Posted by Elizabeth Gore-Jones
on 21 May 2019
I think one of the biggest lessons to learn from 2019's Ultra Tune case is not to be an ar$3.
Ultra Tune could have avoided the ACCC going through them like a fox in a hen house if they had refunded the $33,000 they were legally obliged to refund to a potential franchisee.
This is a truly rollicking story of what not to do as a franchisor. It is a story of heavy handed conduct, why you shouldn't lie in evidence, why you should try to make your story at least a little bit believable and ends in a $2.6 million judgement against Ultra Tune.
It all started with a franchisee wanting to buy a business. He was told:
a) a) The proposed business had only been opened for about 6 months;
b) The rent was $45,000 + GST per annum;
c) The purchase price was $163,000;
d) The deposit was unconditionally refundable.
It turns out that the business had been operating since the 1980s. This was important because the business wasn't performing well and the franchisee thought that was because it was a new business.
The rent was substantially more than he was told and the purchase price was about $12,500 more than he was told.
He paid the deposit before he was given the disclosure document and decided not to proceed before he signed the franchise agreement but the franchisor refused to refund his deposit. (A franchisor cannot collect a non-refundable deposit unless 14 days has passed since the franchisee received the disclosure document).
The franchisee eventually made a complaint to the ACCC who found a number of other infringements and breaches of the Franchising Code of Conduct and the Competition and Consumer Act and instituted proceedings.
The franchisee got his money back.
The End.
