In January this year, the Federal Court found that Ultra Tune Australia Pty Ltd (Ultra Tune) had breached sections of the Franchising Code of Conduct by providing marketing fund statements to prospective franchisees that included “no meaningful information”.
The Full Federal Court found that there was insufficient detail in Ultra Tune’s marketing fund statements. The Court also held that “there is no meaningful information" in simply stating that funds had been spent on television advertising and that there were obvious details including where ads had aired that should have been provided to franchisees.
The Court further advised that, “A franchisor would be well advised to err on the side of candour” in preparing their marketing fund statements.
“The Full Federal Court’s decision confirms that franchisors must provide meaningful information to franchisees about marketing fund expenditure,” ACCC Deputy Chair Mick Keogh said.
While some aspects of Ultra Tune’s appeal were upheld, lowering the penalty from $2.6m to $2m, the case still sends a warning to franchisors about the need to provide meaningful information to franchisees.
You can view the ACCC’s media release to learn more about the decision by clicking here.
The MTA recently provided input to the Federal Government on both the proposed Automotive-specific Franchising Code of Conduct and the Franchising Taskforce Issues Paper in an effort to resolve issues that MTA franchisee members are facing.
If you would like any more information on franchising please contact your Industry Engagement Specialist, Nathan Groves, by clicking here.