2023-11-20 05:00:00
The beer market is experiencing its adolescent crisis in Quebec. Nothing better to illustrate this than the retailer Tite Frette and its numerous bankrupt franchisees, who lost more than $2 million in 18 months.
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“People are drinking less. The industry is in difficulty,” recognizes Karl Magnone, boss of the Granby franchiser.
The businessman knows what he is talking regarding. In 18 months, its network of 53 stores specializing in local microbrewery beer was reduced by half.
Tite Frette is a franchisor that does not own any stores. At least 13 franchisees have gone bankrupt since April 2022, with accumulated debts of $2,057,212.
Ten other store owners have just disaffiliated from the brand.
“I can’t tell you anything,” he immediately replied to Journal one of them, Valérie Lamoureux, from Saint-Jérôme, when we reached her by phone.
Karl Magnone is known in the industry for sending a lot of lawsuits and formal notices, say six sources familiar with the matter.
“I don’t have an easy trigger for formal notices. I sent one and only one,” replies the main person concerned.
He admits to having sent “default notices” – real lawsuits – to franchisees for breach of the franchise contract.
Many bankrupt franchisees – young families, especially – refuse to speak to the media because of the nondisclosure agreement they signed with Tite Frette.
Candy or the way out
This 43% drop in Tite Frette stores – from 53 to 30 – does not come out of nowhere. Quebecers are drinking less since they have suffered inflation.
“My sales dropped by 30%. Before, customers took a 4-pack, now it’s two cans,” says the owner of the ex-Tite Frette de Rosemont, in Montreal.
Philippe Boehm became independent last month when Tite Frette offered everyone to leave the brand.
Philippe Boehm launched a Tite Frette franchise in Rosemont, Montreal, in 2021. He is now going it alone under the name Le Ravitailleur following his disaffiliation from the network. Photo Julien McEvoy
The Granby franchiser’s desire to diversify led it to partner with Sugar Daddy’s candies. The Alsatian, who launched into beer in 2021, did not want to sell candy.
“I’m going to try to diversify into other things,” suggests the owner of Ravitailleur – his new name – who already sells a lot of local food.
At Tite Frette, we think we have found a way to stay afloat with the dual franchise with distinct identities. Candy on one side, beer on the other.
“It brings more customers into the store. Sales increase by at least 50%, the pilot project is a success,” swears Karl Magnone.
A concrete contract
Yes, sales have declined, admits Nicolas Ratthé, of the association of specialized beer retailers of Quebec (DBSQ).
“You have to call a spade a spade. The local market is experiencing an adolescent crisis and will eventually grow,” illustrates the man who also runs the Au Vent du Nord boutique, in Sherbrooke, for 21 years.
But the points of sale of Tite Frette, which is not part of the DBSQ and which has only existed since 2018, have grown like mushrooms, with the pandemic as fertilizer.
Then boom, the return to normal was brutal.
“They sold us dreams with false, unverified figures,” accuse three bankrupt franchisees whose names we will withhold to avoid problems for them.
For example, Tite Frette requires its franchisees to sell products exclusively. “These products often did not sell and must have accounted for 15% of our budget, when in reality, it was more between 22% and 30%,” says a former franchisee.
The average debt of the 13 franchisees in bankruptcy reached $158,000.
The franchisor asks for at least $25,000 – or even much more – to open a store. The sale is made through a 100-page contract.
The newspaper viewed a copy of the document.
When a franchisee goes bankrupt with debts of $424,546, as is the case in Mont-Saint-Hilaire, Tite Frette can still claim $25,000 from him for breach of contract.
This is what we read in the article on the effects of the end of the contract. The company has also requested it from many bankrupt franchisees, which has had the gift of raising their ire.
In another article, we note that there is no limit set to the franchisee’s deposit: he is personally responsible to the franchisor. Even if the franchisee is a corporation with a separate legal personality from the entrepreneur who purchased the franchise, that entrepreneur becomes responsible for all of the franchisee’s obligations.
It is even planned that in the event of bankruptcy of the franchisee, the guarantor will become the new franchisee. It is also expected that the guarantor will be responsible for future commitments made by the franchisee (renewal or amendments to the contract).
8% of sales
When sales began to fall, in 2022, Tite Frette hired Gildor Roy and Michel Barette at a high price as spokespersons.
Franchisees, who had to give 8% of their sales to the franchisor, then fell like flies.
As soon as someone made a negative comment on social networks, Karl Magnone sent a request for removal under penalty of prosecution, say our six sources.
“No. It happened once, a very long time ago,” says the chef of Tite Frette.
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