The Australian Competition and Consumer Commission has accepted court enforceable undertakings from You Can Bake-It Franchising Pty Ltd, in relation to concerns about the failure to adequately provide information to prospective and existing franchisees as required by the Franchising Code of Conduct.
You Can Bake-It, a Western Australian company, is a franchisor that owns and operates retail stores supplying branded bread mixtures and associated home baking products. It also licences franchisees who operate franchisee owned and operated retail stores supplying similar products, under a franchise agreement.
The ACCC was concerned that sections of the franchise disclosure document were ambiguous and open to misinterpretation. Such lack of disclosure could mislead existing and prospective franchisees, breaching section 52 of the Trade Practices Act 1974 and contravening the Franchising Code of Conduct.
The ACCC took action after receiving a number of complaints from existing franchisees about the information in the disclosure document. The ACCC's concerns related to:
- prospective franchisees being provided with figures only relating to the gross profit of franchisor run stores and not being given any figures relating to the operating costs, net profits and returns of franchisee run stores
- the adequacy of information of the current position of franchisee run stores including which franchisees had terminated their franchise agreement with You Can Bake-It
- the training levels provided before and during the operation of the franchised business.
ACCC Chairman, Mr Graeme Samuel, said it is of paramount importance that franchisors comply with the Act and Franchising Code of Conduct and provide full, clear and unambiguous information to potential franchisees so they can make an informed decision on whether to enter a particular franchise system.
"The ACCC will continue to take action to promote strong compliance on the part of franchisors, particularly given the growth of this sector over the past few years", Mr Samuel said.
"The ACCC will act promptly against franchisors that do not meet these fundamental standards".
When the matter was brought to You Can Bake-It's attention it cooperated with the ACCC and has provided undertakings to ensure that similar issues will not arise in the future.
You Can Bake-It will also implement a comprehensive upgrading of their corporate trade practices compliance program, to make sure its disclosure document meets the requirements under the mandatory Franchising Code of Conduct and the Act generally.