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Australia Could Have Stopped Years of Kleenmaid's Abuse of Franchisees

SYDNEY — An ex-franchisee of the Kleenmaid Group has revealed that in 2005 a group of Kleenmaid franchisees complained to the ACCC in regards to unconscionable conduct carried out by the manufacturer. The ACCC dismissed the claims and chose not to take any action.

Editor’s Note: Australian journalist Grant Shepherd of current.com.au has given permission for Blue MauMau to reprint his article in its entirety. The rest of his article follows.

The source, who chose to remain anonymous for protection, contacted Current.com.au to try and expose the company and the ACCC’s mishandling of the situation.

“Around 2005 a number of ex franchisees complained to the ACCC about various shonky practices that the Young’s were doing including selling used product as new, misrepresenting the franchises/business model  in order to sell them and enticing sales people to join the company with the promise of huge salaries (which never happened),” he said.

Some of the specific examples the group provided to the ACCC included: claims of a significant return on investment of 70 to 100 per cent, which was untrue with majority of stores losing money; an exclusive product range, when in fact most products were available elsewhere for a significantly cheaper price; a six month consumer money back guarantee, which the company removed without consultation; and guaranteed margins, which were often not honoured by the franchisor.

In addition to this it was also brought to the attention of the ACCC that once in the franchise, the franchisor then competed directly with them, using questionable sales methods.

“The franchisor’s commercial division would sell appliances at prices lower than what we were authorised to sell at, and in some cases cheaper than our buying price,” he said. “They would regularly sell at below Kleenmaid’s published price list and minimum sell price.”

When confronted with this complaint the ACCC responded by requesting the group take mediation under the Franchising Code of Conduct.

The franchisees replied claiming that mediation was sought but Kleenmaid stopped the proceedings.

“I went to mediation with no result, Kleenmaid basically stone walled the proceedings,” he said.

“Many franchisees have went to mediation but walked away broken and didn’t follow through with the process. Since mediation I have gathered evidence that Kleenmaid did not furnish me with an accurate and up to date disclosure document and vital information was missing in the copy, this alone is a breach of the Franchising Code of Conduct.”

The ACCC then provided a written statement dismissing the complaint.

“I refer to your emails regarding a number of allegations made by you against Kleenmaid Pty Ltd, including alleged misrepresentations on investment returns, the marketing of an exclusive Kleenmaid product range, guaranteed margins and alleged unconscionable conduct.”

The statement then mentions that the ACCC takes into account various factors when considering whether to take action against a company, the following comment was then given.

“Having regard to all of the above this office does not intend to pursue your allegations any further at this time. Any other franchisees who wish to complain about Kleenmaid should contact the ACCC directly themselves.”

It also commented that due to the fact that the complainant had private legal proceeding against the company, they generally do not become involved.

Looking at this decision now after the company has collapsed and owes over $100 million to creditors; it seems the ACCC made a huge misjudgement in regards to Kleenmaid.

Further investigation would have undoubtedly uncovered the company’s criminal activities and prevented tens of thousands of people being disadvantaged.

“If the ACCC had done their job then the Young’s would have been stopped and the company’s countless victims would not have lost huge amounts of money,” said the source.

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Mr. Blue MauMau's my name and speaking on behalf of franchise buyers and owners in this patch of reef is my game. I'm a fish that sports glasses, a bow tie and a serious attitude of wanting to know the truth when it comes to anything about franchises.

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