A class action against 7-Eleven and the ANZ bank is set to seek damages for former and current 7-Eleven franchisees.
Acting on behalf of franchisees, Levitt Robinson Solicitors believes “substantial damages” could be available.
Stewart Levitt, senior partner at Levitt Robinson, is filing a claim alleging the ANZ bank authorised loans to franchise buyers that were unsustainable and could not be repaid, reports The Australian.
Levitt highlighted that the loans were ratified in a three-way deal.
“There’s actually a tripartite deal between 7-Eleven, ANZ and borrower,” he said.
However Darryn McAuliffe, CEO of business intelligence firm FranData Australia, pointed out this is not an unusual set-up.
He told Inside Franchise Business “The use of tripartite agreements is a common practice in franchise lending aimed at protecting the interests of all three stakeholders; lender, franchisor and franchisee.
“Amongst other things these agreements create rights to exchange information and arrangements in relation to the treatment of any securities. In practice they drive improved finance access, early communication and, in need, generally an extended period to maximise the value of an underperforming franchise unit”.
McAuliffe added “It is well known in the market that the ANZ bank have been strong supporters of new and existing 7-Eleven franchisees for many years. Whilst we have not specifically reviewed the ANZ’s franchise accreditation process, their historical support of the 7-Eleven system is likely to have been underpinned by an effective and proven approach to assessing individual loans”.
McAuliffe said there have been changes to franchise lending practices over recent years.
“One thing we are seeing is an increased utilisation of independent, external input by franchise lenders to support their own practices. This is important as it provides them with increased information on objective facts and comparative performance.”
Franchise Council of Australia chair, Bruce Billson, said the association will be following the progress of the claims.
He commented “We learned of the court action through media reports, the FCA is not privy to the details but will observe with interest.”
The Australian reports the case is being backed by an American funder and 50 convenience store franchisees have signalled interest in pursuing the claims.
In a statement, 7-Eleven said it will “vigorously defend any such proceedings”.
“We are proud of the significant efforts we have made together with our franchise network to continually adapt our business, and the positive results that are being achieved. We intend to continue these efforts,” the statement read.
ANZ was contacted for comment but had not responded at time of publication.
On its website Levitt Robinson is seeking confidential information from franchisees including information about legal and accounting advice, and referrals to advisors.