Sumo Salad faces dispute over decision to terminate franchise agreement

A legal battle is brewing in one of Australia’s fastest growing franchises, after Sumo Salad terminated one franchise agreement, alleging the owner did not respond to multiple requests to clean up his store and accurately report income.

Sumo Salad has accused franchisee Isaac Chalik of creating health risks in the way the store was managed and inaccurately reporting franchise income.

Sumo co-founder Luke Baylis says the company has attempted to resolve the disputes with Chalik over the last 12 months without success.

“Basically what happened is that he had multiple breaches of the franchising agreement. Significant breaches that would impact the reputation of our brand and the safety of our customers.”

“Our unfortunate position is to remedy those breaches, but the franchisee has been unwilling to operate in those guidelines and we’ve had to take action to prevent any health risks.”

Chalik denies any breach of the agreement ever occurred, and believes the company does not have any reason to take action against him.

He told SmartCompany this morning that there nothing wrong with the food and that other accusations – including that he was not disclosing income – are untrue.

Chalik’s solicitor, Bondi Junction-based David Newhouse, declined to comment on Chalik’s specific situation, but did say that “in my opinion the Franchising Code does not adequately protect franchisees” in these types of situations.

According to a report in the Sydney Morning Herald, Chalik was evicted from his store on the evening of May 4.

DC Strategy executive director Rod Young says it is rare for franchise agreements to be terminated in such a fashion.

But he also warns such terminations would only happen after a long period of mediation.

“It’s very, very uncommon for this to occur. But it comes after quite a long period of talks, counselling, notification and so on where a franchisee is simply not prepared to follow the system.”

“This is what I would describe as drastic action, and I can guarantee it wouldn’t be taken lightly by the franchise.”