The ACCC has instituted proceedings against franchisor Jump Loops Pty Ltd and its parent company Swim Loops Holdings Pty Ltd (collectively Jump Swim) in the Federal Court, alleging that it made false, misleading or deceptive statements about Jump Swim School franchises, in breach of the Australian Consumer Law.
Jump Loops Pty Ltd is an Australian-based franchisor that sells franchises to those wishing to operate their own Jump Swim School to supply learn-to-swim services.
This follows on from Swim Loops, the company that represents the largest number of Jump! Swim Schools, going into voluntary administration in May. However, it should be noted that as the individual Jump! Swim Schools are independently owned, they are not covered by the order.
Jump! Swim Schools had been facing challenges following a series of court cases and disputes with franchisees. Jump! had grown dramatically and has more than 100 franchise swim schools in the network, including 60 in Australia and others in New Zealand, the US, Singapore and Brazil.
Now, the ACCC is alleging Jump Swim made representations in its promotional material that a prospective Jump Swim School franchisee would have an operational swim school within 12 months of signing a franchise agreement, when it did not have reasonable grounds for making that statement.
More than 90 franchisees did not receive promised school in period
Many franchisees were not provided with an operational swim school within this period and in some cases it was not provided at all. There are over 90 Jump Swim franchisees who did not receive an operational swim school within 12 months or at all. The initial costs of setting up a Jump Swim School generally ranged from approximately $150,000 to $175,000.
“Franchisors need to take their obligations under the Australian Consumer Law seriously. Purchasing a franchise is a big decision, and people looking to open a franchise business rely on the information from the franchisor being accurate,” says ACCC chair Mick Keogh.
“We allege this conduct caused substantial harm to franchisees who paid significant sums but did not receive an operational swim school within the time specified, or at all.”
The ACCC is also taking action against Jump Swim’s director, Ian Michael Campbell, alleging he was involved in the conduct.
Additionally, the ACCC alleges that the franchisor Jump Loops Pty Ltd wrongfully accepted payment from franchisees where it failed to supply an operational franchise within the 12-month period specified, or alternatively, within a reasonable time. The ACCC alleges that Swim Loops Holdings Pty Ltd and Campbell were involved in the conduct.
“Jump Swim continued to accept payments when it knew, or ought to have known at the time it accepted the payments, that the timing for its delivery of operational franchises was dependent on events that were outside its control,” Keogh says.
Each Jump Swim School required development and building approvals from council, and in many instances, it was taking longer than 12 months to provide franchisees with operational swim schools.
The ACCC is seeking injunctions, declarations, pecuniary penalties, redress for franchisees, disqualification orders, an order as to findings of fact, and costs.
Before starting this court action, on June 7, 2019, the ACCC obtained a Federal Court order freezing the assets of Jump Swim and Campbell and requiring them to disclose details of their financial position. If the ACCC is ultimately successful in its case against Jump Swim and Campbell, it intends to apply to the court for any preserved funds (if available) to be used to compensate Jump Swim School franchisees affected by the alleged conduct.
Glenn O’Kearney of GT Advisory and Consulting was appointed as administrator to Swim Loops following a wind-up application brought by Barry Ryle and Dorothy Ryle from Western Australia. O’Kearney says his appointment relates only to Swim Loops and does not extend to or affect any other separate related legal entities.
The administrator says that while he investigated Swim Loops it would be “business as usual” for Jump franchisees and staff, and he would ask the court to allow sufficient time for the investigations.