Jump Swim’s founding franchisor Jump Loops Pty Ltd, which is in liquidation, has been penalised $23 million for making false or misleading representations and wrongly accepting payments from franchisees.
Ian Campbell, the founder and former managing director of Jump Swim, has been ordered to pay $500,000 in compensation to franchisees, and to pay a penalty of $400,000.
However, many franchisees are unlikely to receive full compensation, despite the Australian Competition and Consumer Commission freezing the company’s assets.
The court case was brought by the ACCC and deputy chair Mick Keogh said “Unfortunately despite the ACCC seeking freezing orders shortly after becoming aware of the conduct, the money paid by franchisees had already been largely dissipated.
“Because the companies have been put into liquidation, many franchisees are unlikely to be ever fully compensated for their loss, and the corporate penalties are unlikely to be paid,” he said.
“However, we consider the penalties ordered by the Court send a strong deterrence message.”
The Jump Swim franchisor offered branded learn-to-swim school franchises for sale between March 2016 and July 2019, falsely indicating to 174 franchisees that they would have a swim school up and running within 12 months of signing a franchise agreement.
Most of those franchisees never received an operational swim school.
Jump Swim also took payments from 127 franchisees when the business knew, or should have known, it would be unable to meet the commitment within 12 months or a reasonable period of time.
The Sydney Morning Herald reported Justice O’Bryan described Jump’s behaviour as a “very serious contravention of Australian Consumer law”.
“The conduct was likely to have had a very serious detrimental effect on the business and the livelihoods of those small business owners,” he said.
Justice O’Bryan said “While Jump Loops conduct cannot be described as fraudulent it was deliberate in the sense that Jump Loops was aware that it could not deliver on its promises, but continued to entice persons to enter into franchise agreements and take payments from them.
“It displayed a reckless disregard of their interests and its contravening conduct deserves strong condemnation.”
The ACCC will attempt to contact all qualifying franchisees at their last known mail or email address, through the Australian Government Solicitor. Franchisees are not obliged to participate in the compensation scheme.
Keogh said “We took this action to help franchisees achieve some compensation and to seek orders preventing Mr Campbell and Jump Swim from signing up further franchisees to Jump Swim or another future franchise,”
Campbell has also been restricted from involvement in franchising for three years.
In mid-July 2019 Belgravia Group’s BK Gym & Swim bought the troubled Jump Swim business from the administrator and by October 21 existing franchisees had joined the new network. Early in 2021 the new owners relaunched the franchise model.
Jump Swim Schools current CEO Mark Collins has welcomed the judicial outcome.
“There are a group of very hard-working and dedicated franchisees who make up the Jump Swim Schools network across Australia, and they are very keen to put this behind them, as are we.
“It’s important though that there is justice and we maximise compensation for those who were most impacted by negligence and deception under the previous ownership.”
Collins said he and his team have assisted throughout the legal process to-date and remained committed to helping where they could.
“We are still working with the affected group to help fund other avenues of legal recourse to obtain further settlements for them, if possible.”
Since taking over the network, Belgravia Group has opened five sites and has another four in development.
“Jump Swim Schools today is thriving with enrolments increasing 27% throughout 2020, despite the impact of lockdowns. Most of our schools are at capacity, which is a fantastic position for our franchisees to be in.”
