The liquidator of three recently closed Downlow Burger outlets says he is on standby to wind up three more and claims the franchisor is approaching migrants with scant business knowledge to become franchisees.
Pritesh Patel of Patel and Co was appointed to liquidate Downlow Ponsonby in October last year, at the request of its shareholders. Three months later he was approached to take on the liquidation of the Kohimarama site, then in May, the Kelston store.
Last year Newsroom reported on Downlow franchisor James Tucker’s $2.08 million debt to Inland Revenue and the Ministry for Social Development for unpaid taxes and Covid-19 wage subsidy payments. Tucker is also behind popular Auckland eatery Kohi Beach Eatery & Store and former fast food chains Habitual Fix and Mad Mex.
Newsroom also covered the escalation of a dispute between Tucker’s Mad Mex restaurant in the Westfield St Lukes food court and four young staffers owed a combined $22,637. The staff have since been paid what they were owed.
At the beginning of 2025 there were 10 Downlow stores in operation across the North Island. According to Downlow’s site, which promotes franchising opportunities with “full support”, there are now 20 sites in operation.
In addition the Hamilton East store is listed as being temporarily closed because of a fire and Kohimarama Downlow is listed as being “closed for relocation” – despite the business having sunk into liquidation in January.
Most Downlow stores are run by other franchise owners. Tucker runs several of the venues himself via a number of entities ultimately owned by Downlow Franchising and Mad Group.
‘The hospitality industry has faced significant challenges in recent years, as has been widely reported. Regrettably, while we haven’t got every franchisee and site selection right, our network also includes a number of success stories, and we continue to refine our processes to improve.’
James Tucker, Downlow franchisor
NZ Companies Register documentation shows Tucker is personally listed as the current director for more than a dozen businesses, though about half of these are in liquidation.
In an interview at his Papatoetoe office, liquidator Patel says all three of the franchisees he has recently dealt with signed their agreements without taking independent legal advice. All of them have a migrant background and at least one has only basic English language skills.
He has heard from three more Downlow owners whose businesses are on the brink, and believes there are even more liquidations to come.
“As they’re opening, we’re coming in from the back.”
‘I’m a calm person, but I cried a lot last year. I’m trying to forget it as though it was a dream, but all my money, all my savings from the last 11 years is gone.’
Gupta, Downlow Ponsonby franchisee
Selling a franchise business to a prospective new owner is relatively easy, he says, as it is technically a “fresh business” and there is no provision for the franchisor to provide historical sales data from other stores for the prospect to consider.
“They have got no trading history, no historical information, so no accounts. What am I going to look at? What am I looking at? Nothing.
“A classic example … while it’s still fresh in my mind, at the one in Kelston the lady paid $85,000 as an up-front cost. All of it was for one invoice, fixtures and fittings for $85,000. She paid it, just like that, to head office – no breakdown, nothing whatsoever.
“We don’t know the price of the chiller, for example.”
Patel is a licensed insolvency practitioner appointed under section 241(2)(a) of the Companies Act to liquidate the companies.
In his statement, he says Tucker is seeking interest from among “vulnerable migrants”, whom he believes may equate franchise businesses with the likes of McDonald’s, with a proven formula and little chance of failure. Instead, they’re faced with high rent, rising food prices and hefty overheads such as Uber Eats’ commission fees.
“These people come to New Zealand with a dream – we all do – and this sort of thing tends to happen to them quite early in their life.
“One of them just got married and had just had a baby, and then this happens. The domino effect of that is not just financial, it has an impact on their family too.”
Lawyer Shaheen Azmi, who works with Patel, says the similarities between the liquidations call into question what processes Tucker uses when vetting and preparing franchisees, which she says “don’t appear to be very strong”.
Tucker initially told Newsroom he is “not interested” in making a comment about the closure of Downlow businesses, nor responding to allegations he is targeting vulnerable migrants with the business.
However a statement sent from a Downlow email some hours later, attributed to Tucker, says: “We reject any allegation that Downlow targets migrants, people with limited English, or that we encourage franchisees to trade while insolvent.
“New franchise opportunities are advertised on Trade Me, though a large portion of our growth has come from existing franchisees opening additional locations or franchisees referring their friends, family, and employees.
“The hospitality industry has faced significant challenges in recent years, as has been widely reported. Regrettably, while we haven’t got every franchisee and site selection right, our network also includes a number of success stories, and we continue to refine our processes to improve.”
The owner of Downlow Ponsonby, who wanted only to be known by his last name, Gupta, started working with Tucker in 2023 as a training manager. In this capacity he helped open several stores in Wellington and train staff members.
He opened the Ponsonby store in April 2024 with a 25 percent shareholding, after paying Tucker $50,000 to buy into the franchise. Tucker was also listed as a director and 50 percent shareholder and Gupta’s cousin held the remaining shares. Gupta initially worked in the store full time and Tucker paid him a wage.
Gupta says it became clear within the first few months of operating that the store was not commercially viable – the cost-of-living crisis was in full swing and the business’ Ponsonby Road rent was costly.
In August, Tucker removed himself as a company director from DL Ponsonby’s listing, Gupta says, without consulting his co-owners first.
“He made these promises … but when he saw things are not working he removed his name and even told me: ‘You are the main owner, you are the main person who will look after this store, you can do the hours for free’.”
Having put all of his savings into the business, Gupta knuckled down and tried to make it work but ultimately made the decision to liquidate in October, owing $113,000 to creditors. The first liquidator’s report lists the reasons for the business’ failure as increased cost of goods, reduced foot traffic within Ponsonby restaurant precinct, increased competition and “high costs when menu items ordered via Uber Eats etc”.
Gupta is now working at RE Burger, after losing his previous job on the closure of his former place of work, Burger Burger, earlier in the year.
He says: “I really want to do an office job. But I’m not able to, because everyone checks credit scores and so I’m stuck in the restaurant line.”
Gupta says everyone he knows who has bought into the Downlow franchise are migrants, who are hard workers but don’t have extensive business experience and don’t know about Tucker’s history.
“They’re Chinese or Indian…. people who newly have residence and want to open their own business.
“I’m a calm person, but I cried a lot last year. I’m trying to forget it as though it was a dream, but all my money, all my savings from the last 11 years is gone.”
Several weeks ago Gupta received a call from the owner of another struggling Downlow outlet, who he says was crying over the phone about their financial struggles and fears over alleged claims from Tucker over missing payments.
The same business owner got in touch with Newsroom over LinkedIn, wanting to speak about Tucker’s treatment of them as a franchisee and their struggles building a profitable business, hindered by Tucker’s sale of another Downlow franchise close to their own store.
They pulled out of an in-person meeting, citing family issues and saying they now planned to leave the country.
Franchise Association of New Zealand spokesperson Katrina King says Downlow isn’t a member of the association. She hasn’t heard about any franchising problems within the network.
“Franchisees have the right to have accurate information presented to them, or at least information that is based on reasonable and justifiable assumptions, fairly disclosed,” King says.
“The primary protections are the Fair Trading Act (misleading and deceptive conduct) and Part 2, Subpart 3 of the Contract and Commercial Law Act 2017. Franchisee’s rights are otherwise set out in the Franchise Agreement and in the Code of Practice and Ethics if the franchisor is a member of the Franchise Association of New Zealand.
“Franchise Association of New Zealand recommends that franchisees get legal and accounting advice from professionals experienced in franchising before signing their franchise agreement.”
King doesn’t believe problems such as the level of representation of business opportunities are common, with the association receiving fewer than five formal complaints from franchisees of its members each year.
“The 2024 Massey Franchising Survey found that only 1.5 percent of the approximately 30,000 franchise units in New Zealand were involved in any sort of dispute in the previous 12 months,” she adds.
