Damages of nearly $300,000 have been awarded to four couples and one individual, all franchisees of Top Snack Foods Pty Ltd, after Australian Competition and Consumer Commission Federal Court action.
Justice Tamberlin on Friday found that Top Snack Foods Pty Ltd, the franchisor, had engaged in misleading and deceptive conduct in breach of the Trade Practices Act 1974. He also found that George Manera, a director and manager, of Top Snack Foods, and Nick Kritharas, General Manager, were knowingly concerned in breaches of the Act.
"The ACCC initiated a representative action on behalf of the franchisees alleging that Top Snack Foods, George Manera and Nick Kritharas engaged in misleading or deceptive conduct," ACCC Chairman Professor Allan Fels, said today
"Many small businesses are based on franchises. Those considering entering franchises must be confident that they have received correct information to allow them to make their decision."
The ACCC alleged prospective franchisees were misled into believing:
- gross profitability would be $300 per day per franchise area;
- the distribution of the goods could be performed at a rate of 50 sites per "short" day;
- the packing of the confectionery boxes could be performed at a rate of 20 or more per day;
- loss of genuine customers would be no more than 10% in the first few weeks of operation and there would be no difficulty in obtaining new customers;
- losses of money through dishonesty of customers at retail sites and other problems would not exceed 6%; customers and sites made available by Top Snack Foods were genuine;
- the franchisees could not lose the moneys paid for the franchises because the return was fully guaranteed by Top Snack Foods; and
- the relevant achievable figures set out in a four weekly statement disclosed to the claimants in an Top Snacks Foods Information Brochure were typical and achievable.
Justice Tamberlin found that important parts of the evidence of George Manera and Nick Kritharas were significantly discredited in cross-examination.
Justice Tamberlin found that the representations were misleading and deceptive and there were no reasonable grounds for making the assertions as to profitability, distribution of goods to 50 sites per "short" day or loss of customers.
In relation to the guarantee it was noted that before the guarantee could come into operation the franchisees would be in breach of the agreement so that the guarantee would not operate. The award or damages includes capital injection lost, trading loss, interest on borrowings and an amount for unrewarded labour and anxiety.