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Log In / Register | Apr 23, 2014

Aus Franchisor Loses In Appeal

The New South Wales Court of Appeal determines where Franchisors promote estimates of fees to prospective franchisees, those estimates must be reasonable and based on performance data ‘where information of actual turnover was readily available to the Franchisor’.    

In Camden Video Pty Ltd v Civic Video Pty Ltd [2010] NSWCA 122 the Appeals Court held that ‘the franchisor cannot make a reasonable estimate of turnover by reference to unspecified and unsubstantiated alternative methods.’

The original finding found that Camden had not complied with its obligation to provide returns and it was therefore reasonable for Civic to assess turnover as it had;

we look at the store, look at comparable stores around the country. We look at the buying of the store – you know, how many copies of movies they buy. We look at the discounts that are subsequently received by the store because of their buying and its not just myself that sits down and estimates.

There’s a process whereby there’s myself, the general manager and the managing director that go through the figures and determine, you know, an estimate for the store. We also have key performance indicators for every state and national indicators that tell us the movement of turnover for all our stores across the country, so we use those indicators in order to arrive at estimates.  Mr PeriosCivic’s national CFO,

Civic had terminated the Camden franchise agreement on the ground that the franchisee had Camden abandoned its business. The original finding found the franchisor was entitled to $70,000 plus costs

Bruce Stewart Dimarco for Camden successfully argued that Civic had acted unreasonably by ignoring actual turnover data and had not provided evidence as to performance of ‘other stores’ that was the basis for fee estimates.

Hodgson JA also held that it was not reasonable throughout the whole period to have no regard to actual turnover where Mr Peris knew he could have access to information of that kind.

Many may conclude that lawyers for the franchisor were negligent in not submitting evidence of ‘alternative sites’ while others may conclude that the suggested performance data relied on never existed.

Note: Thanks to Oldsword for sending me the original link; ‘Just remember Ray - if people weren't stupid - you wouldn't have a job.’   ... or a hobby.

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