The attraction was an easy-to-run, no-risk cash cow on the fringe of fashion and turning a reliable profit for an absentee owner.It turned out to be an unmitigated dud that never made a dollar and cost the investor the best part of $1 million in pain.
Blow Dry Bar Franchising Pty Limited marketed lucrative opportunities – in “one of the fastest moving franchise systems in the southern hemisphere” – to prospects with no hairdressing experience and who only wanted a part-time on site presence.
Its boast was to “source, trial and staff your cool Blow Dry Bar franchise” of which it had by 2012 already established 16 “profitable (usually within one month) niche cash flow positive salons”.
It was expanding throughout New South Wales, Queensland and Victoria.
That was when Cairns investor John Giaimo answered adverts by Nathan Cunneen of BDB to become part of a “thriving business model” and who – for a $35k fee – promised the right location, a secure lease and equipment “of the highest standard”.
When told his total investment would be no more than $100k – $150k, Giaimo sought and received reassurance of the profitability of the existing stores in the group.
The figures provided for 12 stores included those of North Sydney which were later found to be overstated by $15k per month. Around the same time two Victorian franchisees and one from Sydney were complaining of not reaching their breakeven turnover. BDB concealed the true state of affairs from Giaimo.
On the strength of the profitability statements, he signed up for the Castle Hill (Sydney) location recommended by BDB.
The salon opened in October 2012 in chaotic circumstances with no manager and no trained staff. The promise of support did not materialise.
The salon location also proved to be hopeless because of long standing traffic diversions away from central Castle Hill and the absence of nearby commercial buildings for a customer catchment.
The business traded unprofitably from the start with a trading loss of $347k to 30 June 2014.
Giaimo eventually sold the business in September 2014 for just $32k after having incurred fit out expenses etc of $110k as well as substantial future liabilities under the lease of $300k.
He sued Cuneen and BDB which were both under bankruptcy arrangements by the time of the New South Wales Supreme Court hearing at which they did not appear.
Judgment was awarded in Giaimo’s favour for a total of $733k for BDB’s misleading and deceptive conduct but it remains to be seen if any of it can be recovered.
BDB is now successfully trading under new ownership.
Carazi Pty Ltd v Blow Dry Bar Franchising Pty Limited (in liq) & Anor  NSWSC 28 White J 02/02/2015