ACCC clears Bakers Delight of deceiving franchisees

…that Bakers Delight colluded with banks, including that they shared information about the franchisee which led to losses being suffered. This allegation was made against more than one bank.

qbr.com.au
April 23, 2008

ACCC clears Bakers Delight of decieving franchisees

Bakers Delight has been cleared of allegations it engaged in misleading, deceptive and unconscionable conduct towards franchisees, the Australian Competition and Consumer Commission announced today.

Having conducted an in-depth investigation, including analysing a large amount of documentary evidence and detailed interviews with various witnesses, the ACCC decided the franchise powerhouse did not in any way breach the Franchising code.

In April 2007 the ACCC commenced investigations into a number of individual allegations from past franchisees, with two serious issues reportedly emerging as common themes.

The first regarded allegations of ‘churning’ - that is, selling a franchise site repeatedly in circumstances where the franchisor is aware that it will fail.

The ACCC says it considered the allegation and concluded there was no evidence of churning within the Bakers Delight system nor, and most importantly, in relation to those complaints that were subject to a detailed investigation.

To the contrary, the evidence is reported to support the view that Bakers Delight is generally reluctant to initiate termination and does not have a record of repeatedly selling franchise sites.

The other related to allegations by franchisees that Bakers Delight colluded with banks, including that they shared information about the franchisee which led to losses being suffered. This allegation was made against more than one bank.

The ACCC investigation revealed terms and conditions of the Bakers Delight franchise agreement and banking loan agreements allowed for the sharing of information in certain circumstances. In some circumstances franchisees had signed an additional confidentiality waiver.

The ACCC says it did not find any evidence there was inappropriate sharing of information or any wrongdoing on behalf of any of the banks or Bakers Delight in this regard.

ACCC Chairman Graeme Samuels says throughout the investigation it was often difficult to substantiate claims and in some cases information given was directly contradicted by documents and other evidence.

"It should not be assumed that where there is smoke there is always fire," ACCC Chairman, Mr Graeme Samuel, said today.

"This said, given the bargaining disadvantage franchisees and other small businesses often find themselves in, where the ACCC forms the view that there is evidence supporting a claim that a franchisor has behaved unconscionably or in a systematic misleading manner it will take action."

Notwithstanding the ACCC's decision to take no further action in this matter, the ACCC is in continuing discussions with Bakers Delight with a view to ensuring its trade practices law compliance procedures and complaint handling processes are best placed to deal with issues that might arise in the future.


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Risks: Deceptive business practices, Misrepresentations, Churning (serial reselling), Privacy breaches a prerequisite for fraud, Predatory franchise lending, Watchdog fails to bark, Banks collude, Blocking for the industry, Undue influence, Regulatory capture, Australia, 20080423 ACCC clears

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