A former car wash and detailing franchisor has been slapped with penalties reaching $4.2 million for unconscionable conduct and making misleading representations to franchisees, including pocketing funds they had paid towards establishment costs.
The Federal Court has ordered $4.2 million in penalties against Geowash, its director, Sanam Ali, and its franchising manager, Charles Cameron, for breaches of the Australian Consumer Law. This included penalties of $1.045 million against Ms Ali and $656,000 against Mr Cameron.
In February 2019, following action by the competition watchdog, the court found Geowash made false or misleading representations and failed to act in good faith in relation to the sale and marketing of its franchises, contravening the Franchising Code of Conduct.
The court also found that Geowash acted unconscionably towards franchisees through its charging practices for the establishment and fit-out of Geowash franchise sites.
According to the ACCC, Geowash created the false impression that amounts charged to franchisees would go directly towards the establishment of their car wash site, when in fact large amounts were used to make commission payments to Ms Ali and Mr Cameron and for other Geowash expenses.
“Franchisors are often in a position of power compared to their franchisees, and Geowash’s actions, including those of its executives, were very serious breaches of its obligations under the Code and the Australian Consumer Law,” ACCC deputy chair Mick Keogh said.
“These significant penalties should send a clear and strong message to franchisors and franchise executives about the importance of complying with their obligations under the Franchising Code of Conduct and Australian Consumer Law.”
The Court has also ordered Ms Ali and Mr Cameron to pay $1 million as partial redress to franchisees for the losses they suffered.
Both individuals were also disqualified from managing corporations in Australia, with Ms Ali disqualified for five years and Mr Cameron for four years.
The company’s website states that it had expanded to 25 sites across four Australian states by 2014–15, but it currently lists only 10 sites, concentrated in WA.
Maja Garaca Djurdjevic is the editor of My Business.
Maja has an extensive career as a journalist across finance, business and market intelligence. Prior to joining Momentum Media, Maja spent several years unravelling social, political and economic intricacies in Eastern Europe.