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Business and Corporate Law, Franchising, Protecting Your Assets

The ACCC adopts a tough approach to rogue franchisors

“Is it the season to be jolly or not ?

The ACCC adopts a tough approach to rogue franchisors

Recently the ACCC has flexed its muscles in enforcing compliance with the franchising code of conduct and Australian Consumer Law

It took action against a regional franchisor trading as Fastway Couriers in Western Australia alleging that it did not provide relevant information about former franchisees who had either transferred their franchises or where the franchise agreement had been terminated in breach of the Code

It also took action to prevent that franchise from making misleading and deceptive representations about a so called “ guaranteed income “ to which the franchisees would be entitled

This is one of the first case where what was omitted from the disclosure document was an issue as by not providing the information the prospective franchisees were unable to make an informed decision about whether to enter into an agreement or not. The franchiser was fined a total of $9000 by way of the new infringement notice provisions

So far as the issue of misleading and deceptive conduct was concerned , the allegation was that by making statements about a “ guaranteed income “ of $1500 per week for 30 weeks the franchisor was representing that the franchisees would be achieving this each and every week after an initial 30 week period

The ACCC accepted an enforceable undertaking from the franchisor under section 87B of the Act that included provisions that it would not make such representations and inter Alia would provide accurate financials for the past 12 months about income and other facts

The moral of this sad and sorry tale is:

  • the accc is getting tough on breaches of the code and ACL
  • If you are a franchisor make sure the disclosure document is fully complete and compliant
  • Don’t make statements about prospective earnings ever
  • Use real and accurate financials

If this is of interest to you please contact David or Reuben on 1300 965 689 or (02) 4305 3500.

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