GJ Gardner Homes NSW master franchisee, Colour Capital, has launched proceedings in the Federal Court against its franchisor, alleging unconscionable conduct.
Franchisee Matt Hope, who founded Colour Capital, is arguing that the Gardner family is trying to take back a business he has grown over more than 17 years for nil or negligible compensation.
“This is a line in the sand which has implications for every franchise business in Australia,” he said. “We have seen a procession of powerful franchisors trying to eat the lunch of profitable franchise businesses, in retail, in automotive and now in the home building sector.”
Hope said launching legal action was a last resort after mediation failed last week.
“Ultimately, we were left with no choice – I am not prepared to surrender my life’s work which I have built up over 17 years into a highly profitable business unless I receive fair value for that business,” he said.
Hope said 90 franchisee builders and thousands of tradies, are reliant on the master franchisee’s support.
“The businesses who depend on us have all faced unparalleled challenges in recent years and above all what they need now is certainty,” he said.
Statement claims unconscionable conduct
In a statement of claim Colour Capital alleges that Netdeen (trading as GJ Gardner) first blocked a multimillion dollar sale of a stake in the master franchisee’s business and then offered to buy the whole business for what Colour Capital believes to be an undervalued rate.
According to Colour Capital, the value of its franchised GJ Gardner business is $54 million. However Hope alleges the franchisor’s top offer in 2021 was just $14 million.
The offer came after Netdeen allegedly blocked the sale of 36.33 per cent of shares to the Teaminvest Private Group, which already had a 33.30 per cent stake in Colour Capital.
Colour Capital claims Netdeen then refused to allow the sale of the business to any third party and cast doubt on the continuation of the master franchise arrangement.
The purpose of the action was to purchase the franchised business at a reduced cost, Colour Capital alleges.
“This conduct was unreasonable, not in good faith and, in all the circumstances, unconscionable in contravention of [section 21] of the Australian Consumer Law (ACL) and clause 6 of the [Franchising] Code.“
Colour Capital alleges Netdeen breached its good faith obligations under the Franchising Code of Conduct. It also alleges Netdeen engaged in unconscionable conduct that breaches Australian Consumer Law.
The master franchisee is seeking injunctive relief, damages or compensation, and declarations under the Competition and Consumer Act 2010.
GJ Gardner was contacted for comment.
