When the Franchise Looks Impressive… But There’s Nothing Underneath.
Case Review: RAA Consults Pty Ltd v Express Business Group MMF Victoria Pty Ltd & Ors [2020] FCA 636
This one came out of a home services franchise system operating across Australia — things like lawn mowing, cleaning, removals.
But it wasn’t a simple model. It was layered. You had master franchisors, sub-franchisors, then actual operators underneath. Each layer taking a cut.
At the top, the system was selling “regional master franchises” with promises of income and growth. Buyers were told they’d get fees from underlying franchisees and, in some cases, guaranteed payments.
The Problem
There were no actual franchisees generating income. The whole thing depended on future sales that never really happened.
The Outcome
The Court looked closely at what was actually promised versus what existed in reality.
Yes, there were agreements. Yes, there were expectations around income and growth. But when you stripped it back, the structure didn’t support those promises.
There was confusion about who was responsible for building the network. One side thought head office would sell franchises. The other thought it was the master franchisee’s job.
That disconnect mattered. Because without franchise sales, there was no revenue — and without revenue, the promised returns simply couldn’t happen.
Claims largely failed
Proceedings dismissed against most respondents
Costs orders made against the applicants
The Lesson for Franchisors
If your model relies on future franchise sales to make the numbers work — you’re exposed.
The structure has to stand on its own. Roles need to be clear. Revenue needs to be real.
Otherwise you’re not selling a business… you’re selling an assumption.
Judgement:
https://www.austlii.edu.au/cgi-bin/viewdoc/au/cases/cth/FCA/2020/636.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.