JK (IPCC) 20 November 2020

Can this franchise case go to consumer helpline?

Hi Friends My friend needs solution for the following issue : I have seen an advertisement for Franchise business of cafe shop in Oct, 2018 and invested in that Rs.5lacs as franchise fee. The terms of the agreement was that the cafe owner will search premises for me in the locations I spotted and if he is not able to find the same in 40 to 45 days then full amount shall be refunded to me. After 20 days I just went across other franchise units to see their performance. To my surprise they were not running well and the profit forecasts shown by the cafe owner are not matching the reality. And also found that the other branches are not following basic sanitation, like cockroaches in the place where food is stored etc., By seeing all this I went to the owner to ask for refund of the amount invested, but he dint agree for the same. Not even a penny is returned. Inturn, he adviced me to bring a franchise business (another scape goat to replace my loss) so that he will taje money from him and return it to me, for which I didn't agree. Overall I was helpless and was not sure what to do, now some people are advising me to go to consumer court. Wanted to know if this case comes under consumer protection or not? Please advice. Thanks in advance.

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2 Replies

Meenakshi Sakhare 20 November 2020

The franchise fee is usually non-refundable. Unless the franchise agreement states otherwise, you won’t get the fee back under any circumstances. However, your franchise agreement may provide a refund if you decide to cancel the deal within a certain period, usually 30 to 45 days after you sign the agreement you can approach the local police station or file suit for specific performance.

Was there an agreement signed?

How will you prove that the amount was given for joining the franchise system in absence of an agreement.

If there was an agreement, does it stipulate any such term of refund?

JK (IPCC) 21 November 2020

Hi Meenakshi

There was no agreement as such, only a Letter of Intent is there which shows the address of both parties and amount received through cheque and a line stating that if the franchisor is unable to show a premises/location for shop in 40 to 50 days then amount paid will be fully refunded.

This franchisor sent me projections for the shop... So can this be used as evidence?

Since there is no agreement done except that LOI, can I approach National Consumer helpline to get this issue addressed?

Please suggest..

Thank you for your time & patience.