ACCC Warns Against Promise of Guaranteed Income with Franchising

The Australian Competition and Consumer Commission has been receiving complaints from franchise owners complaining of undelivered promises of earnings. 

The bulk of the complaints said franchise owners were “guaranteed” income but in reality, they earned little or nothing from it. The ACCC said the complaints mainly came from cleaning and home services industry.

 ACCC’s acting chairman Michael Schaper warned those who are interested in buying a franchise to watch out for these income claims because this is a promise done to entice investors. 

To protect themselves, they have to oversee their contract or agreement with an accountant or a lawyer. 

Schaper said unscrupulous franchisors were targeting those who are not quite adept with the English language because the assumption is that they do not fully understand the agreements they are signing. The ACCC acting chairman said that if you don’t understand the contract, don’t sign it. 

Franchisees are also advised to seek other franchise owners if they want to be clear about how much they should expect when it comes to earnings. Knowing about the system can give potential new owners the gauge to what they can do to survive the business. 

They need to get a grip of the reality of running the franchise. There must also be available information about franchise owners cited in a disclosure document. In it, the reasons for leaving the franchise must also be included. 

Additionally, franchisees should always ensure that the figures “guaranteed” are in writing. More often than not, franchisors only state “indicative” earnings, which isn’t really clear if the buyer will be able to get this.