Leaked email reveals dispute over millions
Some Australians have revealed their “gut wrenching” experience after pursuing a dream.
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A number of Australians say they have been left in a “great deal of distress” amid claims they have missed out on thousands of dollars as a bitter dispute emerges in one of the country’s most popular franchise groups.
News.com.au has been given an exclusive look into the inner workings of Jim’s Dog Wash – part of Australia’s largest franchise company – which has more than 260 franchisees across Australia and New Zealand, according to its website.
Jim’s Dog Wash is part of Jim’s Group, which is best known for its lawn mowing division. Jim’s Group is Australia’s largest franchising outfit with more than 5000 franchisees across 52 divisions and a turnover of approximately $500 million.
Upset franchisees of Jim’s Dog Wash – who pay fees totalling $49,000 upfront or over five years to buy a franchise – have been shocked to discover a change made three years ago, which they say is unfair.
A huge chunk of those fees – $25,000 – is to obtain the trailer but franchisees who came on board in 2021 and beyond will never own it after a contract change.
Evonne* purchased a Jim’s Dog Wash franchise on the east coast three years ago.
Copies of the contract prior to 2021 and post contract change show the franchise cost remains unchanged “so we are essentially paying the cost of purchasing the trailer – $25,000 – like our predecessors, however have no ownership rights to it”, Evonne said.
Many franchisees had interpreted the new contract clause as meaning that Jim’s Group had ownership of the trailers until vendor finance was paid off – but that isn’t the case, Evonne added.
“We are devastated. I have just realised I have lost $25,000 and a lot of us franchisees are in vulnerable positions. We are sick, constantly riding the poverty line and most of the money we make is going to business costs, Jim’s fees or loans,” she said. “We are very angry.”
On average, Evonne said she makes $1500 a week with 60 per cent paying for Jim’s fees, car and trailer insurance, public liability insurance, consumables like shampoos, equipment, repairs and services as well as these loan repayments for the trailer.
“Most people are paying up to $1000 a month to Jim’s Group,” she added. “People ask what does that buy you? Basically nothing, but the right to continue working, advertising and administration fees.”
Evonne said the rest of her money goes towards her personal bills leaving her “stressed about money permanently”.
“Even if we surrendered the trailer, the loan doesn’t break. If you leave before the loan has finished, you still have to continue paying it off,” she added.
“Most (franchisees) are on this finance and they’re too sick, are parents or taking care of people so they can’t go back into the workforce because they need the flexible hours.”
Do you have a story? Contact sarah.sharples@news.com.au
‘Gut wrenching’
Meanwhile, Ava* told news.com.au that she had used a redundnacy payout for the $49,000 to purchase a franchise two years ago, while also paying close to $1000 each month to the franchisor.
But just 18 months later she gave up the franchise as she was “upset and disappointed” to discover that she would never own the trailer.
“It was $49,000 down the drain,” she said. “It’s obviously upsetting to waste so much money”.
The mum, who has now purchased a second hand trailer and started an independent dog washing business, said the reason behind her buying a franchise “collapsed” when she realised she would never own the trailer.
“Basically had we known the truth beforehand, I would have gone independently from the start and bought my own trailer. I’ve wasted an extra $50,000 for nothing. I could have bought a nice little investment property somewhere,” she said.
“I was very upset and disappointed … It’s gut wrenching.”
Ava said she had printed out the entire contract and read through every page.
But she admitted it was confusing as there were so many options and clauses mentioning buy back of assets, as well as being told that franchisees could make modifications to the trailers.
Explosive leaked emails
In a desperate attempt, franchisees reached out to founder Jim Penman via an anonymous email asking that ownership of the trailer be transferred to franchisees once it is paid off or for the $25,000, or the portion paid in finance, be reimbursed.
But Mr Penman refused their requests, stating that the contract was clear. He invited franchisees to sell their business, adding with a “decent client base you should get substantially more than $25,000 back” – something the franchisees dispute.
In an email from July, leaked to news.com.au, saw Mr Penman explained his reasons for denying the request.
“Sorry, not going to happen. The written documentation we provided made it very clear that the trailers remain ours,” he continued.
“If you were promised something different, then why did you never broach the issue with me? In effect, you’re asking me to gift you several million dollars and I will not do that.”
Evonne is critical that a range of advertising and Jim’s Group material dated after the contract change in 2021 promotes trailer ownership as a benefit.
But Mr Penman told news.com.au that Jim’s Dog Wash system was changed because many franchisees were stripping off their signs and going independent, taking their customers with them as well as the use of intellectual property, including trailer design.
“Those who signed after the changeover date were informed of the arrangement and chose to accept the deal,” he said.
“It is unreasonable for them to come back later and ask for what they consider a far better deal. We are bound by the terms of our contracts in that, for example, we can’t raise fees beyond CPI or even change the manual if they object.
“Franchisees also need to be bound to the terms of their contracts, even if they would prefer to have the contract changed in their favour.”
A system similar to McDonalds
Evonne added Jim’s Dog Wash make franchisees pay for all the repairs and servicing for the trailers – despite never owning them – claiming most of them “have spent thousands of dollars on that alone as well”.
Yet, if they “decide to surrender or sell the business” franchisees have to return the trailer, Evonne added.
But Mr Penman said the group fix major issues such as replacing airconditioning units, but ask franchisees to do everyday maintenance.
“If a franchisee sells their business, they get back most or all of their outlay because the right to use the trailer is transferred and becomes part of the value of their business. How much they receive will be determined by the value of the client base, and whether the trailer had been damaged,” he said.
The only real negative to the franchisees of this system is that they can’t easily go independent, he added.
“The system is similar to that of McDonalds, where a franchisee cannot go independent because McDonalds owns the site or hold the head lease,” he said.
“It’s also similar to how Blue Wheelers works – a rival dog wash company.”
Franchisees under Jim’s Mowing and Fencing are allowed ownership of their trailers – which Evonne also says is unfair.
She claimed that franchisees of the dog washing group don’t have the financial means to engage lawyers to fight the contract.
Jim’s Group initially started when Mr Penman launched a full-time mowing business in 1982 with a $24 investment before turning it into a franchise business in 1989.
Since then Jim’s Mowing has become the largest franchise chain in Australian and the largest and best-known lawn mowing business in the world, according to its website.
Jim’s Cleaning was launched in 1994, followed by more than 50 other divisions including painting, plumbing, fencing, pool care, pest control and recently beauty.
$24,000 fine in 2022
Concerns have also been raised that Jim’s Group had been fined $24,240 by the Australian Competition and Consumer Commission (ACCC) in 2022 due to two alleged contraventions of the Franchising Code of Conduct related to the Jim’s Dog Wash franchise.
The competition regulator alleged that Jim’s Group significantly understated the number of former franchisees within the Dog Wash division and failed to provide the contact details of those former franchisees.
It also issued an infringement notice alleging that Jim’s Group had made a false or misleading representation regarding their cooling off rights after entering a franchise agreement.
“The ACCC fine happened because we did not disclose franchisees of a previous franchisor in the same area, who had since left. In our view, including such franchisees would have been misleading, because it did not reflect the service of the franchisor who would actually be providing support,” Mr Penman explained.
“However, we accept the ACCC ruling and now disclose all previous franchisees in the area. I might add that we have been giving prospects a list of all franchisees in the area since 1989, decades before this was required by law.”
*Names changed
sarah.sharples@news.com.au
Originally published as Leaked email reveals dispute over millions
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