If you are a franchisee, you may be able to work collectively with other franchisees to resolve disputes. If there are other franchisees in your network, you should consider reaching out to them. Engaging with these other franchisees can allow you to:

  • learn from each other;
  • share ideas to grow the wider business; and
  • support each other

By reaching out to other franchisees, you might discover that you share some misgivings about the franchisor. If there appear to be some common issues, you may be tempted to work together to address them. However, you should think carefully about taking this course of action. This article will outline what you need to consider before approaching the franchisor as a group.

What Are the Benefits of Reaching Out to Other Franchisees?

Speaking with other franchisees, either through an advocacy group or through informal connections, has some clear benefits. By doing so, you may be able to: 

  • learn from each others’ experiences;
  • offer suggestions and guidance; and 
  • come up with new ideas to support the greater franchise and your business.

How much or little you interact with other franchisees is up to you. Your decision may depend on whether:

  • the other franchisees compete with you in your franchise territory; and 
  • you have any existing relations with other franchisees.

If there is any possibility that you compete with other franchisees in the network, you should be careful not to discuss pricing or other sensitive issues. Although it can be valuable to share positive experiences, you should be cautious when discussing issues or raising complaints with franchisees. 

Differences Within a Network 

What Sets Me Apart From Other Franchisees?

It is important to remember that even if you are part of a network, your legal relationship is with the franchisor (or master franchisee), not the other franchisees. Your franchise agreement outlines your rights and obligations. 

Because of this, your rights and obligations may be different from those of another franchisee.

For example, these differences might include:

  • when you started your franchise;
  • what discussions or negotiations occurred; and 
  • what information was presented in the disclosure document

How you run your franchise may also be significantly different from another franchise because of your: 

  • location;
  • method of operations; or 
  • choice of suppliers.  

This means that if a dispute arises with the franchisor, your problem may be different to the problems other franchisees are facing. Even if you would like to work together, you may be unable to pursue action if each franchisee has a different complaint against the franchisor.

What Similarities Do I Share With Other Franchisees?

Despite your differences, there may be some problems that all franchisees share.

For example, you may all be experiencing:

  • insufficient marketing services or support considering the fees you pay to a marketing fund;
  • a failure to provide support or promised training;
  • issues in the supply or quality of products sourced by the franchisor or their mandatory suppliers; or
  • disappointing returns on your investment in the franchise compared to what the franchisor promised in the application process.

Identifying common issues can allow you to push for positive change, but remember to take into account any key differences between the franchisees. 

How Can I Work Collectively With Other Franchisees?

After speaking with other franchisees, you may have identified common issues that need to be addressed. There are several approaches you could take to resolving the issue. For example, you could:

  • negotiate with the franchisor to make changes;
  • seek compensation or a reduction in fees; or 
  • exit or sell the franchise.

Depending on the circumstances, it may be better to take any action individually or as a group. Some of the advantages and disadvantages of working with other franchisees to resolve a dispute are set out below.

 

Advantages of Taking Collective Action With Other Franchisees
Disadvantages of Taking Collective Action With Other Franchisees
Common issues can present a stronger case for significant change within the network. Any issues that are specific to your situation may be overlooked.
The franchisor is more likely to listen to your concerns and take them seriously. The franchisor may act defensively. This could result in significant damage to the relationship.
A class action lawsuit may be the best way to resolve widespread issues in the network. A lawsuit may be expensive and result in a better outcome for certain franchisees.
The costs of any initial general advice may be shared with other franchisees. You may still need to obtain additional advice specific to your situation.
A single representative may be able to act on behalf of multiple franchisees. A representative may present their own concerns more than those of the group.

 

 

Industry Developments for Collective Actions

The recent Parliamentary Inquiry into the Franchise Industry considered the effectiveness of collaboration between franchisees in a franchise network. Importantly, the inquiry highlighted the benefits of: 

  • collective bargaining by franchisees during the negotiation stage; and 
  • engaging in a collective dispute resolution process such as mediation.

The results of the inquiry are likely to cause significant changes within the franchising industry. Greater cooperation between franchisees may encourage more positive working relationships between franchisees and the franchisor. 

Key Takeaways

Before reaching out to other franchisees about an issue, you should consider whether:

  • the challenges you face are shared by other franchisees;
  • working together is in your best interests; and
  • working together will help other franchisees without solving your problem

If you need help resolving an issue with your franchisor, contact LegalVision’s franchise lawyers on 1300 544 755 or fill out the form on this page.

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