International Law

Franchise Beating

The Franchise image is taking a battering in New Zealand because of the Green Acres franchise fraud.

"The multi-billion dollar franchise industry is bracing itself for a backlash following the recent Green Acres scandal.

The Serious Fraud Office is investigating after 200 people lost millions buying fake ironing franchises, damaging the reputation of franchising and raising questions about whether tougher rules are needed."

The Green Acres franchisees lost their investment to a rogue agent of the franchisor, Keith Lampham.

"Keith Lapham is being investigated by the Serious Fraud Office for allegedly selling fake ironing franchises but Green Acres says it's not responsible for his actions.

"We have no legal obligation to make this right," says chief executive Andrew Chisholm.

But the fake franchise victims are considering legal action against the company and the commerce minister is reviewing the industry's code of practice.

"We will be asking the hard questions around the legal framework for franchises," Lianne Dalziel said in January.

The franchise industry believes the Green Acres problem could have been avoided if investors had taken professional advice before they signed up. And they don't think there's any need for tougher rules or regulations.

"It's a different type of problem that's happened here. It seems like an alleged fraud rather than anything to do with franchising practices," says Floyd.

I actually agree with Floyd that this particular fraud could happen even in a jurisdiction with Franchise Disclosure laws.

You could look it up.

Full post as published by Misleading Advertising Law on February 12, 2008 (boomark / email).