"Fear Stalks the Market"

The diagnosis of the banking pandemic may be clearer, but the prognosis remains wholly uncertain.

In the UK, investors in Barlcays and Lloyds are betting that the government will have to step in to nationalise the institutions, while in Ireland, mandarins have been talking up the strength of the two main players – Bank of Ireland and Allied Irish Banks, as they stress that no moves will be made to bring the pair into public ownership.

Their current share prices “are not indicative”, according to Irish Central Bank governor John Hurley, of their true health, who also said today in Dublin that “fear stalks the market”.

But the banks still have to be shifted to the MRI scanner to obtain deep insight. Until they lay their cards on the table, investors can’t take Hurley’s view as gospel, even if it is actually true.

Last summer, speaking to journalists following Bank of Ireland’s AGM in Dublin, now outgoing chief executive Brian Goggin brushed aside suggestions that the blame for the on-going collapse of the domestic property market should be laid squarely at the feet of Ireland’s banks.

He “completely and utterly” rejected the notion.

His objections would hardly convince a jury.

The property rollercoaster had been fuelled by the banks: cheap finance and a too-cosy relationship with property developers were important ingredients in the boom.

So too, the laissez-faire attitude of the government, whose coffers were swelled by property taxes that fuelled its public spending spree. The government, said one leading Irish economist recently, should have been taxing mortgages to cool the market, not offering borrowers tax relief. It should also have been patently obvious that its over-reliance of property-related taxes was a highly dangerous strategy.

And as Anglo Irish Bank, the poster-boy institution for the boom years, heads for nationalisation, the true extent of the fallout won’t be clear for some time.

And even at Anglo, where new chairman Donal O’Connor is now navigating a course through the rapids without even a paddle, plenty of more nasty surprises could lay in wait.

But O’Connor, a former managing partner at PriceWaterhouseCoopers, may already have some insight in that regard.

He replaced Sean FitzPatrick before Christmas following the revelation that his predecessor had hidden €87m in loans from auditors.

O’Connor and FitzPatrick had been firm acquaintances. Mr FitzPatrick recounted to the UK’s Daily Telegraph back in 2002 how he and his wife Triona had spent one of their recent evenings attending a play in Dublin with O’Connor and his wife, Vera.

No doubt FitzPatrick tried to imbue O’Connor with some insight into Anglo Irish Bank.

Maybe he just didn’t listen.

http://www.telegraph.co.uk/finance/2835628/Early-starts-and-busy-days-achieve-the-right-results.html

http://online.wsj.com/article/BT-CO-20090121-708628.html

http://www.rte.ie/business/2009/0121/financial.html

Do you want fries with that?

As with running any new business, operating a franchise is never straightforward.

You don’t have to tell that to dozens of O’Briens Irish Sandwich Bar franchisees. A number of years ago they felt, well, disenfranchised, by their parent firm, which was established by the gregarious Brody Sweeney (who ran at the last election as a Fine Gael TD in Dublin North East, but failed to get elected).

About 40 of the franchisees were irate that O’Briens intended to link rents to store turnover – paying more rent, the better their businesses performed. They were also miffed at what they perceived was a lack of brand marketing. So incensed were they, that legal action was threatened. They were ultimately placated, as Sweeney and his crew worked hard to win back their trust.

While a perception that enough money isn’t being directed towards marketing your franchise may be bad, even worse the scenario in Australia.

The Sydney Morning Herald reports that a number of franchisees with different firms are alleging that those companies have sometimes been selling franchises knowing that the businesses will probably fail due to poor locations.

“Each time the franchisee spends up to $450,000 buying what he or she believes is a viable business and ends up paying another agreed amount (usually about $50,000) to the franchisor for marketing fees,” says Kristen Le Mesurier in the SMH.

The franchisor sits back and watches the business fold, alleges Le Mesurier, then reclaims the site for a nominal price and resells it to another franchisee who inevitably fails a year or two down the track. The business failures are blamed on a lack of ability on the franchisee’s part, rather than on a poor location.

The alleged practice has finally perked up the ears of the Australian Competition and Consumer Commission, which is apparently investigating the claims, which are being firmly denied by franchisors.

Among the businesses at whom the finger is being pointed is Howards Storage World, a chain that sells everything from fridges to bookshelves, although there's no proof the company has engaged in anything untoward.

Earlier this year, it emerged that a former business development manager at Bank of Ireland Private Banking, Olive Donovan, had secured the master franchise for Howards Storage in Ireland and that eventually 25 of the stores could open on the island. Donovan reportedly spotted the chain while visiting a relative in Perth.

Steeled, no doubt, with enviable business acumen, Donovan will certainly have cut a sharp deal and will make an assured play to make sure the Howard’s Storage outlets here are in prime locations to serve householders whose homes are bursting at the seams. A few rattled Ozzie franchisees are surely unlikely to deflect her, are they?

http://smallbusiness.smh.com.au/growing/management/major-franchise-brands-accused-900007700.html