Kiambu Road, Steers Donholm and and Debonairs Donholm.

Prudential Capital Partners is another company fighting for the Text Book Centre franchise, which is threatening to slip through its fingers. 

The firm went to court to stop the termination of the franchise by Textbook Centre Ltd, terming it unlawful.

High Court judge Wilfrida Okwany issued a temporary injunction restraining Textbook Centre from interfering with Prudential’s franchised stores in Thika and Kiambu.

However, the judge restrained Prudential from advertising, promoting, displaying, selling or offering for sale trademarks “Text book Centre” at Greenspan Mall, Nairobi.

Text Book Centre said that from March 2019, it supplied orders to Prudential worth Sh31.632 million. However, it had only received Sh9,094,641 in payment, leaving a balance of Sh23,642,167.55.

Prudential is accused of opening the store at Greenspan Mall despite the franchise owner refusing to approve the request owing to its concerns over performance at the approved outlets in Kiambu and Thika.

Through its managing director, Text Book Centre said Prudential sought and was awarded a letter of offer dated December 1, 2019 by Tuskys supermarket for marketing, advertisement and promotion of TCB-branded products at Tuskys branches including at Greenspan, Tom Mboya and T-Mall.

Prudential, through James Mworia, denied that it breached the terms of the franchise agreement, adding that Text Book Centre’s claims were “founded on falsehoods and misrepresentation of facts”.

Mr Mworia also denied the claim that the firm owed Text Book Centre Sh23,642,167 as they were only required to remit money for goods or stock sold.

Vicious shareholder wrangles saw CMC Motors lose its franchise for Jaguar and Land Rover vehicles in 2012, with the South Africa-based Jaguar Land Rover instead inking a deal with RMA Group.

CMC had exclusively sold the brands in the Kenyan market for more than 50 years.

However, even after communication the brand owner communicated its decision to terminate the deal, CMC maintained that it had not lost the dealership.

In yet another contested deal, a local dealer in the vehicle rental market, Air Promotion Group East Africa, entered into an franchise agreement with Europcar International Sacco, a French multinational.

The agreement allowed the Air Promotion to carry out business in Kenya using internationally recognised Europcar marks.

To get the franchise, Philemon Mwakitawa was assisted by David Muriuki to develop the proposal. Thereafter, the company set up shop at the Jomo Kenyatta International Airport and proceeded to hire vehicles and drivers for purposes of the business.

Later, however, the parties fell out with Mr Muriuki claiming that he expended enormous resources towards acquiring the franchise and the company owed him Sh12 million.

Air Promotion alleged in a court filing that on or about January 12, 2019 Muriuki maliciously wrote a letter to Europcar intended to revoke the international franchise agreement (IFA).

“As a result of this letter the franchisor (Europcar) threatened to revoke the IFA due to negative publicity and squabbles between the management,” the company said. 

“Attempts made with involvement of third parties to resolve the misunderstanding bore no fruit. The defendant (Muriuki) continued to threaten to publish negative material about the plaintiff to the franchisor”. 

In a judgement given on May 14, 2020, the court barred Muriuki from interfering with the operation of the franchise until the case to determine whether Air Promotion owed him Sh12 million was heard.

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