Billy Baxter Franchisee Provided Wrong Comparable Figures by Franchisor

The Franchisor, Billy Baxter, provided estimated sales figures and rent for a new greenfield café (Jetty Road, South Australia) by using comparable figures from another café (Norwood Parade). The Franchisor figures quoted were higher than actual turn-over from the Norwood Parade café. The Court of Appeal in Trans-it Freighters Pty Ltd v Billy Baxters (Franchising) Pty Ltd [2012] VSCA 71 held that the Franchisor did not have reasonable grounds for the representations made for the new Jetty Road café.

The Franchisee relied on the representations made by the franchisor and used this information in the franchisor’s model, which was then used by the franchisee for an application for finance. The Court looked to the reasonableness of the sales figures/turn-over and rent representations provided by the Franchisor and they were deemed not reasonable under sections 51A(1) and 52 of the Trade Practices Act 1974 (CTH). The Court of Appeal found in favour of the franchisee.

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