The Federal Court is set to hear allegations that dozens of Jump Swim School franchisees were deceived by their franchisor and its parent company about the time it would take to set up a new business.
In a public statement on the case, the ACCC said that it had begun legal action against Jump Loops Pty Ltd and its parent company Swim Loops Holdings Pty Ltd, collectively known as Jump Swim. The action also includes Jump Swim director Ian Michael Campbell personally, who the ACCC has accused of being involved in the alleged misleading conduct.
The competition regulator is alleging that Jump Swim made false, misleading or deceptive statements about Jump Swim School franchises in its promotional material to prospective franchisees.
Those statements, the ACCC has alleged, claimed that “a prospective Jump Swim School franchisee would have an operational swim school within 12 months of signing a franchise agreement, when it did not have reasonable grounds for making that statement”.
It said that “many” of the network’s franchisees were not given an operational business within this time frame, and that some never received this.
“There are over 90 Jump Swim franchisees who did not receive an operational swim school within 12 months or at all,” the ACCC said.
“The initial costs of setting up a Jump Swim School generally ranged from approximately $150,000 to $175,000.”
ACCC chair Mick Keogh said that franchisors are bound by Australian Consumer Law in the sale of franchises, and must take these obligations seriously.
“Purchasing a franchise is a big decision, and people looking to open a franchise business rely on the information from the franchisor being accurate,” Mr Keogh said.
“We allege this conduct caused substantial harm to franchisees who paid significant sums but did not receive an operational swim school within the time specified, or at all.”
Mr Keogh claimed that “Jump Swim continued to accept payments when it knew, or ought to have known at the time it accepted the payments, that the timing for its delivery of operational franchises was dependent on events that were outside its control.”
The ACCC has already successfully frozen the assets of Jump Swim and Mr Campbell, in a court order issued on 7 June 2019, it said.
Jump Swim has been approached for comment.
According to its website, Jump Swim Schools was launched in the NSW regional town of Grafton, and now has more than 60 active locations across Australia, predominantly in Victoria and NSW.
The business also lists international operations in New Zealand, Singapore and Brazil.
A number of franchise groups have been the subject of legal action by the ACCC in recent months. In January this year, automotive repair chain Ultra Tune was fined $2.604 million after it was found to have misled a prospective franchisee, and then allegedly attempted to “cover up” this conduct in court.
A month later, car wash franchise Geowash was also found to have misled franchisees in breach of both consumer law and the Franchising Code of Conduct. Penalties are yet to be handed down.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.