Some franchisors engage in misleading or deceptive conduct during the initial stages of selling a franchise to a prospective franchisee. It may be that certain information is withheld, or that particular details have been misrepresented in the offer or initial negotiations. Either way, if you are left feeling that the Franchisor made you certain promises in order to induce you to enter into a franchise agreement and has failed to deliver, a franchise solicitor should be consulted immediately.

Remedies for franchisees

If you engage in negotiations with a franchisor with you a view to entering into a franchise agreement, make sure you have a franchise solicitor by your side to discuss the pre-contract negotiations, and the specific terms of the document, and identify anything potentially misleading or deceptive. Under the Competition and Consumer Act 2010 (Cth) (the Act), known more commonly as the Australian Consumer Law (“ACL”), certain remedies are available to franchisees (and other individuals) that have been misled or deceived, specifically under Schedule 2 of the Act. To get a better understanding of how this section in the Act (prohibition of misleading or deceptive conduct) and common law misrepresentation affects the rights of franchisees, seek legal advice from a franchise solicitor.

The franchise solicitor will at the very least explain the various remedies available to you, including, but not limited to the following:

  1. Your contractual obligations and ability to terminate;
  2. The right to seek damages;
  3. The right to seek an injunction;
  4. A declaration nullifying the franchise agreement, and a requirement that the franchisor pay all expenditures (deposit, fees, etc) back to franchisee; and
  5. In some cases, a declaration from the franchisor of particular matters.

It is worth noting that following a breach of the Act, the franchisee is also entitled to alert the ACCC of the breach and seek that bodies direct involvement.

ACCC intervention

Once alerted to potential misleading and/ or deceptive conduct, the ACCC may do any of the following:

  1. Impose a redress order to compensate the franchisee;
  2. Impose an adverse publicity order;
  3. Impose orders that are non-punitive, for example:
  4. Educational training on lawful marketing
  5. Training programs aimed at compliance
  6. Community service
  7. Impose a disqualification order on a director of the franchise from managing a corporation in the future.

The ACCC will assist in the most serious of cases where the public interest must be taken into account, and when there is an abundance of strong evidence against the franchisor.

Common Law

Under the common law, a franchisee that is induced into entering a franchise agreement because of the misrepresentations of the franchisor may be entitled to termination of the franchise agreement. Legal advice from a franchise solicitor is invaluable if this occurs, as a court may award you damages if the franchise solicitor can prove the misrepresentation occurred, and was relied upon by you to your detriment.

It is by no means an easy feat proving that a franchisor has breached this common law principle, and, for this reason, you may need the assistance of a franchise solicitor to maintain accurate file notes of any correspondence. It is important to put everything you can in writing from the outset so that you and the franchise solicitor can easily demonstrate in court the franchisor’s misconduct.

Conduct

For guidance on how to proceed when you believe a franchisor has misled or deceived you, contact LegalVision on 1300 544 755 to speak with one of our experienced franchise solicitors. They will assist you at every stage of the process and ensure that you are protected against franchisor misconduct.

Emma Jervis

Next Steps

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