Lavazza accused of throwing franchisees ‘to the wolves'

Martyn Lee takes legal action after failure of master Lavazza Espression franchisee Catalyst Retail and potential loss of £20k refundable deposit.

A Lavazza Espression franchisee who looks set to lose the £20,000+VAT refundable deposit he sank into a Lavazza-branded coffee shop has attacked the Italian parent company after the planned rollout by UK master franchisee Catalyst Retail ground to a halt.

But the deal went sour when the planned openings hit the buffers. Franchisees began demanding refunds of their deposits from Catalyst Retail earlier this year.

Property consultant Cushman & Wakefield subsequently pulled out of a deal to find sites, and major banks withdrew their financial support from individual franchisees.

Catalyst Retail was wound up in the courts this month and a liquidator is set to be appointed. Lavazza Retail is understood to have ended its master franchise agreement back in May.

Lee criticised Lavazza for not taking a stand against Catalyst Retail earlier, and for its treatment of individual franchisees, who he said had been "thrown to the wolves".

He said he was "incensed" that Lavazza owner Giuseppe Lavazza had appeared to dismiss the problems with the Lavazza Espression franchise as "not our core business, it is much more real estate".

Lee said: "I am now out of pocket to the tune of £35,000 in the form of a lost deposit and legal fees expended in the recovery process. There is every indication that this deposit money will never be recovered."

He accused Lavazza of creating a "permissive environment for the failure". He said Lavazza had failed to respond promptly and effectively when problems arose and that the company was not fully co-operating with his legal advisers on issues "of key significance" as he fights the former master franchisee through the legal system.

He added: "Lavazza is now compounding these issues by failing to take responsibility for its actions and honour the refundable aspect of deposits paid to its appointed master franchisee, which are likely lost, and indeed seem to be intent on throwing us to the wolves and re-issuing the master franchise to another party and continuing with its UK rollout as if nothing has happened.

"I feel that their management processes were inadequate, their behaviour towards those that have sustained losses is arbitrary and grossly unfair, their failure to either lead or provide formal support for legal actions against their appointed master franchisee is totally incomprehensible."

He said he would be pursuing his grievances against Lavazza "robustly" now that Catalyst Retail has been wound up.

A Lavazza spokesperson said the company was seeking to employ a new master franchisee next month. "In full compliance with the guidelines laid down for the development of international markets, outlined in Lavazza's 2013-2015 strategic plan (presented in December 2012), Lavazza does not directly manage the Lavazza Espression points of sale. Instead, these are run by master agreements and concessions with specialised operators," the spokesperson said.

"In the UK, Lavazza commissioned a master agreement with Catalyst Retail to expand and roll out the Lavazza Espression café concept. Lavazza now understands, and is treating very seriously the difficulties local franchisees are facing with Catalyst Retail's management of Lavazza Espression. The company is actively engaged in finding a quick and positive solution, ensuring the interests of Catalyst's existing and potential franchisees are taken into account. Lavazza will also take any measure it deems appropriate to preserve the image and reputation of the Lavazza brand.

"The UK's flagship Lavazza Espression café, managed by Harrods, was opened in the department store in December 2010, followed by three Lavazza Espression cafés in airport sites - operated under concession by HMS Host - situated in Belfast City, Dublin International and East Midlands airports.

"The company reaffirms its objective to improve the Lavazza Espression café concept in UK, building on its brand presence and providing UK coffee lovers with a premium and authentic Italian coffee and food experience."

No-one from Catalyst Retail was available for comment.