Franchisees of the Viva Leisure health club chain have sent a legal letter to their franchisor, warning the ASX-listed company that they will take legal action if their concerns are not addressed within one. month.
A group of 53 franchisees from 64 outlets in Viva Leisure’s Plus Fitness gym network sent a legal letter and draft statement to the company in late April, detailing their dissatisfaction with a change in the franchise agreement, The Australian Financial Review Reports.
The letter from the franchisees’ law firm reportedly warned Viva Leisure that they would initiate proceedings on behalf of the franchisees of Plus Fitness, if their concerns were not addressed within one month. The letter also included a draft declaration for a class action lawsuit in NSW Federal Court on behalf of two plaintiffs.
The franchise group is challenging an amendment to their agreement that would allow Viva Leisure to open new gyms near existing Plus Fitness franchisees.
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The change, known as the territorial exclusivity provision, determines the level of protection that franchisees enjoy when their franchisor opens new stores that may compete with them.
The franchisees say that under the amended agreement any business associated with Viva Leisure could open near them.
Last year, Viva Leisure acquired Plus Fitness from Australian Fitness Management, which is a network of 200 franchised outlets.
The ASX-listed company also owns other gym chains, including Club Lime, Fit N First, Pinnacle Health Clubs, GroundUp, and Psycle Life, which operate more than 100 gyms across the country.
The dispute between gym franchisees and Viva Leisure comes weeks after the Australian Competition and Consumer Commission (ACCC) updated its duty free for all future franchisees.
Talk to SmartCompanyACCC Vice President Mick Keogh noted that franchisees often rush into franchise deals without understanding all the constraints that may apply to their businesses.
âWe are continually calling potential franchisees to really do their homework,â he said.
Earlier this month, nationwide courier company Megasave Couriers Australia was fined $ 1.9 million by the Federal Court.
In ACCC proceedings, the Federal Court found that Megasave Couriers had violated consumer law by making false or misleading statements to new franchisees.
The woes of the $ 180 billion franchise industry have not escaped scrutiny in recent years, with a parliamentary inquiry into the franchise code of conduct in 2019 finding the system in need of significant reform .
Despite the survey recommending 71 changes, little has been done since to improve the sector.
The ACCC recommended that the government consider legislating a licensing regime for franchisors instead of the current code-based model.
SmartCompany contacted Viva Leisure for comment.