“COFIX” COFEE SHOP CHAIN HAD TO BE CLOSED DOWN IN KAZAN

The Russian franchising market is in trouble again. This time, the Israeli coffee shop chain “Cofix” turned out to be at the epicenter of the scandal, against which the partners rebelled. 34 franchisees addressed the copyright holder and the shareholders with a message, in which they expressed a desire to join the brand management by reviewing the terms of the commercial concession.

Taking into account that the franchisees represent 82 outlets, which is almost half of “Cofix” points in Russia, the conflict will obviously have to be resolved. The press service of the brand management company “Urban Cofix Russia” claimed that the issue was resolved in February. However, according to the fact that the response to the collective claim was only a response from the CEO, Bernard Blazhey Reiss, the tension in the situation is in full swing. 

What are the main complaints of the “Cofix” partners in Russia? Analyzing the contents of the letter, we can say that a lot of claims have accumulated, for example, the rent is more than 15% of the turnover, the payback period for most trading enterprises almost coincides with the terms of the concession agreement.

But the main thing is that the entrepreneurs complain about is the marketing fees that are unbearable for the Russian regions.

As a result, the franchisees demanded to compensate for the costs of stocks and discounts, reduce contributions and set a threshold for the costs, allocated for the purchase of raw materials for doing business in an amount, not exceeding half the turnover. Will the parent company accept such an offer? Experts believe that this is not worth doing, because the desire of the franchisee to join the board of directors of the parent company with the ability to block management decisions can destroy the entire system of concession relations in general.

However, an unpleasant story with partners from Tatarstan also added fuel to the fire, as the “Urban Coffee Region” company was engaged in the development of “Cofix”. Under the agreement of 2018, it received the exclusive rights, but failed to implement the plans, specified in the concession agreement in Kazan - only four outlets were opened. At the same time, the regional partner managed to owe a decent amount (about 6 million rubles), violating the terms of the contract and not making deductions to the owner. As a result, at the end of 2019, three locations changed signboards, and the owners of the fourth started a legal battle with the tenant (“Mega Kazan” shopping center), after the Moscow management company terminated the contract. 

Local entrepreneurs working as a “sub-franchisee”, having lost their right to use the “Cofix” brand, decided to develop their own network under the brand name of “100% coffee”.

In January, “Urban Cofix Russia” sent 16 applications to the AC of Tatarstan, the bulk of which was an attempt to collect a debt from “Urban Cofix Russia” by the court.

Taking into account that “Urban Coffee Region” did not agree with the claims, the judges indicated that the applicant had the right to demand payment of debts, but in a lawsuit. It can be assumed that litigation will now drag on - this will not contribute to the expansion of the “Cofix” network in Russia, as was originally planned.

In addition, on April 1, the AC of the Moscow Region will have to consider a rental dispute with the Kazan shopping center, which terminated the lease agreement (of 48 sq. meters) with “Optimum” company, which developed one of the “Cofix” outlets as a sub-franchise. One of the co-founders of “Optimum” is Kazan businessman Dzhigit Kadagazov, who is also a member of the “GARANTIYA” Association of Arbitration Managers. We may assume that he has the necessary legal experience to uphold the interests of the organization in court. It is possible that the negative streak for “Cofix” in Russia has just begun.