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The 9 per cent VAT rate has been welcomed by restaurants but does the hospitality sector actually need it?<\/p>\nA former Supermac\u2019s franchisee must pay over \u20ac96,000 in damages to the fast food chain over a breach of their franchise agreement, the High Court has ruled.<\/p>\n
Supermac\u2019s Ireland Ltd sued Watchford Ltd, claiming the franchisee was in breach of their agreement arising from unpaid fees. <\/p>\n
Watchford, an entity controlled by couple John and Mary Lyons, formerly operated a Supermac\u2019s franchise at two premises in Limerick \u2013 one on the Ennis Road, and the other at Dooradoyle. The former restaurant opened in 1995, while the latter began trading in 2003.<\/p>\n
Watchford made a counterclaim in the proceedings for overpaid restaurant equipment fees. <\/p>\n
About 60 per cent of Supermac\u2019s restaurants in Ireland are operated by franchisees. Franchisees pay a fee to Supermac\u2019s to benefit from use of the Supermac\u2019s brand, marketing and operational support. The fee is calculated as a percentage of an individual restaurant\u2019s monthly turnover. <\/p>\n
In a judgment published this week, Judge David Keane noted that \u201cperhaps surprisingly\u201d there was no written agreement underpinning the franchise arrangement between Supermac\u2019s and Watchford. <\/p>\n
The 9 per cent VAT rate has been welcomed by restaurants but does the hospitality sector actually need it?<\/p>\n
Both restaurants operated successfully regardless, the judge said, and noted that Watchford recorded an aggregate turnover in excess of \u20ac47 million at the Ennis Road premises between 1995 and 2018.<\/p>\n
The dispute before the court arose from Watchford\u2019s decision, from August 2018, to reduce its monthly payments to Supermac\u2019s from 10 per cent of its turnover to 7 per cent of its turnover at the Ennis Road premises. <\/p>\n
This was in circumstances where Watchford previously asserted the 3 per cent difference was an equipment fee, and was only owed to Supermac\u2019s when the amount paid to Supermac\u2019s cumulatively equalled the value of the restaurant\u2019s fit out and refurbishment works, the judge said. <\/p>\n
In the alternative, the 3 per cent fee was subject to a rebate in the event of payments exceeding the value of the fit out and refurbishments, Watchford claimed. <\/p>\n
Watchford also asserted that agreement to any further fit out or refurbishment of the Ennis Road store was contingent on a waiver of the 3 per cent fee. <\/p>\n
Supermac\u2019s opposed this, and maintained that the appropriate payment was an \u201cundifferentiated\u201d 10 per cent franchise fee.<\/p>\n
Watchford wrote to Supermac\u2019s in August 2018, stating that on account of Supermac\u2019s failure to refurbish the Ennis Road restaurant, Watchford was ceasing the 3 per cent fee payments. <\/p>\n
In July 2019, Supermac\u2019s terminated the Watchford franchises. <\/p>\n
Supermac\u2019s sued, claiming Watchford owed \u20ac106,505.02 in unpaid franchise fees and other related fees. <\/p>\n
Watchford made a counterclaim for \u20ac907,000, arising from what it said were overpayments on equipment fees. <\/p>\n
The judge found that on the balance of probabilities, the correct fee owed by Watchford to Supermac\u2019s was a \u201csingle, undifferentiated franchise fee\u201d of 10 per cent of the monthly turnover. <\/p>\n
The judge said he accepted the evidence of Supermac\u2019s boss Pat McDonagh, \u201cacross all of the restaurant premises it owns\u201d \u2013 which included the Ennis Road store \u2013 \u201cSupermac\u2019s charges a franchise fee of 10 per cent of turnover\u201d. <\/p>\n
At restaurants where Supermac\u2019s does not own the premises, it charges a 6 or 7 per cent franchise fee, according to McDonagh, the judge noted. <\/p>\n
The judge said that while he did not doubt the honesty and sincerity of John Lyons\u2019 belief that the parties agreed to a 7 per cent franchise fee and 3 per cent equipment fee, he said he was \u201cnot persuaded that [Lyons] is correct in that regard\u201d. <\/p>\n
The judge found further the oral franchise agreement between the parties provided that the 10 per cent fee be paid without regard to the costs of works carried out at the Ennis Road premises. <\/p>\n
By unilaterally reducing its payments from 10 per cent to 7 per cent, Watchford breached the agreemeNt between the parties, the judge found. <\/p>\n
The judge also dismissed Watchford\u2019s counterclaim.<\/p>\n
The judge said he would grant judgment to Supermac\u2019s in the sum of \u20ac96,263.84.<\/p>\n","protected":false},"excerpt":{"rendered":"A former Supermac\u2019s franchisee must pay over \u20ac96,000 in damages to the fast food chain over a breach…\n","protected":false},"author":2,"featured_media":528761,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[72,224919,1128,61,60,3405],"class_list":["post-528760","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-england-v-congo-dr-fifa-world-cup-round-of-32-atlanta-stadium-pa2026","tag-football","tag-ie","tag-ireland","tag-soccer"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/528760","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/comments?post=528760"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/posts\/528760\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media\/528761"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/media?parent=528760"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/categories?post=528760"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ie\/wp-json\/wp\/v2\/tags?post=528760"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}