The beer market in Quebec is experiencing its youth crisis. Nothing can illustrate this better than retailer Tite Frette and its numerous bankrupt franchisees, which have lost more than $2 million in 18 months.
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“People are drinking less. “The industry is in trouble,” says Karl Magnone, head of the Granby franchisor.
The businessman knows what he is talking about. Within 18 months, the network of 53 branches specializing in local microbrewery beer was reduced by half.
Tite Frette is a franchisor that does not own stores. At least 13 franchisees have gone bankrupt since April 2022, with accumulated debts totaling $2,057,212.
Ten other shop owners have just parted ways with the brand.
“I can’t tell you anything,” one of them, Valérie Lamoureux from Saint-Jérôme, immediately replied to the Journal when we reached her by phone.
Karl Magnone is known in the industry for issuing many lawsuits and formal notices, six sources familiar with the matter said.
“I don’t have an easy trigger for formal communications. I only sent one,” replies the main person concerned.
He admits to sending “default notices” – actual lawsuits – to franchisees for violating the franchise agreement.
Many bankrupt franchisees – especially young families – refuse to speak to the media because they have signed a non-disclosure agreement with Tite Frette.
Candy or the way out
This 43% decline in Tite Frette stores – from 53 to 30 – is no coincidence. Quebecers are drinking less as they suffer from inflation.
“My sales fell by 30%. Customers used to take a four-pack, now it’s two cans,” says the owner of the former Tite Frette de Rosemont in Montreal.
Philippe Boehm became independent last month when Tite Frette offered everyone to leave the brand.
Philippe Boehm started a Tite-Frette franchise in Rosemont, Montreal in 2021. After leaving the network, he now does it alone under the name Le Ravitailleur. Photo Julien McEvoy
The Granby franchisor’s desire to diversify led him to partner with Sugar Daddy’s Candies. The Alsatian, who entered the beer business in 2021, didn’t want to sell sweets.
“I’ll try to focus on other things,” suggests the owner of Ravitailleur – his new name – which already sells a lot of local food.
At Tite Frette we believe we have found a way to stay afloat with the dual franchise with different identities. Sweets on one side, beer on the other.
“It brings more customers into the store. Increase in sales by at least 50%, the pilot project is a success,” swears Karl Magnone.
A concrete contract
Yes, sales have fallen, admits Nicolas Ratthé of the Federation of Specialist Beer Traders of Quebec (DBSQ).
“You have to call everything by its name. The local market is in a youth crisis and will grow at some point,” explains the man who has also run the Au Vent du Nord boutique in Sherbrooke for 21 years.
But the outlets of Tite Frette, which is not part of the DBSQ and has only existed since 2018, have grown like mushrooms, with the pandemic as fertilizer.
Then boom, the return to normality was brutal.
“They sold us dreams with false, unconfirmed numbers,” charge three bankrupt franchisees whose names we are keeping secret to save them trouble.
Tite Frette, for example, requires its franchisees to only sell products. “These products often didn’t sell and were probably 15% of our budget, when in reality it was more like 22-30%,” says a former franchisee.
The average debt of the 13 insolvent franchisees was $158,000.
The franchisor charges at least $25,000 – or even much more – to open a store. The sale takes place via a 100-page contract.
The Journal has viewed a copy of the document.
If a franchisee goes bankrupt with $424,546 in debt, as is the case in Mont-Saint-Hilaire, Tite Frette can still claim $25,000 from them for breach of contract.
We read this in the article on the effects of the end of the contract. The company has also demanded it from many insolvent franchisees who had a knack for incurring their wrath.
In another article, we note that the franchisee’s down payment is not limited: he is personally liable to the franchisor. Even if the franchisee is a corporation with a separate legal personality from the business owner who acquired the franchise, that business owner is responsible for all of the franchisee’s obligations.
It is even planned that in the event of the franchisee becoming insolvent, the guarantor will become the new franchisee. The guarantor is also expected to be responsible for future obligations of the franchisee (contract extension or contract changes).
8% of sales
When sales began to decline in 2022, Tite Frette hired Gildor Roy and Michel Barette as speakers at a high price.
Franchisees who had to hand over 8% of their sales to the franchisor then dropped like flies.
As soon as someone made a negative comment on social networks, Karl Magnone filed a removal request under threat of prosecution, our six sources say.
“NO. It happened once, a very long time ago,” says the chef of Tite Frette.
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