For Deb and Bryan Houlahan, life had already dealt them some devastating blows.
In a tragic accident, a semi-trailer slammed into the family car, leaving Deb with severe injuries including the loss of a transplanted kidney. Though her husband and two young daughters emerged physically unscathed, Deb would face yet another trial in 2017 when she was diagnosed with cancer.
The couple received a $754,000 compensation payout from the accident, funds they hoped would help secure their family’s future.
In 2019, they came across V.I.P., a company that markets itself as Australia’s first home services franchise. Established in 1979, V.I.P. claims to have over 1000 franchises across Australasia, including gardening and landscaping services.
For the Houlahans, a franchise seemed like the perfect opportunity. Bryan could have the flexibility to take Deb to her numerous medical appointments and treatments.
‘We never expected to become millionaires,’ Deb told a news outlet, ‘but after talking with V.I.P. we did expect to earn an average income that would sufficiently supplement payments from the payout.’
However, their franchise dream soon turned into a financial nightmare. The couple initially paid tens of thousands for a seven-year franchise in 2019. But costs quickly escalated as they had to replace equipment and discovered the client list they had paid for was essentially worthless.
‘By the time we had sorted out which clients belonged to which contact details we found that the clients had moved on to other maintenance companies, so we had paid for nothing,’ Deb claimed.
In 2020, the couple doubled down, purchasing a second V.I.P. franchise for Bryan’s brother to operate. But neither franchise turned a profit, and the Houlahans found themselves dipping into their accident compensation to stay afloat. Over three years, they estimate spending $200,000 of their payout funds on franchise fees, expenses, and supporting themselves and Bryan’s brother.
Sadly, when Bryan’s brother passed away in 2021, they were forced to close his franchise at a loss. By then, their financial situation was spiralling out of control. Unable to afford the $734 monthly franchise fees, their debt to V.I.P. ballooned to over $7,000, though Deb claims they were told they could defer payments until business improved.
The final straw came in December 2022, when their work vehicle broke down and they had to hire a replacement at $1000 for two weeks. Without sufficient income, they could barely afford to put food on the table. Bryan informed V.I.P. that he was shutting down the failing business, believing he had permission to do so.
However, V.I.P. has continued to pursue them for the unpaid debt, which has now escalated to $21,000 with additional fees and damages. The company claims the couple abandoned the franchise without approval. For the Houlahans, now in their late 50s, the failed venture has shattered their hopes for financial security.
‘It has totally ruined us,’ said Deb. ‘Before this happened we could have bought a house and had a secure future for ourselves and our children.’
Their story is a cautionary tale for anyone considering buying into a franchise business. While franchises can offer the allure of being your own boss with a proven business model, they also come with significant risks and costs that can be financially devastating if the business struggles.
Before taking the leap, it’s crucial to thoroughly research the franchisor and speak with current and former franchisees about their experiences. Carefully review the franchise disclosure document, which outlines the fees, restrictions, territory and other key details. Understand your obligations and have a clear picture of the total investment required, including royalties, marketing fees and other ongoing costs.
Look for warning signs like high turnover rates, territories that are too small or poor franchisor support and training. Most importantly, don’t let the dream of entrepreneurship cloud your judgment. Take a hard look at the numbers and your own financial situation to determine if you can realistically handle the risks and survive the ramp-up period as the business gets established.
For the Houlahans, their franchise experience has left them in financial ruin, with a precarious future ahead.
‘I now have to get a second job for us to just make it through each week when I am not in any condition to work at all and our retirement prospects are bleak at best,’ said Deb.
As they face the possibility of legal action from V.I.P., it’s an ordeal they never imagined when they first bought into the business that promised so much. Their hard-learned lesson serves as a warning to us all to tread carefully and eyes wide open to any franchise opportunity.
