by Simon Lord

last updated 04/06/2015

Electioneering Doesn't Help Fraud Victims

by Simon Lord

last updated 04/06/2015

February 2008 - The recent outburst by Chris Carter, the Minister for Ethnic Affairs, accusing Green Acres of being devious and ruthless in its dealings with those affected by the apparently fraudulent sale of non-existent franchises to Chinese and Indian immigrants marks a sad decline in the previously sensible commentaries on the situation.

While Mr Carter's Cabinet colleague, Lianne Dalziel, has taken the time to investigate the issue, to talk to people involved and to consult with experts in the field, Carter himself has apparently only talked to one group of victims of the fraud. In situations like this, emotions understandably run high and it behoves our elected representatives to help seek a way forward rather than fan the flames. Such an approach smacks of political grandstanding , particularly in an election year. The politicisation of the problem is further evidenced by the news that the new chairman of the group representing the alleged victims is the ethnic adviser to Auckland-based Labour MPs   and their lawyer is tipped to be Labour's second Chinese candidate in the coming general election.

There are two points that need to be made here. The first is that every issue has two sides. Mr Carter, when making his comments, had apparently talked only to one side. Secondly, Green Acres is restricted in how it can respond because it has been told by the Serious Fraud Office not to comment publicly about the case for fear of prejudicing its investigations. In obeying this request, the company - itself a victim if the reports are true - is unfortunately at the mercy of half-informed commentators. Therein lies the danger for Green Acres, its franchisees and the franchise sector as a whole.

A recent story put out by the NZ Press Association quoted business consultant Hannah Samuels on the impact of the fraud on the franchise industry in general . Although Ms Samuels had not apparently talked to any franchisors before issuing her press release, she made some extremely good points about the potential for this issue to damage the reputation of franchising as a whole. She concluded, "One of the signs of a mature industry is how well incidents are handled." It is that process which comments such as those made by Chris Carter are likely to damage.

Mature Response

But just what has the impact been on franchising in general so far? Franchise New Zealand magazine recently hosted a meeting on franchisee recruitment for 56 franchisors and the Green Acres situation was, not surprisingly, the main topic of conversation at every break. Although there were, as you would expect, a number of rumours flying around, few people reported any drop-off in the level of interest in buying franchises. Statistics from the industry's leading website suggest that as many people are looking for information and opportunities as ever at this time of year, and Green Acres themselves report that enquiries and franchise sales have not declined.

Perhaps franchising has indeed developed a level of maturity not just within the sector but in the minds of the public itself. After all, no industry is immune to fraud or criminal acts - just ask retailers who have to put up with theft by customers and staff alike, or the French bankers who have just lost a reported $10 billion to a single rogue trader.

Of course the problems being faced by those who thought they had bought Green Acres franchises must be addressed. Of course the sector must learn from this experience and develop safeguards and practices that ensure it will not happen again. And of course the Franchise Association itself must assist in developing such practices and ensuring they are adopted by all ethical franchisors in this country. The government certainly has a role to play in helping ensure that all this happens and that the public is aware of the safeguards. But for Chris Carter to treat a sector that generates well over $10 billion in the New Zealand economy merely as an opportunity to gain political advantage is not acceptable. New Zealanders - and franchisees and franchisors - deserve better.

Another Complication

Incidentally, one aspect of the case that we have not seen reported anywhere is that the apparent reason why some of the people affected by the alleged fraud are unwilling to take up the rescue package offered by Green Acres is not because of language or financial difficulties but because of time. Many are already working full-time and bought the business in a commendable attempt to increase their income and establish themselves more rapidly in their new country. Unfortunately, being a franchisee requires full-time commitment. This therefore complicates even further the franchisor's well-meaning attempts to resolve the issue, making it more important than ever that others give those involved the space to find workable solutions for all.

The Good News

One good thing to have come out of the publicity surrounding this case may be that people looking at buying a franchise are made wary enough to do their research properly and take experienced legal and financial advice. According to Peter Fergusson of the Franchise Association, 'Our phone inquiry levels have increased since Xmas. Of those calls, most relate to people who are currently looking at a franchise business and have become more aware of the need to "do their homework" a little better rather than blindly trust a good salesman.' Franchise New Zealand magazine & website has been preaching this message - and making the tools freely available - for the last 17 years. Find more information in the Buying A Franchise section of this website.

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