ACCC takes another Franchisor to Court
- The Australian Competition and Consumer Commission (ACCC) is increasingly active in commencing proceedings against a franchisors; and
- Representations made to franchisees by a franchisor’s promotional material to provide goods or services in a specified timeframe may be false, misleading or deceptive
Overview of Claim Against Franchisor
In a recent article, we discussed the Australian Competition and Consumer Commission’s (ACCC) success in demonstrating that a pattern of conduct by Geowash Pty Limited (Geowash), a car washing franchisor, was unconscionable, misleading and deceptive, and in breach of an obligation to act in good faith (https://www.teneolegal.com.au/court-confirms-pattern-of-conduct-by-franchisor-unconscionable-misleading-and-deceptive/). The ACCC has now commenced proceedings against another franchisor, Jump Loops Pty Limited (Jump) and its parent company Swim Loops Holdings Pty Limited (Swim). Jump and Swim sell swimming school franchises, which supply learn-to-swim services. The ACCC alleges Jump and Swim breached the Australian Consumer Law (ACL) by making false, misleading or deceptive statements about its franchises.
Facts of the Allegations
The ACCC alleges that Jump and Swim provided promotional material to prospective franchisees that they would have an operational swim school within twelve (12) months of signing a franchise agreement, when they did not have reasonable grounds for making that statement. As it stands, over ninety (90) franchisees did not receive an operational swim school within the promised twelve (12) months, or in the alternative, were not provided at all. In addition to not receiving an operational swim school within the promised time frame, or at all, the franchisees incurred costs associated with set up of approximately $150,000 to $175,000.
Allegations against Jump and Swim
The ACCC claims that Jump and Swim had accepted payment from franchisees where it did not supply an operational franchise within the period specified, or in the alternative, in a reasonable time. As a result, franchisees had incurred significant damage, as they incurred significant set up costs, yet did not receive an operating franchise in the specified time.
In commencing the proceedings against Jump and Small, the ACCC released a statement that:
“This is a reminder that franchisors need to take their ACL obligations seriously. People looking to open a franchise business rely on the information from the franchisor being accurate”.
As it reads, the statement serves as a reminder for franchisors to comply with their obligations and the ACL, including obligations in respect of information provided to potential franchisees.
If you need information or assistance with respect to any franchise issues you may have, contact Craig Higginbotham on 1300 88 33 92.
Craig Higginbotham and Harrison Dobb
20 June 2019