Franchisee unsuccessful in suing franchisor for failed business

A recent decision of Justice Buchanan of the Federal Court has highlighted the risks franchisees take when suing franchisors for losses arising from failed business enterprises. The case also serves to outline the inherent risks involved in starting a franchise with limited knowledge or experience in a specific industry, in spite of the statutory measures designed to protect franchisees when doing so.

Relevant conclusions

This case should serve as a timely reminder to franchisees that:

• entry into a franchise is, like any small business, a risk for the franchisee and it needs to protect itself from the possibility of genuine misrepresentations and unconscionable conduct on the part of the franchisor;