Behind the Headlines with Jason Gehrke

Jason Gehrke, Franchise Advisory Centre

Conman Peter Foster appears in court over SensaSlim franchise scam

The trial of notorious conman Peter Foster has appeared in the Federal Court in Brisbane for contempt of court proceedings over his involvement in failed diet spray franchise SensaSlim.

The ACCC is taking action against SensaSlim, Foster and other company officers for misleading and deceptive conduct which falsely claimed authenticity for its diet spray product, and which drew in more than 100 franchisees who invested $60,000  each for the rights to distribute the product. Foster used the term IMOM, or “international man of mischief” to hide his connection to the business, according to evidence presented in court.

SensaSlim claimed its product had been trialled by more than 11,000 users, however it is alleged the research had never been conducted. Foster is alleged to have posed as a scientist when selling franchises, directed a promotional video in his home  for SensaSlim, and taken underworld figure Mick Gatto into the venture as an investor.

KFC to appeal $8 million salmonella decision

International fast food franchise KFC has commenced an appeal against an $8 million New South Wales Supreme Court judgement earlier this year, which found that a chicken Twister sold by the company’s Villawood store caused salmonella poisoning  and brain damage in a seven year old girl.

Then seven year old Monika Samaan ate a Twister bought from the Villawood KFC in Sydney’s western suburbs in 2005, which the original court decision found caused her salmonella poisoning because staff at the store had failed to follow proper  food handling procedures, including picking-up and reusing chicken dropped on the floor, and that staff did not wash their hands or wear gloves when handling food.

Monica shared the Twister with her family, who all suffered vomiting and diarrhoea afterwards, but Monica ate most of the Twister, and subsequently lapsed into a coma for six months, and is now a quadriplegic and severely brain-damaged.

KFC stated at the time that it would appeal the decision, and has recently formally lodged its appeal on the grounds of “failure to consider evidence”, an “error in the judge’s factual findings” and the weight given to certain evidence, according to a  media report. A statement released by the company said it felt deeply for Monika and her family, but believed its food was safe.

Encore unlikely for insolvent music group

Iconic Australian music retail franchise Allans Billy Hyde, is unlikely to be sold and will eventually be closed with 56 out of more than 600 jobs to be lost immediately, according to media report.

Receivers at Ferrier Hodgson have announced that there has been some interest in buying the group, but that a closure is likely following liquidation of more than $45 million worth of stock. Franchised stores are not subject to the closure, but may experience disruption to supply chains.

Billy Hyde is based in Melbourne with more than 500 employees around Australia, and can trace its history back to the 1850’s.

Darrell Lea sold, stores close, manufacturing to relocate

Australian confectionary retailer Darrell Lea has been sold for an undisclosed sum to Queensland-based family business, with the remaining company-owned Darrell Lea stores closed with the loss of 400 jobs.

Buyers Tony and Christina Quinn who have built a $350 million empire based on VIP Pet Foods, their gourmet chilled pet food business, will retain 87 staff, building a new manufacturing facility and continue to support Darrell Lea’s six franchised stores in the short term, according to a media report.

NSW private bill proposes statebased franchise legislation

A private member’s bill introduced into the New South Wales parliament seeks to usurp the government’s move to create enabling legislation for the role of NSW Small Business Commissioner, and leaves the door open for state-based franchise  legislation via mandatory industry codes.

New South Wales shadow business minister Adam Searle has tabled a bill that includes the power to prescribe industry codes, including for franchising, which creates the potential for separate state-based regulation of franchising in NSW to exist  concurrently with the federal Franchising Code of Conduct.

The proposed Small Business Commissioner and Small Business Protection Bill 2012 allows for the prescription of industry codes of conduct similar to the Small Business Commissioner legislation in South Australia, where franchising has been stated  as a priority for the development of an industry code.