Is your franchise relationship causing you more grief that you had imagined? Has there been some breakdown of the franchise relationship? Is the franchisor changing the game and not providing the level of support or assistance you had been lead to believe would be provided?

In franchise disputes, it is often perceived that the franchisor has all the ‘power’, leading to disputes. Operational issues, often imposed at the direction of the franchisor, can also result in conflict. Here is a guide to managing the franchise relationship when a dispute arises and some tips on resolving the probable conflicts.

Keep in mind that the Franchising Code of Conduct prescribes methods for dispute resolution, and that changes to the franchising law have recently introduced mechanisms to create more equality in franchise relations and even out any bargaining power imbalance between the parties. In addition, a procedure for handling complaints will usually feature in the Franchise Agreement itself.

Steps to take to manage the franchisor

  1. Communicate the problem to your franchisor by writing a summary, providing practical examples. Indicate what you would like done by the franchisor, i.e. what outcome you’re after, and how you propose that outcome be achieved. Speak with your franchise lawyer about putting this summary into writing. It is important that you (or your lawyer on your behalf) articulate both the issue and the desired result.
  2. Next, you will want to actually speak to the franchisor about how the problem can be resolved without escalating the matter further. Again, whatever resolution you and the franchisor reach should be put into writing or, preferably, a deed of agreement.
  3. If you have been negotiating with the franchisor for some time and there is no resolution in sight, you’re probably feeling a little deflated and defeated and might require assistance from a mediator. Ask whether or not your franchisor agrees to an appointed mediator whose primary role would be to facilitate discussions to try resolve any ongoing issues between you and the franchisor. The Office of the Franchising Mediation Adviser can assist you with this process and appoint a mediator. Before you reach mediation, the Office provides free advice on the steps you should be taking to try and resolve the matter independently.
  4. Mediate the matter. Typically, the costs involved in mediating the dispute will be shared between you and the franchisor. These include the costs of using the mediator and the costs of hiring the room used during the mediation. The role of the mediator is to assist both parties to reach a mutually acceptable resolution.

What should I do during mediation?

  1. Prepare as much as possible. This means having all legal documentation, and relevant correspondence ready to be presented to give substance to your allegations. If you are saying that the franchisor has been lazy in delivering certain support services required under the Franchise Agreement, make sure you are able to prove this claim with evidence. Speak with a franchise lawyer if need be.
  2. Outline your matter and present evidence to support your claim. Make sure you communicate your desired outcome.
  3. Adhere to any obligations you may have as a party to the mediation. For example, you must observe any active and enforceable confidentiality obligations in the Franchise Agreement. Mediation is a confidential setting so you must keep the discussions of the meeting private.
  4. Consider all options to resolve the matter. Sometimes, a cash settlement may be the most appropriate option, however, there will usually be alternatives. Discuss these alternatives with your franchise lawyer, accountant, partner, spouse, or anyone that should be consulted before agreeing to any resolution.
  5. Be flexible and reasonable. Compromising on certain aspects of your claim does not equate to losing to other party, indeed most commercial resolutions require some element of compromise on the part of both parties. Negotiation is often a too and fro exercise that involves prioritising interests. Any settlement arrangement must, without fail, be put into writing

Normally a mediation will lead to a resolution in some shape or form. If it doesn’t, however, it is important that continued efforts are made to resolve the matter without entering the Courts. Particularly in the franchising sphere, litigation is a slow and costly exercise that can negatively impact your franchise business. For this reason, it’s important that you try to reach a resolution.

Conclusion

The franchise relationship is an important partnership and working together is in both parties’ interests. Both parties need the other to succeed and operate lawfully. The franchise relationship can be tumultuous, which is why, if you have an issue with your franchisor, it’s important to seek legal advice and do everything within your power to ensure a quick resolution of the matter without commencing litigation.

For legal assistance and to speak with a franchise lawyer, contact LegalVision on 1300 544 755.

Emma Jervis

Ask Emma a Question

If you would like further information on any of the topics mentioned in this article, please get in touch using the form on this page.