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Report 74 Business Practices Committee

2. The business opportunity

 

 

Kilian advertised in "The Argus" and "Die Burger", daily newspapers in Cape Town. In the advertisements an invitation was extended to purchase a "business opportunity". Those who responded could acquire the right to market and sell coffee machines and related products, such as ground coffee and coffee beans.

 

The following is directly translated from the Afrikaans version of one of these advertisements:

 

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SIMPLY BELLISSIMO

 

Begin your own business by selling cappuccino and espresso coffee machines.

•Restaurants*. •Coffee shops •Businesses (offices, factories, etc) •Functions*

Homes, clubs, etc.

 

This business opportunity was nominated by ABSA Bank at the 1996 International Franchise Exhibition as the best business opportunity in selected areas throughout South Africa, saleson a cos basis and complete support which will ensure a monthly income of more than R20 000.

 

Stock and advertising costs are included.

R49 000 assures you an exclusive area.

 

Money back guarantee

Tel (021) 790-5925

J Kilian, 7 Gibraltar Street, Houtbay.

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Kilian allegedly invited consumers who responded to the advertisement to presentations of the "business opportunity". Kilian and his brother conducted these presentations. Kilian alleged that he was looking for growth opportunities and wanted people to assist him because he "... could not cope" with the demand.

 

The following advantages of the "business opportunity" were allegedly put forward by Kilian during the presentations:

a) the sole and exclusive selling and marketing rights in each area would be guaranteed;
b) a "money back guarantee" in terms of which a franchisee could at any time give notice that he or she wanted to terminate the agreement.Kilian indicated that he would resell a franchisee's area and refund the money paid; and
c) the business was well-established, with an existent client base that merely needed to be serviced.

 

Potential franchisees were required to pay R49 000 for a franchise. Kilian required a deposit of R6 000. On payment of the remaining R43 000, franchisees were to have received 30 per cent of the promised stock. The potential franchisees were handed a document in which it was stated:

 

What do you get???

 

*Sole exclusivity

*National and International Support

*Advertising

*Promotions

*Shows

*Full business setup eg Business cards, pamphlets, catalogues etc

*No royalties

*Training and backup (ongoing)

*Corporate assistance

*30% stock

All included!!!

Television coverage has already taken place and we will endeavour to support national events where television coverage will continue.