Jim’s Group Pty Ltd has paid $24,420 in penalties in its capacity as franchisor of the Jim’s Dog Wash franchise after the ACCC issued it with two infringement notices for an alleged contravention of the Franchising Code of Conduct, and an alleged contravention of the Australian Consumer Law (ACL).
The first infringement notice related to an alleged failure by Jim’s Group to disclose certain information to a prospective franchisee, as required by the Franchising Code. In particular, the ACCC alleged that the disclosure document significantly understated the number of former franchisees within the Dog Wash division and failed to provide the contact details of those former franchisees.
“If someone is thinking about buying a franchise, being able to contact former franchisees is critical for making informed decisions,” ACCC Deputy Chair Mick Keogh said.
“Under the Franchising Code, franchisors must provide prospective franchisees with a compliant disclosure document which provides specified information which is important to prospective franchisees.”
“At this time of year, most franchisors must update their disclosure documents, so this action by the ACCC serves as a timely warning to all franchisors about the importance of ensuring these documents are compliant with the Franchising Code,” Mr Keogh said.
Jim’s Group also paid a penalty after the ACCC issued an infringement notice alleging that Jim’s Group had made a false or misleading representation. The ACCC alleged that Jim’s Group misrepresented to a Jim’s Dog Wash franchisee that their cooling off rights under the Franchise Code ended 14 days after entering into the franchise agreement or the making of a payment to the franchisor, whichever was earlier. In fact, under the Franchise Code, a franchisee can terminate the agreement and receive a refund within 14 days of signing the agreement, even if they have previously paid a deposit.
“By making this representation, Jim’s Group may have discouraged Jim’s Dog Wash franchisees from exercising their cooling off rights where they paid a deposit some time before they entered into a franchise agreement,” Mr Keogh said.
“The ACCC will not hesitate to take enforcement action against franchisors who are failing to meet their obligations under the Code or are misleading prospective franchisees about their rights under the Code.”
Jim’s Group comprises 52 franchise divisions ranging from dog washing, mowing, and bookkeeping, to hiring party supplies. Internationally, there are more than 4,800 Jim’s franchisees, with the majority based in Australia. The Jim’s Dog Wash division offers dog grooming services across Australia by franchisees who use mobile dog grooming trailers.
Ensuring small businesses receive the protections of the competition and consumer law, and any applicable industry codes of conduct, is a current enforcement and compliance priority for the ACCC.
It is important that prospective franchisees understand what they are buying into, including by speaking to former franchisees.
Pursuant to clause 26(1) of the Franchising Code, a franchisee may terminate a franchise agreement within 14 days after entering into it and receive a refund of all payments made in connection with the agreement, less the franchisor’s reasonable expenses.
The ACCC offers a free online course for anyone thinking about buying a franchise, and it includes questions to ask former franchisees. The ACCC website also has detailed guidance for franchisors about their disclosure obligations and the cooling off period.