14/11/2017
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FRAUDULENT FRANCHISOR - ADEGA RESTAURANTS CC -
OWNED BY: LUIS FILIPE DA SILVA FERREIRA / ABDULLAH MUHAMMAD ALI AWADH (also owns MKA TRUCKING)
REPRESENTED BY: DEVON PATHER / KEN LINDEBOOM / AMILCAR MAARTENS / EDUARDO PENALVA SANTOS / RAYMOND DONALDSON
- FRANCHISE SCAM ALONG WITH GLOBAL BUSINESS BROKERS SA -
REPRESENTED BY: MICHAEL GARY HAZAN / MANDY HAZAN
OWNED BY: RAEL ZIMERMAN
I intended getting into a franchise agreement, and there was a solicitation to enter into such agreement by the franchisor (Luis Filipe Da Silva Ferreira), with Adega Restaurants cc (hereinafter referred to as 'Adega').
When I initially contacted Adega, it was via an advert I saw on Gumtree.co.za that was placed by some 'Global Business Brokers SA'. The advert was for an Adega Express store at Ballito Junction which was advertised to me as a 198m2 store as a turnkey solution for R1.6m (including rentaldeposits/council deposits/franchise fees/stock). I requested documents, they forwarded some of the requested documents after asking me to sign a pre-franchise agreement and paying R50000 (NOTE: The signed pre-franchise agreement that they supposed to sign and return to me was signed by an unauthorised person. No resolution was provided granting signing powers to that person, and the alterations to the document was not signed for anyway which renders the document null and void). . The mall's layout plan showed the store as 120m2 (differs from advert), and the setup cost sheet that the broker sent to me on behalf of Adega Restaurants cc displayed a total of R1.74m (another misleading aspect of the presented deal). However, they tried to justify the reasons for that, and I decided to proceed. They then advised that Ballito Junction is not available, they do not have a store reserved there. Adega Restaurants cc together with Global Business Brokers SA then offered me a store at the new Cornubia Mall which was getting constructed at the time, and introduced me to the Landlord/landlord's agents, whom they had made prior arrangements with in terms of a site at the mall. The cost of the Cornubia Adega Express Store was presented to me at the same cost (R1.74m) for a turnkey solution.
I accepted and proceeded to select the appropriate site together with Adega Restaurants cc's approval, and went ahead with signing an Offer To Lease upon their advice to do so.
After that was done, I applied for finance with ABSA using the financial information presented to me by Adega (Adega provided costings and financial projections, etc as it is a franchisor's responsibility to do due diligence for a particular site). The investment seemed viable to me based on the investment cost and the projected returns presented to me by Adega, and their advice of other stores with a similar investment/financial history. My bank also considered it viable based on the same information.
(Note that they hadn't sent me a disclosure document with a draft or final franchise agreement although it was already 3 months passed from the signing of the pre-franchise agreement, despite me requesting for the document for my finance application. The franchisor has a legal obligation to provide such document within a prescribed timeframe according to the Consumer Protection Act).
After receiving an approval letter from the bank, I followed up quite often requesting guidance on what my responsibility would be to get the store ready as I didn't want any delays in opening otherwise I would be liable to pay penalties to the Landlord (the owners words at one stage were 'you don't have to do anything, just go home and relax').
It was supposed to be a turnkey solution but I wanted to actively monitor the progress, so I asked Adega for equipment lists that I can get quotes on, and requested the quotations that they had received so far (had asked them since 25/07/2017) since we had limited time to get the store ready (store was to open on 28/09/2017 and it would take 6 weeks to setup from start to finish). After numerous messages, emails, calls, I hadn’t received a final list of equipment items that I would need to order, and neither did they provide me with an equipment list specific to my store (specs/dimensions/type/quantity,etc). They were aware that I had sourced suppliers for the same (after they failed to act in time and couldn't suggest reputable and local suppliers). The supplier (Bidfood) had also failed to obtain final confirmation from Adega in terms of their requirements, despite numerous communications back and forth. The supplier requested a meeting with Luis Ferreira since Adega didn't have a local representative/project manager to discuss the equipment requirements. I called Luis on the 14th September 2017, and he advised that he would come to Durban from Johannesburg on the 16th September 2017 to meet with the supplier and resolve/finalise. However, in the same call, he spoke to the Equipment Manager from Bidfood and never spoke about meeting him but instead insisted that he would call him back later that day to discuss everything telephonically. (He didn't call the supplier, and didn't show up in Durban on the 16th September 2017).
Since the beginning of August 2017, I had also asked them to arrange for the contractors quotes (gas,building,plumbing,electrical,tiling,ceilings,point of sale,cctv,etc) which they failed to send/delayed in sending me the same, until I engaged with local contractors on my own to quote on works, due to desperation to get the store ready to avoid penalties being charged by the mall for not having the store ready for the opening day of 28th September 2017. My contractor experienced difficulty in getting finalised building plans for +/-3 weeks, and no proper schedule of the store finishes were provided in order for my contractor to go ahead with quoting/carrying out any works. The architects always didn't have final answers, and the franchisor always said that they would 'finalise it and send today', etc. The delays were caused by Adega. Once the plans were approved by the mall management, Luis Ferreira kept on making changes to it so it had to go back and forth for approvals, and they always made mistakes and had to correct, which they didn't do timeously.
After failing to get proper communication from Adega and their architects, and due to the fact that they never had a project manager on site to advise the contractors on their requirements, I demanded an urgent meeting with Adega's architect and for a project manager. Adega confirmed that I should call a meeting with all service providers/contractors at 9am on the 12th September 2017 at the store. I called the architect at 08:52am and he advised that he is still on his way to the airport to check for available flights (at Johannesburg!!!) but mentioned that Luis Ferreira will attend in the meantime until he reaches Durban (when did he expect to reach?). All parties except Adega were present at the meeting at 9am. Adega (Luis Ferreira and an employee who started working for Adega a week before that) only rocked up at 10:40am, and were stuck at the construction site office of the main contractor of the mall due to not having PPE (they did the same at the previous meeting). Once they finally arrived at the meeting, Luis had an attitude with some of the service providers about the way in which they wanted to do certain things (the mall had certain requirements/standards that needed to be met, which the service providers were trying to comply with. However, Luis wanted things done his way which would not be compliant with the mall's and municipal requirements). He also made changes to the landlord approved plans on site with a pen while going through it with the contractors. No final set of approved plans were received afterwards. He also chose finishes (tiles/counter tops/ceiling design/lighting/etc) that were extremely costly than what was budgeted for.
I had been following up with Luis Ferreira and Devon Pather, including the architect they appointed (Amilcar Maartens of The Creative Axis Architects), regarding all the issues but never could get any final decision from anyone. They all just seemed to keep on passing responsibility to the next person, or act as though they're working on the matter with no proper action being taken thereafter (that's if they finally take your calls).
Adega had not appointed a project manager on site for this project, yet they claim that they have (They claimed that Luis Ferreira, Devon Pather, Amilcar Maartens were managing the project..from Jhb. You can't manage a construction project without being there. Adega has only been to site on the day when the mall handed over the keys to me but also left before the formalities were done, and once more after I put pressure on them to meet with contractors I’ve had to source). They have put in no effort at all, although they were very much ready to present me with an invoice a day after I received my approval letter from the bank (before the bank could even get documents signed), for the amount of R380 000, and insinuated that the project would only continue upon receipt of funds in their account. Even at that point, no mention/effort was made in providing me with a disclosure document/franchise agreement, which was already requested from them a few times before. However, I was forced to effect payment expecting continuation of my project without any interruption/delays, as that’s how they had demanded it from me. They mentioned that I need to settle the invoice to continue with the project.
Furthermore, after I have had to find suppliers (after they failed to provide me with final quotes from local contractors which was supposed to meet their estimated costings), the quotes I obtained (based on Adega's specifications/communication with all suppliers) have added up to more than what I was told it would cost (this was due to the expensive finishes they demanded and underestimation of most of the costs). Even the suppliers they managed to find were even more expensive for certain things and weren't based locally/weren't compliant with the mall's/municipal requirements.
For example:
1. Adega's building estimate: R358 000 Contractor's estimate: R829 000. Adega still expected to add on to the scope of works, thereby increasing the cost.
2. Gas Line Installation - not provided for in Adega's estimate. However, it was costing around R14 000.
3. Adega's kitchen equipment including cold room, freezer room and extraction canopy estimate: R501 000 Supplier's estimate: R610 000 (could not be finalised as they still didn't confirm a few items, which means it would cost more).
4. Landlord's additional work done according to Adega specifications: R270 000 invoice received for extraction plant, waterproofing, etc. This is not the final cost as Adega had requested more work to be done at my cost.
5. Adega's Furniture estimate: R30 000 Supplier's estimate: R40 000.
All of these amounts, together with what I paid to Adega plus what I would need for stock, computer systems, lcd screens for menus, signage, cctv, council deposits, licences, telephone/internet line, wages/salaries, rental deposit, rental, insurance, etc would mean that there was a shortfall of +/- R1 250 000. This amount excludes penalties that the Landlord would charge due to the store not opening for trade on 28 September 2017 as per the lease agreement, since Adega failed to make use of the beneficial occupation period to get the store ready. Penalties as per the lease are in excess of R120 000 per month (R160 000 for the 1st month).
The franchisor didn't seem bothered that costs are higher than they presented to us, as he tried to make it seem as a joke by making certain immature/unprofessional comments (When I met and spoke to Luis Filipe Da Silva Ferreira on the 12th of September 2017 about the shortfall, his exact words were “I see you paid me in full though, so now i don’t have to worry about your store”, and “you’re driving an expensive car, you got lots of money”, and “sell the tyres of your car and you’ll have enough money to set up the store”. Although i thought that he said it in a joking way, it has now been proven that those were his actual thoughts and intentions. These issues, as well as his response to my query about “Global Business Brokers SA” led me to believe that Adega Restaurants cc does not operate in an ethical and lawful manner, and this reinforced my decision to retract from the deal). It seems as though he knowingly presented misleading information just to attract an investor to his brand and to make the investment attractive for banks to approve any finance applications. This obviously means that the franchisor mislead me and my bank with regard to the costs of the franchise as we made our investment based on the cost of the investment vs the projected returns presented to us by Adega. Therefore, I had decided to stop all works with the project and contacted an attorney to advise further.
After discussing all these issues with the Landlord (senior management), they were disappointed at Adega Restaurants cc’s unprofessionalism as they had previously given Luis Filipe Da Silva Ferreira an ultimatum to get the store ready for the opening day, after I had sent them an email with the issues I was facing, which Luis Filipe Da Silva Ferreira failed to act upon. They suggested that Adega Restaurants cc take over the store as a corporate store and relieve me of the responsibilities of the lease (including all costs suffered/to be suffered by me). They clearly stated at the meeting that should Adega Restaurant cc refuse to take responsibility, the Landlord will not consider doing business with the Adega brand in future. My attorneys then contacted Luis Filipe Da Silva Ferreira and sent a letter to Adega Restaurants cc to offer them to meet with the Landlord to discuss the way forward in that regard, which they ignored. It should be noted that Adega Restaurants cc had by this time stealthily engaged the services of “Global Business Brokers SA” to advertise the Cornubia store on Gumtree for an amount of R3.6m, a store which they initially presented to me at a cost of R1.74m. (all this done without any communication to me/my attorneys and without responding to my attorney’s correspondence).
My attorney advised that in terms of the Consumer Protection Act, they were not supposed to demand the R380 000 from me prior to providing a proper disclosure document and franchise agreement, and only upon signing that would I be liable for any of the costs. They requested a disclosure document and franchise agreement from Adega and was provided with an incomplete document which was not specific to my store, and one that is not compliant with regulations for such documents. After that, the attorney informed Adega of my intention not to proceed with the franchise and that they would have to refund my monies that were prematurely paid over to Adega. They were also offered the opportunity to take over the store as a corporate owned store as was suggested by the landlord since I had signed a 5 year lease for the store. They were then sent a final demand for my money to be refunded. We have not received any response from Adega and neither have they expressed any intention to refund my money.
After I retracted from the deal, I investigated and found out that Luis Filipe Da Silva Ferreira only owns 25% of Adega Restaurants cc, and 75% is owned by an Abdullah Muhammad Ali Awadh. This was not mentioned to me previously and even some of Adega's Franchisees are unaware of it. However, I managed to trace his contact details and contacted him with the hope that he is unaware of the facts of the matter and would assist in resolving without the need to proceed further, since he owns majority of the business and since his name/brand is at stake. He was supposed to meet and discuss with Luis and attempt to resolve but didn't contact me afterwards. This can only mean that Adega and its members/representatives do not intend on paying back my money, as they were afforded such an opportunity prior to taking the matter further, which they blatantly ignored.
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FURTHER NOTE:
1. During my meetings with Adega Restaurants cc, as it was my first venture in the food industry, i asked a question as to how do i get approved for Halaal. Adega Restaurants cc’s representative advised that i will need to have a Muslim manager. He also mentioned that, in some of the stores, they pretend as though the Muslim manager is out for the day/during the SANHA inspection time, even though the store would not have a Muslim manager. He also mentioned that food items need to be purchased from Halaal certified suppliers. However, he did mention that they don’t always comply with that due to price/preference. He mentioned that just a few items are purchased from Halaal suppliers just to maintain their Halaal status although majority of stock is purchased from other suppliers regardless of their Halaal status (exact words were “for example, we’ll buy 1 box of prawns from a Halaal supplier for the week, and the rest from other suppliers so that when the SANHA inspectors come over, we just show them ‘that’ box of prawns and the invoice will prove that its from a Halaal supplier”). Although i am not Muslim, this seemed very unethical and unprofessional to me, and i am sure the entire Muslim community would agree.
2. Besides the above issues related to the store, after the signing of the pre-franchise agreement earlier this year and after I initiated my finance application process, I received a call from Michael Gary Hazan of Global Business Brokers SA, the business broker whom Adega Restaurants cc had appointed to find them franchisees. His reason for the call was to follow up on payment of broker fees (I did not engage his services. It was Adega Restaurants cc who appointed him. There was no mention of any amount I would have to pay for responding to an advert placed by them). He emailed me a document titled 'Securing Deposit' for R50 000 (a securing deposit is paid when purchasing a business, and those funds go as payment towards the sale price of the business if the sale is successful. It is not a term used to collect brokerage fees as in the way this broker states). He told me that this fee is included in the costing estimate from Adega Restaurants cc. I did not see that mentioned anywhere in the estimate so I contacted Adega Restaurant cc's representative (Devon Pather) regarding the same. Adega Restaurants cc's representative advised that the amount is not included in their costing but I will have to pay it because “that is what our contract” with the broker entails. On the 12th September 2017, when I met the owner of Adega Restaurants cc (Luis Filipe Da Silva Ferreira), I asked him the same, and told him that's not how the business brokerage business operates (it is always the seller who pays the broker, unless the buyer engages the services of the broker to find a suitable business and a fee for the same is decided and signed for upfront). His response was “that is the contractual agreement that I have with Global Business Brokers. All the franchisees will pay a success fee”. I told him that, that is the wrong way as he cannot agree to something on behalf of franchisees without informing them/getting their approval first. It is unethical of them to do that. I assume that they are aware that it is illegal to do that, hence they used the term “Securing Deposit” so that they can manipulate the issue should anyone take them to task regarding that. This proves that Adega Restaurants cc is unethical and unlawful in the way it conducts its business activities as i have also received legal advice on this issue from my attorney, as well as senior management of the International Business Broker’s Association, and they all confirmed that this is a scam. I have also sent details of the incident/the broker/the company name used to the Estate Agency Affairs Board of South Africa (EAAB) for future reference and investigation.
https://www.hellopeter.com/adega/reviews/fraudulent-franchisor-adega-restaurants-cc-luis-filipe-da-silva-ferreiraabdullah-muhammad-ali-awadhdevon-pather-franchise-scam-along-with-global-business-brokers-sa-michael-gary-hazan-mandy-hazan-rael-zimerman-2385520
