Consumers generally aren’t privy to the business arrangements of companies. They see a big brand, which has been around for years, and invest their trust – and money – in it, believing they’re in safe hands should anything go wrong.
As many discover, when things go wrong they involve the company’s doors closing, without them getting what they paid for – in terms of a franchise agreement, each “branch” is, in fact, a privately run company.
And there won’t be any compensation or refunds coming from “head office”, the franchisor.
This was the case with the sudden closure of Harvey World Travel in Gateway, uMhlanga, a few weeks ago.
The franchisor, having investigated several complaints, contacted franchisee Guy Stringer of Stringer Travel cc – who had traded as Harvey World Travel Umhlanga Gateway since 2007, and informed him that his franchise agreement was cancelled and ordered him to close shop.
This he did, leaving his many clients – who had paid him for flights, tours and hotel accommodation, both local and overseas, but had yet to be issued their vouchers – to get a letter from his attorney, informing them of “this unfortunate situation”.
The attorney said in the letter that Stringer “has every intention of paying back the money he owes you” by selling his home, and his wife her business, but that the funds might be available only by the end of April.
“I suggest that you bear with Mr Stringer until he is in a position to pay you,” he wrote. “Your kind consideration here will be greatly appreciated.”
Most were feeling rather short of kind consideration for Stringer at that point, having discovered that he had failed to pay the respective airlines and hotels for the bookings – as he had claimed to have done – so the bookings had fallen away, and, of course, the rates and airfares have since gone up. (See sidebar.)
Some sought help – and a refund – from Harvey World Travel’s head office in Johannesburg. That’s when they discovered how the franchise business model works.
Harvey World Travel managing director Rosemary Moss said Stringer’s franchise agreement was terminated on January 22, when head office investigations revealed fraud at the franchise.
Moss said in a letter to the victims, of whom 25 have come forward so far: “The individual business owner remains liable and accountable for all transactions and business activity.”
She encouraged them to seek legal advice and apply to their banks for chargeback.
Credit card companies worldwide offer this consumer protection, in terms of which the consumer’s bank, at the consumer’s request, approaches the merchant’s bank to return funds, on the basis of lack of delivery.
But it applies only to those who used their credit cards to make payments – about 90 percent of the victims in this case, Moss said.
“I have been in contact with Standard Bank, the merchant acquirer (Stringer’s bank). And we have advised all customers paying by credit card to follow the normal dispute procedures. This would fall under the ‘goods and services not received’ category.”
But what about those who paid by electronic funds transfer, and thus cannot seek chargeback?
“Harvey World Travel will never turn its back on customers,” Moss said.
“And to this end, as soon as we have completed further investigation, means will be sought to assist customers in recovering their money from the franchisee.”
But the bottom line remains that the franchisor, thanks to the franchise agreement, is not responsible for the business affairs of the franchisees, nor accountable to their customers.
The franchisees are independent business operators – separate legal entities – and, in this case, the victims did business with Stringer Travel, not Harvey World Travel.
“Franchisors are not responsible for the day-to-day running of private businesses, even though they may carry the brand; thus liabilities and manner of conduct rest solely with the franchisee.”
But Moss did say Harvey World Travel – the franchisor – was in the process of “lodging a criminal complaint against the respective individuals”.
I asked Moss the question many of the victims had posed to me: “Why support an established, nationwide brand if you’re on your own should the franchisee turn rogue?”
She said: “Harvey World Travel is globally recognised as one of the leading franchise brands in the travel industry, with a blueprint of service excellence, and depth and breadth of knowledge and experience.
“(It) started its franchise operation in South Africa in 1997 and this is the first fraud-related incident that has affected the brand.”
She said the biggest advantage for consumers of doing business with a major travel brand was “the buying power we have to negotiate the best possible deals available to travellers in South Africa”.
Just realise that if that franchisee disappears with your money, you have no claim against the franchisor.
Best advice: pay by credit card, and keep all your documentation, so that you can apply for chargeback if you don’t get what you have paid for.
Travel agency not a member of industry body
What about a regulatory body for the travel industry?
There is one – the Association of South African Travel Agents (Asata), and membership is voluntary.
Interestingly, only the Harvey World Travel franchisor is a member. HWT Gateway was not, said Asata executive officer Otto de Vries.
HWT managing director Rosemary Moss said that while the franchisor encouraged its franchisees to join Asata, membership of any voluntary organisation “doesn’t necessarily guarantee greater consumer protection”.
“Asata’s financial controls and the potential protection that consumers may derive as a result are not the overriding reason why we encourage our franchisees to join Asata.
“The primary reason we do so is so that they can derive the many benefits the organisation offers, including foreign affairs updates and ongoing negotiation with consulates.”
The franchisor required its franchisees to meet far more stringent financial criteria than Asata imposed, she said.
Credit card clients get chargeback
A few days before Christmas, Thareshnee Govender and her husband paid Harvey World Travel, Gateway, R50 000 for a holiday in Europe, to take place in late June, and got what they thought was a booking confirmation.
They have since discovered that none of their bookings were paid for and have fallen away.
They have successfully applied for chargeback with their bank, Standard, but they are going to have to find an extra R11 000 to rebook their flights, alone.
The cruise liner left Durban last week – without her, the Naidoos having discovered that HWT Gateway had not paid for the booking.
The Naidoos applied to their bank, Absa, for chargeback, but received an e-mail from the bank’s disputes department, rejecting the claim.
“We advise you to address the matter directly with the merchant concerned, in order to obtain a credit voucher,” the e-mail said.
I then raised the case with Absa’s media department.
The following day I received an e-mail from Naidoo, saying he had been contacted by a bank representative who said the chargeback would be done that afternoon.
The booking was “finalised” in early November, but no vouchers were issued. The travel consultant constantly said: “I will contact you when they arrive.” They never did, no one contacted her, and then she discovered the agency had closed.
Unfortunately, those who paid by EFT cannot claim chargeback.