All washed up: Geowash prosecuted by ACCC
The Australian Competition & Consumer Commission has scored another Federal Court win against a franchise operation over breaches of the Franchising Code of Conduct and Australian Consumer Law, signaling its commitment to pursue franchisors who fail to comply with their obligations.
Former hand car wash and detailing franchisor Geowash was found by the Court to have made false or misleading representations on its website and to have acted unconscionably towards franchisees.
Geowash was found to have acted unconscionably towards franchisees by charging franchisees whatever they were willing to pay towards the establishment and fit-out of the franchise sites when it should have only charged franchisees the actual and likely costs involved with establishing and fitting out the sites.
Making false or misleading representations
On its website, Geowash was found to be representing that it had commercial relationships with other corporate entities when it did not. These included Nissan, Kia, Renault, Audi, Emirates, Shell, Hertz, Holden, Ikea and Thrifty.
Further, Geowash suggested prospective franchisees could make $70,216 in monthly average revenue and $30,439 in gross average profit without any reasonable basis.
Geowash was also found to create a false impression that the amounts charged to franchisees would go directly towards the fit-out when in fact the amounts paid by franchisees became commission payments to Geowash’s Director and Franchising Manager and other Geowash related expenses.
Failing to act in good faith
Given the above conduct by Geowash, the Court also found it failed to act in good faith as required under the Code.
Further investigations into Geowash revealed that its director, Sanam Ali was knowingly involved in all of Geowash’s offending conduct. Additionally, Geowash’s Franchising Manager, Charles Cameron, was knowingly involved in Geowash’s unconscionable conduct and failure to act in good faith.
The case against Geowash follows the recent action against Australia’s second largest motor repair organization, Ultra Tune Australia, which was fined $2.6 million for breaching the Code and ACL.
Both the Geowash and the Ultra Tune cases are the first actions brought by the ACCC against franchisors in relation to the new good faith provisions of the Code.
The penalties and other orders sought by ACCC against Geowash are yet to be determined, but will be closely monitored by Macpherson Kelley and we will report on these when they become available.
Macpherson Kelley can advise you in relation to your rights and obligations under your specific Franchise Agreement, the Code and your general obligations under the ACL. If you have any questions in relation to this outcome or would like more information, please contact us.
This article was written by Alanna Richmond, Law Graduate – Commercial.