Their franchise project drives two brothers into bankruptcy

Jacques and Antoine, two dynamic brothers with an entrepreneurial spirit, plunged into the restaurant adventure. By leveraging a franchise of a popular banner, they thought they could be successful.

The brothers always dreamed of starting their own business and being able to give up their office jobs.

“In 2018, we took steps to operate a food service franchise. This required the infusion of personal funds of approximately $50,000 each, as well as taking out a loan to purchase furniture and equipment,” explains Antoine.

The first two years went quite well and their business was good, so much so that they were even able to pay themselves a comfortable salary. But starting in 2020, the pandemic changed the situation.

Once they were able to reopen their doors, they had to deal with a labor shortage, rising costs, and a decline in customers, in addition to extended closures.

As a result, they have accumulated deficits over the past three years despite government aid.

It’s impossible to get back on track

The company no longer generates the money needed to pay suppliers their dues, and the two restaurateurs were unable to afford a salary for six months. They wonder whether they should continue to operate the company at a loss and risk not being able to pay employees.

Guyllaume Amiot, licensed insolvency practitioner and senior director at Raymond Chabot, analyzed the situation and the company’s financial reports and concluded that it was not possible to restructure the company.

“Since the price of the dishes is controlled by the franchisor, he cannot increase it. Since the market is also saturated in the region, traffic is unlikely to improve,” he says.

As for costs, they are difficult to reduce.

Can the two brothers fill some positions more cheaply and reduce the workforce?

Since the salary they could pay themselves is much lower than what they would earn as an employee for an employer, this solution seems hardly feasible to them.

Stop the financial bleeding

There is another risk that needs to be taken into account as Jacques and Antoine, as directors, are personally responsible for salaries, withholdings and GST/QST which may not be paid.

“Since it is difficult to make the restaurant profitable in the short term and stop the financial bleeding, bankruptcy is the best solution,” says Guyllaume Amiot.

The trustee therefore took the file in hand, but after liquidating the restaurant assets and paying creditors, there still remained a balance of $25,000 of the loan guaranteed by the brothers and $3,500 in GST/QST. It is therefore expected that an agreement will be reached with creditors to repay these amounts once they have found a new job and are receiving a salary.

“Fortunately, within two weeks they managed to find work that would provide them with a stable and higher income than in the past,” says Guyllaume Amiot.


Financial assets:

  • Balance: $750
  • Catering Equipment and Furniture: Valued at $65,000
  • Inventory (perishable goods): Value of $5,000
  • Franchise: Value of $20,000


  • Guaranteed loan for purchase of equipment and furniture: $75,000
  • COVID Loan: $60,000
  • GST/QST: $3500
  • Suppliers: $10,000

TOTAL DEBT: $148,500

Average monthly income:

  • Catering revenue: $28,500

Monthly expenses

  • $31,500 (including salaries and social security contributions. Rent, GST/QST, loan repayment, suppliers, franchise fees, etc.)

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