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If a franchisor promises supply of the ‘best coffee beans in the world’ to an incoming franchisee, can that franchisee sue for misleading and deceptive conduct if those beans transpire to be not the best? Or what about when a franchisor entices franchisees with ‘the possibility to earn an income you only ever dreamed of’? Will they be liable if the franchisee to whom they made that representation only makes a modest income? The answer depends on how that representation is classified; is it puffery or a genuine representation? If a statement is puffery, a franchisor will not be liable. However,  if it is a genuine representation, they may well be. 

This article will provide guidance for franchisors on:

  • what puffery is;
  • how the courts have considered puffery in the context of franchising disputes; and 
  • how to analyse promotional, recruitment and onboarding materials to ensure that what appears as obvious puffery does not cross the line into a genuine representation, which a franchisee can rely on. 

So What is Puffery?

Puffery is a claim that a party makes, which does not represent a genuine offer or promise about the product or service in question. Instead, it expresses an exaggerated subjective view, which no reasonable person would take literally. 

The key phrase here is ‘reasonable person’. This is the test applied to determine if a statement made is a genuine representation/ promise or, instead, puffery. For example, there is probably someone out there who was very disappointed not to sprout a pair of wings after polishing off their can of Red Bull. However, no reasonable person would think this would occur.

Of course, there are many cases that walk the line of puffery or genuine representation. Suppose a court does not find puffery and there is a genuine representation. In that case, the maker of the representation can find themselves liable for breaches of the Australian Consumer Law and, in particular, the misleading and deceptive conduct provisions.

Case Example 

In one particular case, the franchisor of a well-known franchise group sought to avoid liability for assurances they made about the quality of goods and supply arrangement for those goods, prior to entering into the contract. They did so on the basis that the relevant assurances were ‘mere puffery’.

The franchisor assured its ability to deliver ‘high quality products from 1,400 km away’. This was from Brisbane, where the supplier was based, to the franchise site in Townsville. However, it transpired that the goods as delivered were of lacklustre quality and often they could not sell them. Therefore, the franchisee made a claim based on these assurances (amongst other things). Here, the court was unwilling to accept the franchisor’s argument. 

The court found the relevant statements did not constitute puffery, characterising those statements in the following manner: 

They were as to the kinds of products to be supplied to a potential franchisee for retail sale by it, the reliability and frequency of that supply from Brisbane and the quality of those products upon their receipt in Townsville. They were significant definitive statements.

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Case Law Takeaways

In looking at a number of case decisions on the issue, it is clear that the court considers some common factors in determining if a statement is puffery, or a genuine representation, namely: 

  • statements that are quantifiable are more likely to be a genuine representation. For example, a claim that ‘You can expect your revenue to be in the six figures within 12 months’ is more likely to be a genuine representation than an assurance that ‘You will be performing well financially soon’; 
  • the more definitive a statement is, the more likely it is to be a genuine representation, i.e. the use of a precise timeline in the above example of ‘within 12 months’ is more likely to render it a genuine representation than the more open-ended ‘soon’; 
  • ambiguous claims that are open to interpretation are less likely to be a genuine representation (or more likely to be mere puffery). For example, what is ‘performing well’ is an ambiguous term and open to many different interpretations; and
  • context is key. Statements made will generally be considered by the courts in the overall context, including other discussions and representations made. For example, at face value, a promise to be ‘performing well soon’ may not be a genuine representation. However, suppose it was said in response to a query from an incoming franchisee in which that franchisee set out what ‘performing well’ meant to them. In that case, it may cross the line to genuine representation territory. 

What Does This Mean for Franchisors?

There is often a fine line between what is puffery and what is misleading or deceptive conduct. Therefore, franchisors should:

  • be considerate of how an audience is going to interpret their advertising, recruitment and promotional documents. Also, they should seek feedback on proposed documents to ensure their assumed interpretation mirrors that of third parties; 
  • avoid any specific or quantifiable promises unless the franchisor is 100% certain that they can meet the promise;
  • if using puffery, make sure it is obvious that you do not intend it to be taken literally; and
  • when in doubt, disclaim. With the above example, a quick footnote would assist, stating that ‘there is no guarantee a franchisee will perform well financially, and this is dependent on their individual efforts and performance, together with a number of factors beyond the franchisor’s control’.

Key Takeaways

The line between puffery and misleading or deceptive conduct can be a fine one, so if you are a franchisor and are concerned content in your recruitment or promotional documents may cross the line from puffery to genuine representation, it is best to get legal advice before any publication or recruitment occurs. 

If you would like to know more about puffery or misleading and deceptive conduct, LegalVision’s experienced franchise lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.

Frequently Asked Questions

What is puffery?

Puffery is a claim that a party makes that does not represent a genuine offer or promise about the product or service in question. Instead, it expresses an exaggerated subjective view that no reasonable person would take literally. For example, a supplier promising the ‘best coffee beans in the world’ is puffery. 

What is a genuine representation?

A genuine representation is a genuine offer or promise about the product or service in question. Where puffery is not established, and a genuine representation is found, the maker of the representation may be liable.

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