Schoolteacher Sue Riches giving evidence at the banking royal commission.
Schoolteacher Sue Riches giving evidence at the banking royal commission.

Wendy’s store bankrupts teacher

AN ADELAIDE primary school teacher agreed to purchase two Wendy's franchises, only for the Bank of Queensland to put her "between a rock and a hard place" by doubling her monthly interest payments once it was already too late to pull out of the contracts.

Giving evidence before the banking royal commission on Wednesday, Suzanne Riches told how her company was forced into liquidation and she had to sell her property in the coastal town of Normanville after struggling to meet the nearly $9000-a-month repayments.

In 2012, Ms Riches and her husband looked into buying a franchise using inheritance from his mother, settling on two Wendy's outlets in Adelaide's Westfield Marion Shopping Centre.

The commission heard that Ms Riches received conditional approval for a $280,000 business loan, based on the documentation provided by Wendy's about the performance of the two franchises.

"We made an appointment with the branch manager, and I specifically asked him, 'Given the information you've been supplied with and your calculations, are we in a position to be viewed favourably for this loan?'" she said.

"I remember asking two or three times, and specifically saying, 'Will the Bank of Queensland be able to supply a loan for us?' To which he answered, 'Yes.' On the basis of that, I then asked again, 'So I can make an offer on the two Wendy's outlets?'"

Despite being warned by her accountant that the "bottom line profit margin already looks skinny", Ms Riches said she and her husband, who had hospitality experience as a chef and caterer, were confident they could improve on that - so they signed the contracts.

As the settlement date of October 8, 2012 neared, however, numerous phone calls and emails to Bank of Queensland went unanswered. It wasn't until a week after the settlement date, on October 15, that Ms Riches was called into the branch to sign the final letter of offer.

"I was alarmed that the [monthly repayment] amount had doubled from $4400 and the term of repayment was only three years," she said. "[The branch manager] said that was due to the [short] nature of the leases and that was the only way he could get the loan through."

Ms Riches said she "unfortunately" signed the paperwork.

"I felt I was between a rock and a hard place," she said. "The cooling-off period [with Wendy's] had lapsed on October 5 and I had no way to get out of the contract. There were threats of legal implications."


The Wendy’s franchises had ‘thin’ margins.
The Wendy’s franchises had ‘thin’ margins.

Because of the delay in settlement, she said the Wendy's franchises missed out on an estimated $40,000 in revenue over the lucrative school holiday period, putting them "behind the eight-ball" from the beginning and struggling to meet the crippling repayments.

"I tried to make the payments whenever possible, but it was very, very difficult to make those repayments," she said.

Ms Riches said Bank of Queensland had misled her, and that she would have reneged on the franchise agreement had she known.

Ms Riches ceased operating the Wendy's franchise in mid-2015. Her company was placed into liquidation she remortgaged the family house under a deed of forbearance signed with Bank of Queensland. The loans have since been refinanced through ANZ.

Counsel for Bank of Queensland, Noel Hutley SC, told Commissioner Kenneth Hayne that Ms Riches "may well have been inadequately advised by her lawyers and accountants and Wendy's".

"The position of the banks cannot become akin to that of a custodian to the interests of the small business holder, because they need to and should be looking to their own advice," he said. "On the whole they have the intelligence and sophistication to protect their own interests. Obviously the banks can't engage in anything which is sharp practice, misleading conduct or the like, but you are being asked to consider the banks being put in position of some overarching or custodial position."

It comes after the commission heard from former Pie Face franchisee Marion Messih, who lost everything when the business collapsed and Westpac reneged on a repayment plan, taking her property.

On Monday, Westpac was forced to defend its actions after attempting to evict cancer-stricken disability support pensioner Carolyn Flanagan, who was roped into going guarantor for her daughter's failed business loan.

The third round of hearings focusing on small business lending kicked off on Monday and runs for two weeks until June 1. The commission held its first round of public hearings from March 13 to 23, with consumer lending practices under the spotlight. The second round focusing on dodgy financial advice ran from April 16 to 27.

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