How To Avoid The ACCC Knocking On Your Door
As at January 2019 a decision was made by the ACCC in regard to UltraTune and alleged breaches of the Franchising Code of Conduct.
This is the first case which has considered what is required by the Code in relation to the obligations to act in good faith, in addition to considerations surrounding obligations in disclosure documents and marketing fund audits.
In regard to the detail required in marketing fund statements this case has shown, for the first time, what is meant in the Code by the statements providing “meaningful information”. Justice Bromwich held that marketing fund statements “must have some explanatory force and permit meaningful insights to be gained by the franchisee” and that, as a general rule, “the more significant an expense is, the more important it will be to a franchisee, and therefore the greater the level of detail that will be required to facilitate an informed assessed by the franchisees concerned”.
In other words a franchisee, without any expertise in accounting, should be able to understand from the marketing statement what is being spent, on what, when and the amount being paid to whom, so that they can make a judgement on whether this spending is considered appropriate, from this document alone. A Franchisor may not, according to this case, rely on general newsletters etc to franchisees as a means of providing further details around marketing spending.
This case also heavily focused on the representations made during the sale process of a new franchise and ultimately found that Ultra Tune had failed to act in good faith in its dealings with a prospective franchisee by making false or misleading representations regarding the rent, purchase price and the period for which the venue had been operating (in contravention of section 29 of the Australian Consumer Law), and failed to give a disclosure document to Mr Ahmed within the required timeframe (breaching clause 9 of the Franchising Code).
This is why it is worth your time and money to have a lawyer assist you in the issue of and maintenance of documentation in your franchise, so that you can avoid any knocks on the door from ACCC.
Don’t Hesitate to Reach Out!
If you would like to learn more about how DC Strategy Lawyers can be of assistance, we are happy to talk. We know that each business is unique and it is not a case of one size fits all. Our initial meetings are an investment on our behalf. We take the time to assess your needs and determine an action plan to move forward together.
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