Quest Services Apartments is facing court action from 29 of its franchisees over higher fees and changes in terms.
Photo: Jesse Marlow
A rift has emerged in one of Australia’s biggest accommodation providers with 29 Quest Serviced Apartments’ franchisees taking legal action in a bid to stop the franchisor raising its fees and changing the terms of their franchise agreements
In a statement of claim filed with the Federal Court in Victoria during November, the 29 franchisees claim that Quest chairman and founder Paul Constantinou announced in March last year that its gross sale fee would rise from 6 per cent to 8 per cent, with a new 1 per cent brand fee to be added while a new agreement and operations manual would come into effect on July 1, 2012.
The claimants are arguing that, among other things, the higher gross sales fee was not realistic or reasonable.
Quest’s defence, filed with the Federal Court, said the new “all inclusive” fee structure eliminated several ancillary fees.
The new system was needed to invest in Quest’s “system, processes and brand activities necessary to retain and increase value for Quest’s stakeholders”, with resources, under the present fee structure, likely to be stretched as the group aimed to meet the challenge of the coming decades.
A directions hearing is due to take place in the Federal Court in Melbourne on Friday morning before Justice Julie Anne Dodds-Streeton.
The claimants also argue that a new standard agreement effectively reduces or cancels their exclusive territory, opening them up to competition from new Quest franchises.
Reducing or eliminating a franchisee’s exclusive territory would have a material financial impact on the applicants, the claim says.
Changes to the manual would unreasonably prejudice their interests and change their rights and status under the existing agreement, according to the statement.
They are also claiming that Quest engaged in unconscionable conduct under consumer law because it was aware that each of the applicants lacked bargaining power as they needed to renew their existing agreement in order to continue to operate their Quest franchise.
Quest denied the claim.
The full version of this story first appeared on The Australian Financial Review