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.