ACCC institutes against Arnolds Ribs and Pizza Australia Pty Ltd for alleged misleading promotion of franchise system

The Australian Competition and Consumer Commission has instituted proceedings in the Federal Court, Sydney, against Arnolds Ribs & Pizza Australia Pty Ltd. The ACCC alleges misleading, deceptive and unconscionable conduct in regard to the promotion of Arnolds' fast food franchise system.

The ACCC alleges that in the process of promoting it’s business, Arnolds:

• made oral and written representations that misled potential franchisees as to the likely level of sales and profits their stores might reasonably achieve and the training and business support to be provided by Arnolds
• acted in an unconscionable manner with regard to
• targeting people with little or no experience in running a business
• imposing conditions that were not reasonably necessary for the protection of the legitimate interests of Arnolds
• failing to ensure franchisees understood important terms of the franchise agreement.

The ACCC alleges that Arnolds, its four directors and its Queensland master franchisee, have breached s52 of the Trade Practices Act 1974, which prohibits conduct by a corporation that is misleading or deceptive, s59(2) of the Act, which prohibits making false or misleading representations as to the profitability, risk or other material aspect of a business, and s51AC, which prohibits unconscionable conduct.

The ACCC is seeking court orders including:

• declarations that Arnolds has breached sections 52, 59(2) and 51AC of the Act
• declarations that Directors of Arnolds and it’s Queensland master franchisee were knowingly concerned in Arnolds contraventions
• injunctions
• orders that Arnolds disclose proceedings in its Disclosure Document given to potential franchisees
• orders requiring Arnolds to publicise the outcome of proceedings in an appointed industry publication
• findings of fact
• costs.

"It is important to note in relation to this matter, the ACCC action is against the franchisor corporation and five associated individuals arising out of the sale of Arnolds franchises. This action does not involve any conduct on the part of Arnolds store owners in their dealings with their customers", ACCC Chairman, Professor Allan Fels, said today.

A directions hearing for this matter is listed for 11 April 2002 in the Federal Court, Sydney.