Burnan Pty Ltd (Burnan), trading as Résumé Service, promotes and supplies a résumé writing business process. Burnan's business process involves the preparation of résumés and the marketing and operation of a résumé writing service as a business operated from home offices. The business process is sold to various individuals across Australia for A$22,000.
Burnan advised purchasers of the business process that they could expect to earn between A$43,000 and A$96,000 per annum using the business process. These representations were published on Burnan's website, in newspaper advertisements and in the documents supplied to prospective operators.
In April 2009, the ACCC brought proceedings in the Perth Federal Court against both Burnan and its founder/director Keith Rolston for alleged misleading and deceptive conduct in contravention of section 52 of the Trade Practices Act 1974 (Cth) relating to the promotion and sale of résumé writing businesses to the public.
The ACCC alleged that Burnan and Rolston made the representations regarding the income which could be earnt operating the business without reasonable grounds.
The Court found that these representations regarding income were unfounded and misleading as Burnan had no evidence to support his claim nor to suggest that anyone using the business process had ever earned income in that range.
The Court ordered that any representations made by Burnan and Rolston in the future regarding Résumé Service's expected earnings had to be supported by reasonable grounds.
The potential profitability of a business is a material factor for those considering whether to purchase a business, particularly a franchised business. The ACCC's chairman Graeme Samuel stressed the importance that "those selling and promoting business opportunities have to make credible and sustainable claims about the viability and profitability of the business."
Prospective franchisees seeking to work from home or in vulnerable financial positions rely on the information disclosed by the franchisor regarding their potential earning capacity, profit and sales figures. This case reminds franchisors that the ACCC seeks to protect consumers and any misleading or deceptive claims, including those regarding the expected profitability of a franchised business opportunity, that are designed to entice prospective franchisees to sign on and purchase a business will expose franchisors to possible court action.
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