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Prospective franchisees misled by fraudulent director, court finds

Adrian Flores
Adrian Flores
02 March 2021 1 minute readShare

The Federal Court has ruled that a company breached the Australian Consumer Law by making false and misleading representations to prospective franchisees.

The court found that Megasave Couriers Australia Pty Ltd (Megasave) assured prospective franchisees that they would receive guaranteed minimum weekly payments (typically $2,000 per week) and a guaranteed annual income (usually $91,000) if they purchased a Megasave courier franchise.

Megasave’s sole director, Gary Bourne, admitted that he was knowingly concerned in the conduct.

The representations were made in promotional statements and marketing material on Megasave’s website and in online advertisements, as well as in documents and communications provided to prospective franchisees.

However, during this time, Megasave was not paying existing franchisees the promised minimum weekly payments, and did not have sufficient revenue to pay existing or potential franchisees in accordance with the representations it was making.

Megasave then admitted that there was no reasonable basis for making the representations.

ACCC deputy chair Mick Keogh said many of the affected franchisees experienced significant financial hardship and emotional distress due to Megasave’s failure to make the guaranteed payments that it promised.

“We received many complaints from Megasave franchisees who had relied on these representations when making a decision to pay many thousands of dollars for a franchise, believing that buying a Megasave franchise would provide them with a secure future income,” Mr Keogh said.

“The ACCC is continuing its important work in the franchising sector, taking action where franchisees are being treated unfairly.”

By consent, the court also made an order disqualifying Mr Bourne from managing corporations for a period of five years.

“There are significant consequences for company executives and officers who are knowingly concerned in breaches of the Australian Consumer Law,” Mr Keogh said.

Megasave and Mr Bourne admitted liability and consented to the orders made by the court.

A hearing to determine the penalties and compensation for affected franchisees will be held on 29 April 2021.

Prospective franchisees misled by fraudulent director, court finds
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Adrian Flores
Adrian Flores

Adrian Flores is the deputy editor of MyBusiness. Before that, he was the deputy editor for SMSF Adviser as well as features editor for ifa (Independent Financial Adviser), InvestorDaily, Risk Adviser, Fintech Business and Adviser Innovation.

You can email Adrian at [email protected].

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