Reza Solhi Responds to Allegations of Gautam Malik and Jianhua Gua

by Anthony Solhi

Conflict between Franshisers and Franchises is typical of the franchise business. It happens within even the largest companies, despite good faith on all sides. Such a dispute in my company spilled over into the press and eventually into the courts. 25 counts of fraud were brought against me, as well as innocent members of my staff unfortunate to be caught up in this matter.

A simple Google or Yahoo search for my name will produce hundreds of articles about these events. What none of these articles report is that every single charge against me was thrown out of court at the preliminary hearing. Not for lack of evidence. For lack of guilt.

Unfortunately, this bad publicity proved fatal to our company – which had been one of the most successful pizza franchising businesses in Canadian history. Thousands of people lost their jobs and hundreds were ruined in the wake of the disaster.

Gautam Malik and Jianhua Gua

Many of these articles are based upon interviews with the same key players. Two favorite media personalities are Gautam Malik and Jianhua Gua. These names come up time and time again because the two of them (along with Gautam's wife, Nidhi Malik) continue to actively solicit press support for their tale -- telling it over and over and over again.

The nature of the dispute between Gautam Malik and my company is quite different from the claims made in many press reports. In these articles, it is often claimed that the Maliks did not possess a lease or that I was somehow failing to make rent payments on their behalf. Neither is true, and I retain all the paper-work (contracts, invoices and receipts) to show this to be the case (though no reporter has contacted me for comment).

Ironically, it was bad press that prompted the dispute between Gautam Malik and my franchising company. In the wake of this bad publicity, the Maliks feared for the safety of their investment. That fear was quite reasonable. Unfortunately, they sought to walk away from their contractual obligations without penalty though their deposit had long ago been spent securing their store. It was not in my power to do as they demanded.

The facts concerning Jianhua Gua diverge even further from the story often repeated in the papers. Rather than argue the point in a single blog posting, I've written a detailed synopsis of the situation and placed it in a permanent archive online. Those interested in the real story, I invite to consult the information I have made available there. Also available is a more detailed account concerning the dispute with Gautam Malik and Nidhi Malik.

Once I would have thought talking to all sides an essential part of basic reporting. I am no longer so naive. Experience has taught me that in journalism, facts are never allowed to interfere with a good story – and the best stories must always have a compelling villain. The press decided on my guilt and cast me in the role of villain without once soliciting my side of the story.

For more information, see AnthonysFranchiseFACTS.com.

Anthony Solhi Did Not Steal Deposits from his Franchisees

Anthony Solhi Did Not Steal Deposits from his Franchisees

A few years ago, I wanted to purchase a car.

I wasn't sure I would be able to secure the financing but I so desperately wanted to purchase the one car I had in mind that I put down a $1000, non-refundable deposit on the purchase. My deposit showed my good faith to the seller and, in return, he held the vehicle in reserve for me while I investigated my credit situation.

For five months he held that car for me.

During that time, many other buyers approached this seller and offered to buy the car. Each time he would answer, “I am sorry but Reza has put a deposit down on this car and I cannot sell it.” Had he broken our deal, he could have unloaded the car much sooner and gotten his money that much quicker. He could have been earning interest on that money.

But he kept the deal and held the car for me.

Sadly, after five months of trying, I discovered I was unable to secure the credit to buy the vehicle (hardly surprising given that I'd just lost my business, home and previous vehicle to creditors).

Did I then approach the dealer and ask for my deposit back?

Of course not. The deposit was lost. I had received already all the service to which that money entitled me: The reservation of the car for five months.

Did the fact that he kept my deposit make him a thief?

No. Of course not. He was entitled to the money as some compensation for his financial loss.

A deposit is something like an engagement ring: You don't get it back if you leave the bride standing at the alter. You're lucky you're not on the hook for the cost of the wedding!

The deposit acts as an incentive for both buyer and seller to adhere to the terms of their agreement. The seller is encouraged to incur whatever costs are associated with closing the deal (in this case, the cost of storing a vehicle for five months) while the buyer is encouraged to follow through with the full purchase so as not to lose the deposit sum. The deposit is also there to compensate the seller in some small way should the deal not go through.

Because I had a thousand dollars on the line, I worked very hard to secure the financing I needed to buy that car. I was very disappointed when I failed to do so. But the seller received some compensation for his wasted time.

When prospective franchisees placed deposits with my company, they did so under essentially identical terms (though with a lot more lawyering involved). The deposit initiated the complex process of building a pizza franchise location. In most cases, several toll-gates interrupted this building process at which points the franchisee was contractually obliged to pay additional deposit sums. The purpose of these check points was to insure that the deal was still going though and that the franchisee remained committed to the agreement.

This was important because through this entire process, my company was spending far more money on the location than the franchisee ever would. Franchising companies are the principle investors in every franchise location. Our enormous costs are recouped only over years of operation.

At the end of the building phase, when the location is ready, the franchisee is expected to turn over the remainder of the down-payment.

As bad publicity decreased the perceived value of our brand, many of our buyers decided to back out of the deal here at the end of the process. That would have been damaging enough to our company but these persons also wanted their deposits returned.

Many people say to me, “Anthony. Why didn't you just give them their deposits back? Wouldn't that have been easier than facing them in court and adding to the negative publicity?” I say that of course I would have preferred to do that. The problem was that the deposits did not exist. Those monies had been invested in the location.

Few people, who are not themselves entrepreneurial business owners, realize that businesses largely operate on credit. The money sunk into start-up costs for a typical franchisee does not come out of some company cash reserve. It is borrowed by the company from the bank. The bank invests in the future of the company based upon past performance. The company risks the borrowed capital as wisely as possible, with the intention of repaying the loan from profits earned.

In most cases, deposit money was spent almost immediately on costs associated with negotiating the initial deal. But many times that amount was invested by my company to pay architects, designers, builders and installers. None of these folks could give money back to me and compared t that overhead, the deposit fee was pennies.

For more information, see the personal Web Site of Anthony Reza Solhi.

Anthony Reza Solhi: My Life

See: The Personal Web Site of Anthony Reza Solhi

1985. It was the year I graduated high school in Tehran. I had graduated a year early by sacrificing my summer to extended studies. Ironically, had I not done so, I might not have found myself, a few weeks into the new school year, stowed with the luggage in the underbelly of a bus parked at a checkpoint just inside the Turkish border. I might have avoided certain discovery.

I thought of school in that moment. I wondered how my mates on the wrestling team were doing this year. I wished then that I was there with them at school. Such were my thoughts, as the border guard removed from the compartment, the suitcases and traveling bags that surrounded me and kept me safely hidden.

It was the Iran-Iraq war that had led to my situation. My family was determined to keep me out of the conflict. Payments were made to certain nefarious persons and a place for my brother and I was secured in a human smuggling operation.

Things didn't go smoothly.

For a full month, we were kept in safe houses along the Turkish border but we had to dodge armed soldiers and searchlights just to get that far. We spent an entire night up to our necks in swamp water, listening to the sound of machine gun fire rattling in the distance.

For 24 days we waited in an obscure border village, unable to bathe or wash even the clothes we were wearing. Our family heard nothing from us. We had no way to contact them, even if doing so would not have been foolish. As the weeks dragged on, my mother and cousins feared the worst.

But the day finally came when my brother and I boarded a bus bound for the last Turkish checkpoint: Our bus to freedom. A few miles from the customs station, the bus stopped, the bags were removed, and we were stuffed into a space inside, smaller than a coffin.

The ruse, unfortunately, was doomed to fail. After inspecting passenger passports and searching the inside seating, one of the guards demanded the baggage compartment be opened.

From my space behind the luggage, I heard the door crank open and I knew full well it was over for me. One by one, the bags were removed. As each was unloaded, another tiny shaft of light poked through from the outside to our hiding place. The guard was digging his way deeper. The makeshift wall beside us was getting thin.

Then. Unexpectedly. Inches from discovery. He stopped.

A minute went by. I heard voices. Another minute. More talking. Conversation. Two or three more minutes of waiting. Nervously waiting.

And then the bags were being put back in place. The light shining through, faded and then disappeared as the door once again was closed. We were on our way.

Minutes down the road from the customs station, the bus stopped again. The doors were thrown open and we emerged from hiding. The bus driver and passengers gathered round and cheered, congratulating us. We were free!

53 passengers had shared the knowledge of our presence beneath the bus. Not one had sold us out.

I later asked why had the guard stopped, so close to our discovery? The offer of a cigarette had saved us. That simple gesture from our smuggler had been enough to distract the guard from searching further. It was enough to set us free.

* * *

My brother and I, together with our sisters and mother (who left Iran legally to join us), came to Canada some time later. Living in Toronto, I was to get the wish I'd made in those frightening moments beneath the bus on the Turkish border: I was returned to complete a semester of high school at Don Mills Collegiate. It was a good experience though. I met many other Persian kids struggling to learn English and struggling to find their place in a new country. I made many friends. Friends you never forget.

I got my first job at 3161 Eglington Ave. East. $10 a day. Mopping every one of the building's 16 floors. Then it was five dollars an hour on the corner of Dundas and Young, guarding against theft at an electronics store across from the Harvey's restaurant.

I got my big break when a friend of the family put me intouch with the secretary of one of the wealthiest men in the Persian community. I never did get to meet him but his secretary got me my first real, steady job: Bus boy in a fancy restaurant owned by a “Mr. Baha”. But I was so naive, I showed up for work on my first day in vest and bow-tie – and Adidas running shoes.

Even at just five dollars an hour, it wasn't hard to make a lot of money at Mr. Baha's. Not when I was working seven days a week, often from eight or nine A.M. to as late as two o'clock in the morning. But I wasn't spending any of it. I had a plan. A plan I conveyed to Mr. Baha one afternoon while we were out running an errand. As we walked past the Belair Cafe, Mr Baha noticed the interest his busboy had taken in a Ferrari parked by the sidewalk. “Oh you like that car?”, he asked me, wearing a sarcastic smile.

“Yes.” I said. “And one day, I'm going to buy one”.

By 1989, I had managed to save ten thousand dollars. Not to buy a car but to buy a Pizza franchise. A 2 for 1 Pizza outlet. $10,000 was actually less than half of what was needed though. I partnered with a friend who came in for the other twenty thousand but, with a loan, I would buy out his half of the business just three months later (when he realized he didn't want to be a pizza maker).

The 2 for 1 Pizza store eventually became the family business. My mother, sisters, uncle and brother joined me each day, making pizzas and making pizza deliveries. We did well. But I knew we could do better.

* * *

In 1990, I sold the franchise for 20 times what I had initially invested just 15 to 16 months earlier. $200,000 dollars in total. I was a rich man.

But I had plans for that money.

I sold the franchise because I had an idea. An idea for something no one had ever tried before.

In the late 80s, the Buffalo Wings phenomenon was really beginning to take off. The innovation had started just across the U.S. Border in the 1960s and hadn't taken long to spread to Toronto. Many Toronto restaurants were serving the Buffalo-style wings to their sit-down patrons.

A certain chain of restaurants in Canada, specialized in home delivery of rotisserie chicken, was offering wings on its home delivery menu. I noticed that the orders placed for wings far outstripped those for the chicken. There was an obvious market for home delivery of chicken wings.

And I was willing to bet that this market perfectly overlapped the Pizza delivery market.

That was the idea behind Side by Side Pizza and Wings: The first chain of pizza stores ever to offer the pizza and wings combo for home delivery. I opened the chain in late 1990 and leased five stores across the Greater Toronto Area from which I planned to offer home delivery.

Unfortunately, the idea was so new and so radical, city regulators had failed to anticipate that anyone would ever need the combination of equipment to do it. Laws existed on the books for regulating pizza ovens and laws existed on the books for regulating deep fat friars, but no laws existed to cover the combination of the two.

It took me six months to secure the permits just to furnish the kitchens. My stores sat empty while I waited for government regulators to play catch up and they were in no hurry. It wasn't their investment that was on the line. They could afford to take their time.

I couldn't.

By the time the permits were finally in my hand, my entire $200,000 nest egg had dribbled away. I watched the landlords chain up the shops and confiscate my equipment. I declared bankruptcy.

But I didn't quite lose everything.

I negotiated with the landlord at one location and secured just one store, promising, with permit in hand, regular rent checks from that day onward.

I kept my word.

The store made money and I was able to keep up my rent payments.

But of course the store made money! Because the idea was good. I was right about the market. Pizza and wings made the perfect combination and it wasn't long before I was expanding into a second location. Even greater success was to follow with a name change and the opening of a call center. In October of 1991, I officially launched 3 for 1 Pizza and Wings.