What Happens When Franchisors Ignore Compliance? A $1.5M Lesson
Case Review: Girchow Enterprises Pty Ltd v Ultimate Franchising Group Pty Ltd
Most franchisors treat disclosure like a compliance exercise.
Tick the boxes. Copy the Code. Move on.
This case shows why that mindset is dangerous.
A franchisor provided a disclosure document with estimated setup costs — framed as being based on “current practice” and what franchisees typically incur.
The Problem
There were no existing franchisees.
No operating history.
No “current practice” to rely on.
The numbers weren’t grounded in real-world experience — they were effectively guesses.
Even with disclaimers.
Even though the document followed the Code format.
The Court looked past the form and focused on the substance.
And that’s where it unravelled.
The Outcome
The representations were found to be misleading — and the franchisee was entitled to relief, including having the agreement set aside.
The Lesson for Franchisors
You can’t rely on templates, disclaimers, or the structure of the Code to protect you.
If your disclosure suggests real-world data — it needs to be based on real-world data.
If you don’t have runs on the board yet, you need to be very careful about how you present costs, assumptions, and “ranges”.
Because once it reads like experience… the law will treat it like experience.
Judgement:
https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCAFC/2024/143.html
If you’re reviewing your franchise documents or unsure whether your disclosure stacks up — it’s worth getting clarity early.
We can walk you through it.