Have you been misled by your Franchisor?

You were promised blooming profits – but has your franchisor led you down the garden path?

Everything may seem rosy when you take the big step into buying a franchise, but further down the track things might not be all they were cracked up to be and franchise disputes may arise.

You might find yourself thinking, “Has my franchisor misled me?”

What is Misleading and Deceptive Conduct in the Franchise Context?

Misleading and Deceptive Conduct will usually occur when the franchisor has made false representations to you prior to entering the franchise. Matters that are usually misrepresented are the profitability of the franchise business and the training and support that will be offered. The misrepresentation – or misleading and deceptive conduct – need not be intentional. The fact that the representations were incorrect, were inducements to you to purchase the franchise and that you relied upon those representations (whether written or verbal) in making your decision to purchase, may well be enough.

An example of the “profit” argument is if the franchisor has told you that you will make a certain level of profit without a reasonable basis for making that statement. Sometimes a franchisor will provide numbers in writing as to projected profits, without appropriate caveats. Other verbal representations, although harder to prove perhaps, using hyperbole which is pure sales talk without foundation can all amount to inducements, if you rely on them.

We can assist with providing advice as to whether there is a valid claim against a franchisor on the basis of misleading and deceptive representations. We will also help you work out a strategy to resolve your franchise dispute.

It is against the law for a franchise to falsely promise profits that cannot be delivered. False, misleading or unconscionable conduct is not in keeping with Franchise Code of Conduct. Information given to you by your franchisor must be able to be supported. Pie in the sky figures are cause for legal action, false expectations and over-promising will end badly on the franchisor’s part.

If your franchisor has made promises that they cannot keep, then they can be held liable. It could be an exercise to go through the projections and weigh these against actuals? There are so many variables when it comes to running a business and your franchisor may have many logical reasons why your business is not performing to its optimum:

Franchisee not up to the task: Your franchisor could turn this around on you and complain that you are simply not cut out to run the franchise. The franchisor could criticise your management ability and the worthiness of your staff. Once again, the right franchise lawyer can help you build a positive case against these claims, don’t just take them lying down.

Weather and outside influences: There are some things that are beyond everyone’s control and those are referred to as force majeure, or as we have seen more recently with the Coronavirus. Then there is also the legal term know as an act of God. If your region has recently undergone some dramatic weather conditions such as fierce storms, cyclones, earthquakes, extreme cold/snow or even heavy, continuous rain – it is going to affect your trading. This takes the profit and loss scenario out of your franchisor’s hands – a reasonable level of understanding and patience is required. Your franchisor should, however, do everything it can to help you during difficult times such as these and by working together your profits will hopefully be restored sooner rather than later.

Tough retail conditions: Events like recessions, the Global Financial Crisis, a decline in spending – all of these things can affect your business and unfortunately this is no fault of yours or your franchisor. The economy affects all businesses, franchised or not – it is a challenging fact of life that we all have to live with in business. However, if your franchisor is worth its salt it will be making moves to help you survive and be there to back you up during the difficult times.

Negotiation and expert franchise legal advice will be key to resolving your dispute with your franchisor. Alternatively, if you are a franchisor and have been accused of misleading and deceptive conduct, we can assist you as well.

We have extensive experience in handling franchise disputes from initial advice through to mediation and court proceedings. Our clients are both franchisees and franchisors and we handle all aspects of Franchising and Commercial Law.

We will work through your dispute and develop a strategy and work to obtain the best outcome for you. Our team and lawyer are experienced and professional in many aspects of commercial law. We offer concise advice with commercial understanding.

 Call us on 1300 907 335 to speak to a franchise dispute lawyer or complete an enquiry form and we will contact you.

Please note: the above article is not legal advice. Every circumstance is different. It is critical that you obtain legal advice in relation to your personal circumstances before taking any action.

© PCL Lawyers 2020
Author: Glenn Duker