Pets Paradise franchise in Federal Court stoush with disgruntled franchisees

Negotiations will continue between Pets Paradise and two former Queensland franchisees, after the decades-old pet care chain was found to have breached the Trade Practices Act by making misleading and deceptive claims when the franchisees signed up.

Franchisees Elizabeth Campbell and Lynda Donnelly, owners of the business Pampered Paws Connection, took legal action on their own behalf and on behalf of other present or former Pets Paradise franchisees, accusing Pets Paradise of misleading and deceptive conduct over a range of claims made when the pair entered into their franchise agreement in 2007.

In a judgement handed down last week in Federal Court in Adelaide, Justice Ronald Mansfield found the majority of the former franchisee’s assertions were without foundation, but said Pets Paradise had been involved in one instance of misleading and deceptive claims around the way the franchisees were required to pay up front for stock allocated to them by Pets Paradise’s major supplier, a company called Global Pet Products.

A further hearing has been set for February 22. The parties have 14 days to file proposed orders.

At the heart of the argument was whether their franchise agreement in fact compelled them to purchase stock only from Global Pet Products.

As Justice Mansfield explained, the applicants’ thesis was that “the Pets Paradise system was to enable ‘Global, and those controlling it, to manipulate the franchisees’ businesses to the benefit of Global’, so that the franchisees would be no more than Global retailers.”

“The only relevant legal relationship between Pampered Paws and Global is by the Global Supply Agreement. Thus, it is asserted, Global achieves the product mark-up to franchisees with a ‘tied product’ obligation, and Global controls and regulates the products which franchisees including Pampered Paws are entitled to sell,” he said.

“It is claimed that the ‘Pets Paradise Business Model’ as described in the Disclosure Document and in the Franchise Agreement is different from that reality.”

But Pets Paradise responded that its franchise system was a typical and well-run operation and the Global deal was both unremarkable and proper.

Mansfield agreed, and dismissed most of the franchisees’ claims of misleading and deceptive conduct.

However, Mansfield said in his conclusion the representations made about recurring and isolated payments to Global for allocated stock were misleading and deceptive and did breach the Trade Practices Act.

But he added: “It is not clear that Pampered Paws has suffered any result of that representation or its misleading character.”

Pets Paradise has 53 franchised Pets Paradise businesses throughout Australia, and 23 company-owned businesses and was founded in the late 1970s in Melbourne. It was contacted for comment this morning, but the relevant person was not available.