Franchise warning on sales estimates

"Projections based on personal experience in the trade - which is what (Billy Baxter representative) Mr (Phillip) Mauviel largely seems to have relied upon - will not suffice," he said. "The problem for Billy Baxter's in this case was the lack of objective supporting evidence or empirical research to back up his projections."

Adelaide Now
May 27, 2012

Franchise warning on sales estimates
Russell Emerson
The Advertiser

Billy%20Baxter%27s.jpg

Billy Baxter's franchise development manager Phillip Mauviel at City Cross restaurant. Picture: Coker Dylan Source: The Advertiser

AUSTRALIA'S $202 billion franchising industry must back up its promises when attracting new business partners, a court has warned.

A Victorian appeal case has found franchisees establishing a new Billy Baxter's restaurant at Glenelg were misled by representations as to the revenue and profit they could expect in the first year.

The Court of Appeal said the initial figures provided by a representative for the restaurant chain - based on the turnover of a restaurant at Norwood and the income needed to cover the negotiated rent for the popular Jetty Rd tourist strip - were accompanied by the required warnings as to independent advice but had "no logical connection" to support the estimates.

Franchise Council of Australia executive director Steve Wright warned the decision was likely to boost insurance and research costs and ultimately convince franchisors to help franchisees less.

"If there is to be any negative effect it is most likely to fall on the franchisees and what good will it do for them?" he said. "A franchisor may be confident about giving that forecast but it can never be sure, so they are reluctant because they don't want to risk the possibility of misleading potential franchisees."

The court overturned the original decision, and awarded franchisees Ross and Dianne Pollard $1.2 million in damages in a decision likely to throw another challenge to the "relationship of trust" needed between franchisors and their potential business partners.

Thomsons Lawyers partner David Gaszner said the case was likely to make franchisors more conservative.

"It may result in more franchisors refusing to make or provide any forecasts," he said.

"Franchisors will now be even more careful about what representations they make as to potential income, profitability and turnover."

The case is also likely to increase research costs, he said. "Projections based on personal experience in the trade - which is what (Billy Baxter representative) Mr (Phillip) Mauviel largely seems to have relied upon - will not suffice," he said.

"The problem for Billy Baxter's in this case was the lack of objective supporting evidence or empirical research to back up his projections."

http://www.adelaidenow.com.au/franchise-warning-on-sales-estimates/story-e6frea6u-1226368672169


Brought to you by WikidFranchise.org

Risks: Abuse of business, regulatory & political authority can destroy people , Bootstrapping the assets of a corporation, Brand backlash: franchisees suffer because brand owners screw up, Bullshit baffles brains, Can't collect on court decision, Contempt of court, Deceptive business practices, Federal insolvency laws used to shirk legal claims, Franchisee abandons their investment, Franchisees are pawns in insolvency flip, Franchisor insolvency, intentional, Franchisor knew they were selling money losing concepts, Intimidation through lawyers , If it doesn't jingle, it doesn't count, Insolvency, Insolvent system renamed and sold to a relative, Intentional franchisor insolvency creates huge fees for legal, accounting, consulting firms, Misrepresentations, Multiple corporations protect majority shareholders' interests, Multi-tradename franchisors are often the most ruthless, My franchise was a prison, No real penalties for abuse of federal insolvency laws, Nothing but cold calculation, Nothing personal, it's just business, Only 3 ways out: resell to next loser, independence & be sued or abandon and go bankrupt, Opposition to fake franchisor insolvency and ownership flip, Should anyone trust anything associated with franchising anymore?, Trustee/consultant does mass terminations under insolvency to flip to new owner, Unsafe at any Brand?, War of attrition, Was new franchisor money really old $ siphoned offer before false insolvency was declared?, Australia, 20120527 Franchise warning

Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-ShareAlike 3.0 License