Franchisor misconduct when buying a franchise

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Table of Contents

• Remedies for franchisees
• ACCC intervention
• Common Law
• Conclusion

Some franchisees are misled and deceived by the franchisor during the initial stages of buying a franchise.  It may be that certain information is withheld, or that particular details have been misrepresented in the offer. Either way, a franchise solicitor should be consulted immediately if you believe you have been the victim of a franchisor’s misleading or deceptive conduct when buying a franchise.

Remedies for franchisees

If you engage in negotiations with a franchisor, make sure you have a franchise solicitor by your side to alert you of any misleading or deceptive representations. The Competition and Consumer Act 2010 (Cth) (the Act), known more commonly as the Australian Consumer Law (“ACL”), affords certain remedies to franchisees who are misled or deceived by their franchisors. To get a better understanding of how this section in the Act (prohibition of misleading and 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. The right to seek damages;
2. The right to seek an injunction;
3. A declaration nullifying the franchise agreement, and a requirement that the franchisor pay all expenditures (deposit, fees, etc) back to franchisee; and
4. 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 Australian Competition and Consumer Commission (“ACCC”) of the breach and seek their direct involvement. The ACCC is the industry watchdog that seeks to ensure businesses comply with its regulations.

ACCC intervention

Once you or your franchise solicitor have alerted the ACCC of the misleading and deceptive conduct, the commission 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:
   • Educational training on lawful marketing;
   • Training programs aimed at compliance; or
   • Community service
4. 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 terminate 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 misconduct.

Put everything you can in writing from the outset of the franchise relationship so that you and the franchise solicitor can easily demonstrate in Court the franchisor’s misconduct.

Conclusion

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 lawyers. They will assist you at every stage of the process and ensure that you are protected against franchisor misconduct.