Franchising and Minimum Income Guarantees

Depending on the franchise system - the Franchise Agreement, Franchisor or representative for the Franchisor may provide details setting out minimum guaranteed income, that is, a promise that a Franchisee will earn a minimum amount of income from the franchised business.

If you are looking to acquire a franchised business and the Franchisor is representing that you earn a minimum income, it is important as a prospective Franchisee to carry out appropriate due diligence to verify any promises made by Franchisor about earnings information.

If you have entered into a Franchise Agreement and have been guaranteed or promised a minimum income level by the Franchisor, but your income level is less than what was promised, the Franchisor may have:

• defaulted under the Franchise Agreement (depending on its terms and conditions); and/or

• breached the Competition and Consumer Act 2010 by engaging in misleading or deceptive conduct.

Such breaches of the Act may result in:

• the ACCC investigating such conduct by the Franchisor and seeking penalties or injunctions; and

• the Franchisee obtaining damages or compensation.

In more extreme cases, directors of Franchisor companies can also be held personally liable for misleading and deceptive conduct.

If you are a Franchisee that has been promised minimum income earnings from the franchised business and that income has not eventuated, you should consider seeking legal advice as to what rights are available to you.

Contact Greyson Legal | Franchise Lawyers. E: mail@greysonlegal.com