competltloh 6. form g ..sumer commissio!; sydney i 7 dec · participants including brands such as...

r . COMPETlTlOH 6. ..SUMER COMMISSIO!;

SYDNEY i Form G

Commonwealth of Australia

1 1 7 DEC 2007 ( Trade Practices Act 1974 - subsection 93 (1)

To the Australian Competition and Consumer Commission:

Notice is hereby given, in accordance with subsection 93 ( I ) of the Trade Practices Act 1974, of particulars of conduct or of proposed conduct of a kind referred to subsections 47 (2), (3), (4), (5), (6), (7), (8) or (9) of that Act in which the person giving notice engages or proposes to engage.

PLEASE FOLLOW DIRECTIONS ON BACK OF THIS FORM

1 Applicant

(a) Name of person giving notice: (Refer to direction 2) ~432'474 This Notice is given by Jireh International Pty Limited ACN 071 676 661

("Jireh" or "Master Franchisee").

(b) Short description of business carried on by that person: (Refer to direction 3) /

Jireh owns and operates a franchise business that grants to franchisees

the right to operate retail food and beverage cafes specialising in the sale

of coffee and tea under the brand name "Gloria Jean's Coffees".

(c) Address in Australia for service of documents on that person:

c/- Mathew Webster Deacons Level 8, 1 Alfred Street SYDNEY NSW 2000

2. Notified arrangement

(a) Description of the goods or servicei in relation to the supply or acquisition of which this notice relates:

This Notice relates to the purchase by franchisees of certain food products

including beverage ingredients, biscuits, muffins, cakes, pastries, syrups,

chocolate powers, premixes, sauces, essences, pre-made chiller mixes,

pastry; associated items such as lids, straws carry bags, labels, stickers,

signage; and also certain branded items such as ceramic cups, heat

insulated cups, paper bags, plastic cutlery, napkins, uniforms and other

branded merchandise.

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(b) Description of the conduct or proposed conduct:

Gloria Jean's Coffees franchisees will be required to purchase products of

the kind referred in paragraph 2(a) above from suppliers or the supplier

approved by Jireh.

New franchisees or existing franchisees that are granted a renewal of their

franchise agreement will be required to sign a franchise agreement, which

includes the following clauses:

"Definitions

"Approved Supplier means a supplier approved in writing by the MasterFranchisee for the supply of Products and services to the Franchisee.

Products means the types and brands of coffees, teas, coffee and tea andrelated products, supplies, services, equipment, materials and accessoriesas well as beverages, beverage ingredients, food items and gift itemsoffered for sale at the GJC Stores, as approved by and specified in writingby the Master Franchisee from time to time.

"Products and Approved Suppliers

6.7 The Franchisee must:

(d) only purchase from Approved Suppliers all Products and services

not supplied by the Master Franchisee;

6.8 The Master Franchisee will provide the Franchisee with a list of

Approved Suppliers. The Master Franchisee may in its discretion from

time to time change or amend the list of Approved Suppliers.

6.9 If the Franchisee wishes to purchase Products from a supplier other

than an Approved Supplier, the Franchisee must first obtain the

Master Franchisee's written approval to do so. The Franchisee must:

(a) give the Master Franchisee written notice of:

(i) the nature and quantity of the Products that the

Franchisee is seeking to purchase;

(ii) the name and address of the proposed alternative

supplier; and

(iii) the price per unit that will be charged by the proposed

alternative supplier for the product;

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(b) deliver to the Master Franchisee a sample of the product that

the proposed alternative supplier is to provide;

(c) provide a written statement from the proposed alternative

supplier of:

(i) the period that the price for the product or service will

be fixed; and

(ii) the terms and conditions of supply;

(d) satisfy the Master Franchisee that the proposed alternative

supplier is able to maintain a continuity of supply of the product;

and

(e) satisfy the Master Franchisee that the product meets the Master

Franchisee quality requirements, including but not limited to

factors such as:

(0 the product being at least equal to the food, beverage,

ingredient or product it substitutes;

(ii) the product is suitable for the purpose for which it is

intended; and

(iii) the product is consistent with, and not prejudicial to, the

System and the Operations Standards Manual.

6.101f the Franchisee requests approval in accordance with clause 6.9, the

Master Franchisee will advise the Franchisee of its decision in writing

within a reasonable time. Any alternative suppliers approved by the

Master Franchisee in accordance with clause 6.9 become Approved

Suppliers until such time as the Master Franchisee advises the

Franchisee in writing that the approval has been withdrawn.

6.11 The Franchisee acknowledges that clauses 6.7 to 6.10 are reasonable

and are necessary to maintain strict quality control and standards with

respect to the supply of Products."

(Refer to direction 4)

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3. Persons, or classes of persons, affected or likely to be affected by thenotified conduct

(a) Class or classes of persons to which the conduct relates:(Refer to direction 5)

Gloria Jean's Coffees franchisees.

(b) Number of those persons:

(i) At present time:

See (ii) below.

(ii) Estimated within the next year:(Refer to direction 6)

110. Approximately 75 new franchises will be granted to franchisees by

Jireh and approximately 35 existing franchise agreements will be renewed

within the next year.

(c) Where number of persons stated in item 3 (b) (i) is less than 50, theirnames and addresses:

Not applicable.

4. Public benefit claims

(a) Arguments in support of notification:(Refer to direction 7)

Jireh submits that the intended effect of the arrangement is to ensure:

• franchisees are able to satisfy the expectations and demands of

customers consistently in relation to the Gloria Jeans brand;

• franchisees are able to provide high quality products and consistent

service to customers;

• customers get a uniform and consistent experience across all Gloria

Jean's Coffees franchises;

• the risk that defective or deficient products are sold by a franchisee

is minimised;

• the value and reputation of the Gloria Jean's Coffees stores is

maintained by ensuring that the products at Gloria Jean's Coffees

stores are consistent with standards and image of the franchise

system; and

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• that the market positioning of the Gloria Jean's Coffees brand

continues to grow.

The proposed arrangement will help to:

• ensure franchisees are able to purchase high quality products at

lower average prices;

• reduce average transaction costs for franchisees by limiting the

number suppliers;

• promote consistency between franchised stores, which is necessary

to ensure each store in the network has an identical "look" and offers

a uniform customer experience, ensuring consumer awareness of

and confidence in the brand is maintained;

• ensure Jireh can effectively monitor the quality of products used or

sold by franchisees so that the reputation of Gloria Jean's Coffees

stores is preserved; and

• reduce average costs and improve the quality and consistency of

ingredients and other products sold or used by franchisees so that

they may receive the optimum benefit from the Gloria Jean's brand

and, therefore, be more competitive in their respective markets.

Lower purchase prices may be able to be achieved for franchisees as the

volume of products purchased by franchisees from a particular supplier

increases.

By limiting the number of approved suppliers the ability of Jireh to negotiate

more favourable terms and conditions upon which franchisees can require

goods is enhanced as the volume of the franchise network's purchasing

requirements increases its negotiating power.

The market for the retail sale of coffee, tea and café style food and

beverage products is a highly competitive market with a large number of

participants including brands such as Starbucks, Hudsons, McCafe,

Michele's Patisseries, Muffin Break and Jamaican Blue and Donut King;

(b) Facts and evidence relied upon in support of these claims:

These claims are supported by basic marketing principles.

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5. Market definition

Provide a description of the market(s) in which the goods or servicesdescribed at 2 (a) are supplied or acquired and other affected marketsincluding: significant suppliers and acquirers; substitutes availablefor the relevant goods or services; any restriction on the supply oracquisition of the relevant goods or services (for example geographicor legal restrictions):(Refer to direction 8)

The relevant market likely to be affected by the proposed conduct is:

(a) the various markets for the provision to consumers of coffee and tea

products and related foodstuffs and other merchandise — in

geographical areas serviced by franchisees; and

(b) the various markets for the provision by wholesalers to retailers of the

products referred to in paragraph 2(a) of this notification.

6. Public detriments

(a) Detriments to the public resulting or likely to result from thenotification, in particular the likely effect of the notified conduct onthe prices of the goods or services described at 2 (a) above and theprices of goods or services in other affected markets:(Refer to direction 9)

Jireh submits that there are no substantial public detriments of the

proposed arrangement.

(b) Facts and evidence relevant to these detriments:

Not applicable.

7. Further information

(a) Name, postal address and contact telephone details of the personauthorised to provide additional information in relation to thisnotification:

Mathew WebsterDeaconsLevel 8, 1 Alfred Street*SYDNEY NSW 2000Telephone: (02) 9330 8257

*As from 7 January 2008

Grosvenor Place, 225 George Street, Sydney 2000

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Mathew Webster(Full Name)

(SignatCaumEn 10A,

17PL;C*MISg 6IkIFY ION

1 7 DLL 2007

Dated /* (-P )0,-)7

Signed by/obi behalf of the applicant

Deacons(Organisation)

Senior Associate(Position in Organisation)

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DIRECTIONS

1. In lodging this form, applicants must include all information, including supportingevidence that they wish the Commission to take into account in assessing theirnotification.

Where there is insufficient space on this form to furnish the required information,the information is to be shown on separate sheets, numbered consecutively andsigned by or on behalf of the applicant.

2. If the notice is given by or on behalf of a corporation, the name of the corporationis to be inserted in item 1 (a), not the name of the person signing the notice, andthe notice is to be signed by a person authorised by the corporation to do so.

3. Describe that part of the business of the person giving the notice in the course ofwhich the conduct is engaged in.

4. If particulars of a condition or of a reason of the type referred to in section 47 ofthe Trade Practices Act 1974 have been reduced in whole or in part to writing, acopy of the writing is to be provided with the notice.

5. Describe the business or consumers likely to be affected by the conduct.

6. State an estimate of the highest number of persons with whom the entity givingthe notice is likely to deal in the course of engaging in the conduct at any timeduring the next year.

7. Provide details of those public benefits claimed to result or to be likely to resultfrom the proposed conduct including quantification of those benefits wherepossible.

8. Provide details of the market(s) likely to be affected by the notified conduct, inparticular having regard to goods or services that may be substitutes for the goodor service that is the subject matter of the notification.

9. Provide details of the detriments to the public which may result from the proposedconduct including quantification of those detriments where possible.

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competltloh 6. form g ..sumer commissio!; sydney i 7 dec · participants including brands such as...

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