Aussie picks through Wizard carcass
Operators of some Wizard Home Loans franchises are being told they must move to a different town and even interstate if they want to take on an Aussie Home Loans franchise as part of the purchase by the latter of the former.GE Capital agreed to sell Wizard to Aussie in late December and Aussie took control of the business two weeks ago. Operators of Wizard franchises now have until late next month to sign a new agreement with Aussie.The operator of the Wizard outlet in Cairns has been told they must set up in another town further south.The same applies to the operator of the Bendigo outlet who could perhaps try their luck in Ballarat since Aussie doesn't have a presence in that regional city.The options border on the comical for the operators of the three Hobart and one Launceston franchises of Wizard. Aussie proposes that these four shift their business across Bass Strait to Victoria.The problem for Aussie and the Wizard franchisees is the overlapping territories of each franchise system.After several attempts at developing a successful and locally-based distribution system Aussie has 31 outlets, though somewhat unevenly located with one third of them in Queensland.Some Aussie outlets, such as the one in the northern Hobart suburb of Moonah, appear to have state-wide rights to market under the Aussie label, and Aussie management appears unwilling to compensate them, or other operators, to enable the amalgamation of two distribution networks.Owners of Wizard franchises are in a bind. GE Money, the owner of the Wizard franchise system, has sold the brand, which Aussie will scrap. The Wizard franchises have also lost access to home loan funding through GE, and any support from GE.While part and parcel of the sale agreement between GE and Aussie, the fact that GE and Aussie are in effect abandoning the Wizard franchise system is generating plenty of heat as the April 28 deadline approaches for Wizard operators to decide whether to sign on with a new owner.Wizard franchises have already lost their brand, marketing support and funding from GE Capital as the US financial giant exits the home loan sector in Australia. Aussie is abandoning the Wizard Home Loans brand as part of the purchase, though it is still aiming to attract as many of the 160 Wizard franchisees as it can. Wizard franchises that signed updated agreements with GE in 2007 and 2008 say they were induced to sign the new agreement on the back of a guaranteed buy back and payout multiple. GE appears to have reneged on this agreement and, where a Wizard franchisee declines to switch to Aussie, plans to pay them only a lower multiple based on their previous agreement.Those that do not cross to Aussie also face threats of legal action by Aussie in a bid to enforce standard non-compete clauses that restrict an operator from working as a home loan broker, or similar, for one year and within five kilometres of their previous marketing territory.Whether the non-compete clause is enforceable