The Australian Competition and Consumer Commission has applied to the Federal Court for leave to commence proceedings against Geowash Pty Ltd (subject to deed of company arrangement) (Geowash), a national car wash franchisor that has been marketing and selling hand car wash franchises since 2013.
The ACCC proceedings will allege that Geowash made false or misleading representations and engaged in unconscionable conduct in breach of the Australian Consumer Law, and also failed to comply with the good faith obligation which is contained in the Franchising Code of Conduct.
If leave is granted, these proceedings will be the second court action recently taken by the ACCC alleging a breach of the good faith obligation by a franchisor.
The ACCC will also allege that Geowash’s director, Sanam Ali, and National Franchising Manager, Charles Cameron, engaged in and were knowingly concerned in the conduct.
In particular, the ACCC will allege that from at least November 2015 to May 2016, Geowash made false or misleading representations on its website that:
prospective franchisees could make revenues of $70,216 and estimated profits of $30,439 in an average 28-day period, when Geowash did not have reasonable grounds for making those representations; and
Geowash had a commercial relationship or affiliation with each of Nissan, Kia, Renault, Audi, Emirates, Shell, Hertz, Holden, Ikea, and Thrifty, when it did not.
The ACCC will also allege that Geowash directed a substantial portion of franchisee funds for purposes not permitted under the franchise agreement and not disclosed to franchisees, including payment of commissions to Ms Ali and Mr Cameron.
“The ACCC investigated Geowash’s conduct following complaints from franchisees alleging that they had been misled about their establishment costs, and ultimately had not been provided with an operating car wash franchise,” ACCC Deputy Chair Dr Michael Schaper said.
“The ACCC was particularly concerned that, allegedly, franchisee funds were used for purposes other than those permitted by the franchise agreements, including as commissions paid to the director and franchise manager,” Dr Schaper said.
If granted leave to commence proceedings against Geowash, the ACCC will seek declarations, injunctions, an order for the payment of pecuniary penalties, orders for non-party consumer redress, corrective notice orders, and costs.
The ACCC will also seek orders disqualifying Ms Ali and Mr Cameron from managing corporations for a period of five years
Courtesy Business Franchise Australia