How not to sell franchises.
The Australian Competition and Consumer Commission announced that it has "instituted legal proceedings against Kyloe Pty Ltd, Impact Design Accessories Pty Ltd and associated persons alleging contraventions of the Franchising Code of Conduct and section 51AD of the Trade Practices Act 1974.
The ACCC alleges that Kyloe, Impact and associated persons in promoting and operating the Polar Krush Ice drink franchise:
* failed to provide franchisees with a disclosure document* provided earnings information that was not based on reasonable grounds
* failed to provide franchisees with a 7 day-cooling off period
* prevented prospective sub-distributors from associating with and contacting other franchisees
* failed to request written statements from prospective franchisees that they had/had not received independent advice, and
* failed to provide an internal complaint handling procedure in agreements.
The hearing in this matter is scheduled for August, 18th 2006.
How did Kevin McCann get into this trouble, according to the ACCC? Apparently, the ACCC "alleges that the contraventions are a direct consequence of the respondent's failed attempt to contract out of the Franchising Code of Conduct by calling its contracts "sub-distribution agreements" rather than franchise agreements."
One of the interesting features of the Australian code of conduct is that the franchisor has to request written statement from prospective franchisees whether or not they have received independent legal advice about the purchase. Is this an effective way to get franchisees competent legal assistance?
I think that it is better than the US or Canadian practices, which only require that disclosure document recommend that getting independent legal advice is important. It would be better if the written statement had to detail how the franchisee found the attorney, or lawyer that gave him the advice and why the franchisee believed that the attorney or lawyer was competent in franchise law. (For a detailed due diligence checklist on how to select a franchise lawyer, see Keith Kanouse's page here.)
Technorati Tags: franchisees, accc, disclosure document, prospective, impact design, trade practices act, complaint handling, cooling off period, legal proceedings, ice drink, australian competition, krush, independent advice, code of conduct, franchising, polar, franchise
