The competition regulator, the Australian Competition and Consumer Commission (ACCC), has initiated proceedings against Australia’s second largest car repair organisation in the country, Ultra Tune Australia Pty Ltd (Ultra Tune). The ACCC alleges that Ultra Tune has failed to comply with the Franchising Code of Conduct (Code) and the Australian Consumer Law (ACL).
The Code requires franchisors to provide prospective franchisees with certain information, presented in a specific format. The ACCC’s case alleges that Ultra Tune failed to comply with these requirements, and did not provide prospective franchisees with the necessary information before requiring non-refundable payments. Additionally, the ACCC claims that the franchisor made false or misleading representations about the franchise site, and failed to act in good faith.
Some franchisees operate marketing funds to advertise the franchised business. Marketing funds require all franchisees to contribute money (often a percentage of revenue) for the good of all franchisees. If a franchisor operates a marketing fund, the Code requires it to prepare an annual financial statement and provide them to franchisees. In addition to the allegations above, the ACCC also claims that Ultra Tune failed to provide marketing fund financial statements and audit reports for three financial years to its franchisees.
A franchisor does not necessarily have to have the marketing fund audited, but this is only when at least 75 per cent of franchisees agree the franchisor does not have to comply with the requirement. According to the ACCC, this is not what occurred in this matter.
The ACCC is seeking:
- a refund for prospective franchisees; together with
- declarations, injunctions, pecuniary penalties, compliance and adverse publicity orders against Ultra Tune.
If you would like assistance in relation to franchising and compliance with the Code, please contact: