The Australian Competition and Consumer Commission has accepted a court enforceable undertaking from Express Mobile Services Australia Pty Ltd (Express Mobile Services) following an investigation into its alleged non-compliance with certain requirements of the Franchising Code of Conduct, and false or misleading representations to prospective franchisees.
Express Mobile Services is a mobile professional services franchise business with multiple divisions across Australia, including ‘Test and Tag’ electrical services and Pest Control. The ACCC was concerned that its franchise agreements did not meet the requirements of the Franchising Code because they contained waivers of verbal or written representations.
The ACCC was also concerned that Express Mobile Services engaged in misleading conduct and made misleading representations to prospective franchisees (in brochures, on its website, and on other websites such as Seek Commercial and Gumtree) by:
- representing that services performed by Test & Tag franchises are a mandatory requirement, when this was not always the case in Western Australia;
- representing that no specific qualifications are required to operate franchises, when that was not the case in relation to the Test & Tag and Pest Control franchises; and
- advising some prospective franchisees they would be provided with initial customers, when Express Mobile Services did not always have reasonable grounds for giving that advice.
Express Mobile Services has acknowledged the ACCC’s concerns that its conduct was likely to have contravened the Competition and Consumer Act 2010.
"Franchisors must ensure that all representations they make to potential franchisees are true and accurate, and that they have reasonable grounds for making them," ACCC Commissioner Sarah Court said.
“Potential franchisees must be able to rely on the accuracy of disclosure documents and representations made by the franchisor when they are deciding whether to purchase a franchise.”
"The ACCC strongly encourages anyone who is thinking about buying a franchise to talk to other franchisees in that system and to do their research, including discussing the franchise agreement with a lawyer and an accountant, before making such an important decision,” Ms Court said.
To address the ACCC’s concerns, Express Mobile Services has provided the ACCC with a court-enforceable undertaking that it will:
- for a period of three years, not make representations about the nature, value, benefits of, or need for, a franchise without first obtaining independent verification from a lawyer or financial adviser;
- write to each franchisee stating it does not intend to enforce the waiver of representations clause (and offer to remove the clause), and advising them of the ACCC website’s free online franchise education course;
- make changes to its website and existing advertising to remove any representations relating to the supply of initial customers; and
- establish and implement a Consumer Law Compliance Program, and maintain it for three years.
The ACCC has funded a free online education program, run by Griffith University, to help prospective franchisees make more informed decisions. To sign up to the program, visit http://www.franchise.edu.au/home/education/for-franchisees/pre-entry-franchise-education.
The undertaking is available at ACCC’s public register