Behind the Headlines

Franchise Advisory


Franchise director jailed as brother set for early release

Evidence presented in the trial of the last of three former directors of failed whitegoods retail franchise Kleenmaid has been used to appeal the sentence of one of the other already-jailed directors, according to a media report.



The fourth trial of Kleenmaid founder Andrew Eric Young on charges of knowingly operating the company while it was insolvent, and for defrauding the Westpac Bank of $13 million prior to the 2009 collapse of the whitegoods retail franchise concluded in January with Young found guilty on all charges. Young, who represented himself in court, attempted to shift blame to his younger brother Bradley Wendell Young, who was jailed for the same offences in 2016.


However Bradley Young launched an appeal against his sentence based on evidence produced during his older brother’s trial. The Queensland Court of Appeal rejected the appeal but did shorten Bradley Young’s non-parole period from 21 to 15 months, which means he will be eligible for parole from 5 May 2002.


Meanwhile, his older brother Andrew was found to be mentally competent during his recent trial, despite a “transient amnesiac event” which he unsuccessfully argued should have resulted in a mistrial. Andrew Young previously thwarted three trials for the same offences by forcing his legal team to withdraw and sacking another team appointed by Legal Aid.


Kleenmaid collapsed in 2009 with debts of more than $100 million that left more than 30 franchisees without businesses and 6000 customers emptyhanded after they had paid deposits for whitegoods that were never supplied. The Kleenmaid brand has since been sold to new owners. 


Food chain sales lift following restructure


Healthy fast-food alternative franchise Oliver’s has grown sales to $9.6 million during the second quarter from $8.9 million the year prior following a 2019 leadership shuffle and restructure to focus on cost control, increasing employee confidence, and returning to pre-IPO strategies to increase turnover and profit, according to a media report.


Franchisor fined $4.2m, directors banned


Mobile service franchisor Geowash Pty Ltd has been fined $4.2 million by the Federal Court for breaches against Australian Consumer Law, according to an Australian Competition and Consumer Commission (ACCC) media release.


The penalty includes $1.045 million against the former hand car wash and detailing company’s director Sanam Ali, and $656,000 against national franchise manage Charles Cameron. Ali and Cameron were also disqualified from managing corporations in Australia for five and four years, respectively.


A three-year investigation into the company by the ACCC culminated in Geowash being found guilty in February 2019 of offences including acting unconscionably, making false and misleading representations, and breaching the Franchising Code of Conduct by failing to act in good faith. Geowash was placed into voluntary administration in October 2016 and went into liquidation in April 2019.


Franchising steps up for bushfire relief


The franchise sector is showing tremendous support for bushfire relief and recovery efforts through a variety of fundraising initiatives, according to media reports.


Initiatives include giving and collecting donations, franchises matching the donations made by employees, offering customers the chance to round-up the price of their purchase with the difference being donated, and amending volunteering policies to provide open-ended paid leave for volunteer firefighters and reservists during this natural disaster.


Support has come from across the sector, including coffee, food, gaming, real estate and property, retail, travel and hospitality, with one international brand also contributing from its operations in the United States. 


Perth franchisee faces $630,000 fine for underpayments


A former franchisee of Asian food chain outlet, Han’s Café, in Western Australia is facing legal action and a fine of up to $630,000 for serious contraventions of the Protecting Vulnerable Workers laws, according to a Fair Work Ombudsman (FWO) media release.


The FWO alleges vulnerable workers were underpaid by the franchisee who had previously faced court for similar conduct. The breaches occurred between October 2017 and April 2018 and affected 11 employees who were underpaid a total of $5,022. The employees have been back-paid.  The franchisee is facing the prospect of a tenfold increase in penalties because they had previously been prosecuted last year by the FWO for similar breaches.


Underpayments common in Asian franchises: FWO


A Fair Work Ombudsman (FWO) investigation into emerging fast food, restaurant, and café franchises have discovered underpayments to be common in Asian franchises, according to an FWO statement.


The national investigation audited seven franchises selected on data and intelligence that raised concerns related to workplace law compliance. Six of the seven franchises were founded overseas: five in Asia and one in the US. Underpayments totalling $731,648 were recovered for 780 workers.


Franchisees reported receiving little guidance from franchisors on workplace law compliance with the most common breaches related to pay slip obligations, penalty rates, and record keeping.


Ruling eases US joint employer fears


A ruling by the National Labor Relations Board (NLRB) in a long-standing labour dispute with McDonalds Corporation has relieved concerns that franchisors in the United States are considered to be joint employers of their franchisees’ workers, according to a media report.


The dispute, which started in 2012, was triggered when workers were disciplined and in some cases fired by McDonald’s franchisees for participating in protests to increase minimum wages to USD$15 per hour. McDonald’s Corporation argued that it was not the employer of the fired workers, but offered a settlement that was initially rejected by a judge before the latest ruling ordered that the settlement be accepted.


The acceptance of the settlement offer settles the question of joint employer liability and ends years of uncertainty for franchisors across the United States, according to the International Franchise Association, which represents franchising in the US.