Due Diligence Investigation for Large International QSR Client

A large international Quick Service Restaurant (QSR) client engaged Kreller to conduct a due diligence investigation into a pair of franchise applicants. The applicants, a husband and wife, were prominent, wealthy business owners in South America. They operated a large conglomerate that was involved in food, retail, and media and already represented other multinational brands. Given their high-profile status and the potential risks associated with their business dealings, the client sought a thorough investigation to ensure the applicants met the company’s ethical and operational standards.

Objective

The primary objective of the investigation was to assess the applicants’ suitability as franchisees by identifying any potential risks, including legal, financial, and reputational concerns, that could impact the client’s brand and operations. 

Methodology

Kreller’s investigation team conducted a comprehensive pre-transaction due diligence process, which included:

• To identify any negative reports or allegations about the applicants, it will be necessary to examine local and international media sources, including those only available in the local language.
• A review of court records and legal databases to uncover any ongoing or historical litigation involving the applicants.
• Analyze publicly available information to verify the applicants’ business history and financial standing.

Findings

The investigation revealed significant red flags:

• Multiple media reports, accessible only in the local language, detailed a history of bribery scandals, fraud, smuggling, and political manipulation involving one or both applicants. These allegations date back to the 1970s and indicated a pattern of unethical business practices. 
• Kreller uncovered ongoing litigation related to a breach of contract claim. This information was unavailable through standard database queries and required direct access to court records.
• The applicants’ involvement in high-profile scandals and legal disputes posed a substantial risk to the client’s brand reputation and operational integrity. 

Outcome

Kreller compiled its findings into a detailed report and presented it to the client. Based on the investigation’s results, the client decided against proceeding with the applicants as franchisees. The decision was driven by the significant reputational, legal, and financial risks of the applicants’ history and ongoing litigation.