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Franchised Businesses Ltd and TVWorks Ltd - 2008-070

Members

  • Joanne Morris (Chair)
  • Paul France
  • Tapu Misa
  • Diane Musgrave

Complainant

  • Franchised Businesses Limited of Auckland

Dated

18th September 2008

Number

2008-070

Programme

Target

Channel/Station

TV3

Broadcaster

TVWorks Ltd


Complaint under section 8(1B)(b)(i) of the Broadcasting Act 1989
Target – item about the experience of a man who purchased the “Hire A Hubby” franchise for the suburb of Greenlane in Auckland – allegedly inaccurate and unfair

Findings
Standard 5 (accuracy) – not inaccurate or misleading – Target mentioned that there had been a settlement – the settlement was not the focus of the item – not upheld 

Standard 6 (fairness) – fairness arguments relied on the programme being misleading – FBL was treated fairly and given a fair opportunity to comment – not upheld

This headnote does not form part of the decision.


Broadcast

[1]   An episode of Target, a consumer affairs programme, broadcast on TV3 at 7.30pm on 29 April 2008, covered the story of Colin Hinds and his experience as a Hire A Hubby franchisee. Viewers were told by the programme’s presenter that Target had investigated “a claim that Hire A Hubby is vague about the potential income new franchise owners can earn from the territories they sell and what a ‘new’ area actually is”. The story consisted of two five-minute segments which were separated by another Target item.

[2]   In the first segment, Target reported that Mr Hinds had bought the Hire A Hubby franchise. Target reported that Mr Hinds had bought the Hire A Hubby franchise, owned by Franchised Businesses Ltd (FBL), for the central Auckland suburb of Greenlane in October 2005, after considering it for six months. Target told viewers that historical sales data for Greenlane was not available for Mr Hinds to look at prior to the purchase because FBL told him it was a new franchise area. Mr Hinds and his wife Deb Haimes told Target that they had been to a franchise expo, and were told that Hire A Hubby franchisees could earn more than $2000 a week, which was what eventually convinced them to purchase. They paid FBL more than $29,000 for the franchise, plus $7,500 for equipment, and a monthly franchise fee of $731.

[3]   Target’s presenter went on to say that, unfortunately for Mr Hinds, by December of 2005, “the work had all but dried up”, even though he had distributed many flyers around Greenlane advertising his handyman services. Mr Hinds was shown saying he was lucky to get one day of work a week, and was having to survive on about 40 hours of work a month. He then, according to Target, discovered from other franchisees that Hire A Hubby had been in operation in Greenlane before, and that the previous franchisee had complained about the lack of work in the area.

[4]   Target’s presenter reported that, by March 2006, Mr Hinds had to sell a rental property “to make ends meet”, and was ready by June to dissociate himself from the franchise, but FBL talked him round by offering to divert work from another franchise area, and suggested that he put more effort into marketing. Three months later, Mr Hinds sought legal advice about getting a “divorce” from Hire A Hubby and a refund of his $29,000; in the meantime he tried to sell his franchise on TradeMe, with no success.

[5]   In December 2006, Mr Hinds stopped paying his monthly fee to FBL. Target’s presenter reported that FBL told Mr Hinds he would have to pay an $8,500 cancellation fee to get out of their contract early, and that “debt collectors were mentioned”. The presenter told viewers that “finally in June 2007 Hire A Hubby terminated the franchise agreement but still wanted $6,500 from Colin in unpaid monthly fees”. The Greenlane franchise was sold to someone else, but it was reportedly back on TradeMe within six months.

[6]   At the beginning of the second segment for the item, Target’s presenter summarised Mr Hinds’ experience as follows:

The crux of the issue was Colin’s understanding at the time of buying the franchise that it was a new franchise and therefore had no historical sales data for him to view. A year-and-a-half later Colin’s contract with Hire A Hubby’s owners Franchised Businesses Ltd or FBL was terminated. FBL said he still owed them $6,500 in unpaid monthly franchise fees. But Colin wanted the $29,000 he paid for the franchise refunded.

[7]   Having discovered the Greenlane franchise was back on TradeMe, the Target presenter posed as a prospective buyer and asked the following questions of, and received these responses from, FBL, which were displayed in on-screen graphics during the programme:

Presenter:    Is Greenlane an old or a new franchise?

FBL:             It’s actually both! The Greenlane area has been worked before but the
                   previous owner/franchisee has returned to South Africa. We have historical
                   data in regard to all enquiry [sic] for the area.

Presenter:   We replied that we were a tad confused about it being both old and new and
                   could they please explain, and while they’re at it, maybe send through some
                   historical data.

FBL:            The area has been worked by previous Hubbys.

Presenter:   Which covered the old part, and as for the new?

FBL:             We advertise the business as new on TradeMe alongside other Hubbys
                   who are for sale too.

[8]   Target’s presenter told viewers that FBL had attached historical sales data for Whangarei North, which showed a Hubby whose net monthly earnings were more than $13,000. Target asked again for sales data from Greenlane. FBL responded that:

There are no financial statements from the previous franchisee. The projected gross income for a first year Hubby is approximately $135,000 and up (subject to individual performance).

[9]   The presentersaid that FBL had again attached sales data for Whangarei North. So, it said, it contacted FBL directly, as Target, and asked how a franchise that had been worked before could still be called “new”. FBL offered the following responses:

FBL:            The territory was vacated and was available for purchase directly from
                   Hire A Hubby. It was not sold as a going concern... so it is a new business.

Presenter:    We also asked if it was common practice when selling a franchise to provide
                   historical sales data from another area.

FBL:             Data belongs to the franchisees... some are happy to share as an example
                   of what can be achieved [and] how the business works.

Presenter:    Finally we asked, is it true that Hubbys can earn $135,000 a year and up,
                   just like they told us earlier.

FBL:             We confirm that Hire A Hubby franchisees can earn up to $135,000 in their
                   first year of operation. This is based on regular reports furnished to
                   Hire A Hubby by individual franchisees.

[10]   The Target presenter was then shown arriving at the offices of FBL and asking the receptionist if someone was available to comment on Mr Hinds’ story. The presenter said the receptionist had told him that FBL’s directors were overseas, the operations manager was sick, and the franchise sales manager was out of the office. The presenter told the receptionist that Target would wait outside for 30 minutes if anyone decided to offer comment. He then said that:

Presenter:     15 minutes later their PR man called to say if we went back in, security would
                     kick us out, and if we wanted an interview he made us this very curious offer.

FBL:              Yeah basically, drive to a location, then I’ll give you a call and let you know,
                     ok?

Presenter:     That all sounds a little bit underhanded, driving to a secret location...

FBL:             ...I think you’ll enjoy it... come with me for the ride... I think you’ll enjoy it.

Presenter:     We’re a television show. We don’t just go on rides with strangers to sort out
                    issues, we meet them at their place of work and that’s what we’ve come here
                    to do. Now if you’ve got someone from Hire A Hubby that would like to
                    represent themselves on Target, on TV3, then we’re willing to do that.
                    We’re not willing to accommodate you and your vague offers – he’s hung up,
                    again.

[11]   The presenter then stated at the end of the segment that “Colin can’t talk to us anymore either because a recent court settlement means he can’t comment further”.

Complaint

[12]   Franchised Businesses Limited (FBL), made a formal complaint to TVWorks Ltd, the broadcaster, alleging that the programme “contained a number of inaccuracies and misrepresentations” which breached standards of balance, accuracy and fairness.

[13]   FBL argued that Target was aware that the matter between it and Colin Hinds had been settled “on the basis that Colin Hinds accepted he had no claim against [Hire A Hubby]”, and had been provided with a copy of the settlement deed. FBL said that “he withdrew all claims, and acknowledged that he was responsible for royalty payments he had not made”, and that there had been no breach of the arrangement on the part of Hire A Hubby.

[14]   Secondly, FBL considered that Target had told viewers that Hire A Hubby had terminated Mr Hinds’ franchise agreement, which was untrue. It said that Mr Hinds terminated the agreement himself, having walked away from the franchise agreement.

[15]   Target was also wrong, FBL argued, to represent to viewers that Mr Hinds had terminated the agreement because he did not have sufficient work. FBL wrote that “Mr Hinds, by his own admission, made himself unavailable for much of the work referred to him... It is simply wrong to suggest that the franchise underperformed”.

[16]   The complainant took issue with Target’s portrayal of FBL as “unwilling to speak with it”. It said that Target had arrived at its offices unannounced and without an appointment, despite FBL having previously requested that Target make an appointment if it wished to speak with the company’s owners. Further, Target was aware, prior to arriving at FBL’s offices, that the owners were overseas, and no one else at the office was able to provide information to Target or was authorised to meet with Target on camera. FBL considered that Target had therefore misrepresented the position of the company. It maintained that Target did not give FBL an opportunity to speak with it before broadcasting the programme, and that Target did not indicate to viewers that FBL had actually provided a number of written responses to Target’s questions.

[17]   The complainant concluded that:

Target’s portrayal of the conduct of the Company was misrepresented, grossly distorted, and designed simply to cast as negative a light as possible on the Company. In no way was the programme balanced, accurate, or representative of the actual position. Of greater concern, is that all of the background was known to Target and that it chose to deliberately ignore the facts surrounding the (now resolved) dispute.

[18]   FBL requested from the broadcaster a retraction and apology regarding its treatment of the company.

[19]   The complainant attached copies of correspondence between FBL’s lawyers, Top Shelf Production’s lawyers, and FBL.

Standards

[20]   TVWorks assessed the complaint under Standards 4, 5 and 6 of the Free-to-Air Television Code of Broadcasting Practice. These provide:

Standard 4 Balance

In the preparation and presentation of news, current affairs and factual programmes, broadcasters are responsible for maintaining standards consistent with the principle that when controversial issues of public importance are discussed, reasonable efforts are made, or reasonable opportunities are given, to present significant points of view either in the same programme or in other programmes within the period of current interest.

Standard 5 Accuracy

News, current affairs and other factual programmes must be truthful and accurate on points of fact, and be impartial and objective at all times.

Standard 6 Fairness

In the preparation and presentation of programmes, broadcasters are required to deal justly and fairly with any person or organisation taking part or referred to.

Broadcaster's Response to the Complainant

Standard 4 (balance)

[21]   With regard to Standard 4, TVWorks stated it did not consider that the programme discussed a controversial issue of public importance. It said that FBL’s concerns regarding “balance” were matters of factual accuracy and therefore more appropriately dealt with under Standard 5.

Standard 5 (accuracy)

[22]   Turning to accuracy, TVWorks noted that it had requested comment from the producers of the programme, and been provided with copies of correspondence between Top Shelf Productions and FBL. It then responded to each of FBL’s arguments made in its formal complaint.

Breach of the franchise agreement by Hire A Hubby

[23]   TVWorks did not consider that Target suggested there had been a breach of the agreement between Hire A Hubby and Colin Hinds. It emphasised that the item had two separate elements. First, it covered Mr Hinds’ experience up to the point of settlement, which TVWorks noted was recorded prior to the settlement being effected, and secondly, it separately investigated the issue central to Mr Hinds’ claim, regarding what constituted a “new” franchise area. 

[24]   TVWorks maintained that at no point did the programme state that a breach of contract had occurred between Hire A Hubby and Mr Hinds; the item explained the difficulties Mr Hind had experienced and the dispute that had arisen and explicitly stated that the dispute had been settled: “Colin can’t talk to us any more because a recent court settlement means he can’t comment further”.

[25]   The broadcaster emphasised that Target’s reporting of the investigation regarding the information provided to potential franchise purchasers from Hire A Hubby made no specific mention of Mr Hinds’ contract and the two distinct angles of the story were broadcast seven minutes apart, though linked with a recap of the earlier story (about Mr Hinds) to provide background. It noted the summary at the end of the item which told viewers “if you’re looking at buying a franchise ask the right questions...”

[26]   TVWorks concluded that there was no suggestion in the item that there had been a breach of any arrangement between Mr Hinds and FBL, and that even if that suggestion arose from telling Mr Hinds’ story, “the fact that the dispute [was] settled does not ‘validate’ a contention that there was no breach”.

Statement that Hire A Hubby terminated the franchise agreement with Mr Hinds

[27]   TVWorks considered that the programme made it clear that Mr Hinds had terminated the agreement by choosing to walk away. This was supported by the statements that Mr Hinds had sought legal advice to “divorce” Hire A Hubby, that he wanted out of the agreement plus a refund of the purchase price, and that he stopped paying his monthly franchise fees. The latter statement was accompanied by a “CANCELLED” graphic over the top of a cheque made out to Hire A Hubby. Later in the programme Target reported that “finally in June 2007 Hire A Hubby terminated the franchise agreement”.

[28]   TVWorks referred to a letter of 16 May 2008 from Target’s lawyers Chen Palmer to Claymore Law (representing FBL) which responded to the following point made by FBL:

Target was advised by Mr Hinds that HAH purported to terminate the agreement with effect from 1 June 2007 by means of a letter from its solicitors. It follows that HAH did not accept any prior termination of the franchise agreement by Mr Hinds...

Suggestion that the franchise underperformed because Mr Hinds had insufficient work

[29]   FBL argued that Target misrepresented this, because “Mr Hinds, by his own admission, made himself unavailable for much of the work referred to him”. TVWorks said that its understanding was that Mr Hinds was available to work but did not obtain enough work to enable him to survive. It invited FBL to provide evidence that Mr Hinds “made himself unavailable”.

[30]   The broadcaster pointed to Chen Palmer’s letter of 16 May to FBL’s lawyers, which noted that the programme-makers had information supporting Mr Hinds’ comment that he had one day a week worth of work, and that he was only charging around 40 hours a month. Chen Palmer stated that “this is supported by information provided to Top Shelf by your client, which shows that Greenlane HAH franchise received an average of 9 to 10 enquiries through its 0800 number between January 2006 and December 2006”.

[31]   TVWorks concluded that the broadcast did not breach Standard 5.

Standard 6 (fairness)

[32]   FBL argued that Target portrayed it as unwilling to comment on the programme, that Target left it no opportunity to speak with Target before the programme went to air, and that at no point did Target indicate to viewers that FBL had provided written responses to its questions. TVWorks considered that these were issues of fairness rather than accuracy.

[33]   The broadcaster noted that the majority of these issues had been covered by the lawyers’ correspondence. Chen Palmer in its response to FBL’s letters had confirmed that various interview requests were made by Top Shelf on 29 January 2008 and that a meeting between Top Shelf and FBL representatives was filmed on 30 January, at which time FBL declined to comment. On 18 April a fax was sent and on 23 April a hard copy delivered from Top Shelf to FBL, containing questions and an invitation to respond to them. FBL responded to some of those questions in writing via email. TVWorks pointed out that relevant extracts from some of those responses were broadcast on Target, both in writing and verbally.

[34]   With regard to FBL’s contention that Target had portrayed it as unwilling to comment at the time the presenter visited its offices, TVWorks considered that it would have been obvious to viewers that the presenter’s call was unexpected. It argued that, because Target explained for its audience that most of the staff of FBL were overseas or out of the office, its “portrayal of this particular encounter was both fair and accurate”.

[35]   TVWorks assumed that FBL accepted the response from Chen Palmer as an accurate account of the contact between FBL and Target’s producers, and therefore concluded that FBL had the opportunity to respond to Top Shelf before the programme went to air and that a sufficient summary of FBL’s response was included in the programme. It declined to uphold the complaint that Standard 6 was breached.

Referral to the Authority

[36]   Dissatisfied with TVWorks’ response, FBL referred its complaint to the Authority under section 8(1B)(b)(i) of the Broadcasting Act 1989.

Background

[37]   FBL first offered the following background information:

  • FBL was party to a franchise agreement dated 17 October 2005 with H 2 Blo Limited. Colin Hinds was the director and shareholder of H 2 Blo, and entered the agreement as guarantor.
  • A dispute arose between the parties and FBL issued proceedings against H 2 Blo and Mr Hinds. They counterclaimed.
  • The parties agreed to attempt to settle the proceedings by way of a settlement conference. A settlement was reached on 16 April 2008.
  • Prior to the judicial settlement conference, Mr Hinds contacted Target, produced by Top Shelf Productions Ltd. FBL argued this was “a tactic commonly used by a party attempting to gain some leverage over the other party by showing them in a bad light”.
  • The parties to the dispute became aware that it was likely a settlement would be completed at the settlement conference. While investigating the matter, Target was specifically advised by FBL that the matter was sub judice and that no comment could or would be made by FBL. It attached emails and correspondence supporting this.
  • Pursuant to the settlement deed:
    • H 2 Blo and Mr Hinds had provided FBL with a written acknowledgement that their claims were unequivocally withdrawn and that they would make no further claims in the future; and
    • Both parties undertook not to make further comment on the dispute or terms of settlement to any third party.
  • This information was made very clear to Target and they were also provided with a copy of the settlement deed.
  • On 29 April 2008 at 7.30pm, Target broadcast an item featuring the dispute between FBL and Mr Hinds.

Referral

[38]   FBL maintained that Standards 5 (accuracy) and 6 (fairness) had been breached, and that TVWorks had failed to address the substantive issues referred to in its original complaint.

[39]   FBL emphasised that Target was aware that the matter between FBL and Mr Hinds was settled on the basis that Mr Hinds and H 2 Blo accepted that they had no claim against Hire A Hubby. They withdrew all claims and acknowledged that they were responsible for royalty payments owed to FBL. On that basis, FBL said, it was “simply wrong for Target to claim that there may have previously been a breach of the franchise agreement by FBL”, especially as the settlement, of which Target was provided a copy, made it clear that Mr Hinds and H 2 Blo accepted that there was no such breach.

[40]   The complainant contended that, despite the fact that this information was made available, Target continued with the programme and aired footage “which would lead any reasonable viewer to conclude that Mr Hinds and [H 2 Blo] had, and continued to have, a legitimate claim against [FBL]”. They did not, FBL said, and they had accepted exactly that in the settlement deed.

[41]   FBL maintained that Target was specifically advised in the initial stages of its investigation that no comment could or would be made by FBL because the matter was sub judice; it made clear to Target how a contempt of court might arise. FBL said it would not, and could not, be party to any such contempt and would not do anything that may have adversely influenced the possibility of settling the matter.

[42]   Regardless, the complainant said, when Target arrived unannounced at FBL’s offices, the staff available made clear that FBL was not in a position to provide any representatives to speak. This was despite FBL’s previous request that Target make an appointment should it wish to speak with the company’s owners. Further, any comment that they would have made would have been limited to the fact that there had been a confidential settlement with the “clear agreement that no parties were to speak on this matter”.

[43]   FBL took issue with Target’s representation of FBL as refusing to speak with the presenter, because it did not tell viewers the reasons for this. It disagreed that FBL had “refused to speak with Target”.

[44]   The complainant noted that at no point had Target told viewers that Mr Hinds and H 2 Blo withdrew their claim because they had accepted they had no claim. FBL said that “this was crucial and was not portrayed because Target would then have acknowledged there was no dispute”.

[45]   FBL argued that the programme was intentionally broadcast in a way that made no distinction between Mr Hinds’ initial position and his actual, accepted position following the settlement conference. This was totally misleading, FBL said, and TVWorks chose not to comment on this point in its response.

[46]   FBL concluded its referral by requesting a formal retraction and apology from TVWorks and Top Shelf Productions.

Further Information Requested from the Complainant

[47]   As FBL’s main concerns in its referral centred on its settlement with Mr Hinds, the Authority asked FBL to provide it with a copy of the settlement deed that had been shown to Target. FBL forwarded a copy to the Authority, and reiterated its earlier arguments.

Authority's Determination

[48]   The members of the Authority have viewed a recording of the broadcast complained about and have read the correspondence listed in the Appendix. The Authority determines the complaint without a formal hearing.

Standard 5 (accuracy)

[49]   The complainant’s overall concern appears to be that the dispute between FBL and Mr Hinds was settled, so that the item in its entirety was misleading. The Authority notes that FBL provided Target with a copy of the settlement deed on a “read only basis” and emphasised its confidential nature, and yet has argued that Target misled viewers by not including selected terms of that settlement.

[50]   The Authority considers that the programme was not inaccurate or misleading simply because it was broadcast after a settlement had been reached. The programme mentioned that there had been a settlement and also stated that Mr Hinds had abided by it by not making any further comments to Target.  

[51]   In the Authority’s view, the individual points made in FBL’s referral were not relevant to the focus of the programme. The programme was not concerned with the settlement. Rather, Mr Hinds’ experience with FBL was used as an example of some of the pitfalls of buying a franchise. As a result of Mr Hinds’ story, Target raised questions about some of FBL’s business practices and provided a general warning to people considering purchasing a franchise. This focus was summarised by the presenter at the end of the item:

Target says if you’re looking at buying a franchise ask the right questions because as our enquiries regarding Greenlane clearly show, when FBL says a franchise is “new” it may not mean new in the “new car” or “new shoes” sense of the word. So for being so vague, we say shame on you Franchised Businesses Ltd.

[52]   Accordingly, the Authority declines to uphold the complaint that the programme was misleading in breach of Standard 5.

Standard 6 (fairness)

[53]   Most of FBL’s arguments under the fairness standard relied on the programme having misled viewers. As the Authority has concluded that the programme was not inaccurate or misleading, it does not consider that FBL was treated unfairly in this respect.

[54]    The only other point made in FBL’s referral was that it was unfair for Target to portray FBL as having refused to comment. In the Authority’s view, the programme did not create this impression for viewers. With respect to the focus of the programme – FBL’s marketing of franchises and its vagueness about what constituted a “new” franchise area – FBL was given a fair opportunity to comment when Target emailed the company with questions about the Greenlane franchise. Relevant extracts from FBL’s answers were then shown during the programme. Because the programme focused on FBL’s business practices generally, using Mr Hinds as an example, it did not matter that FBL had not commented specifically on its dispute with Mr Hinds.

[55]   Accordingly, the Authority does not uphold the complaint that FBL was treated unfairly in breach of Standard 6.

 

For the above reasons the Authority declines to uphold the complaint.

Signed for and on behalf of the Authority

 

Joanne Morris
Chair
18 September 2008

Appendix

The following correspondence was received and considered by the Authority when it determined this complaint:

1.            Franchised Businesses Ltd’s formal complaint – 7 May 2008
2.           TVWorks’ response to the complaint – 5 June 2008
3.           FBL’s referral to the Authority – 4 July 2008
4.           TVWorks’ response to the Authority – 16 July 2008
5.           FBL’s response to the Authority’s request for information – 12 August 2008