If you’re involved in a franchise dispute, either as the franchisor or the franchisee, it’s crucial that you follow the strict dispute resolution procedures in the Franchising Code of Conduct (the Code). 

This article sets out 6 tips on how to resolve franchising disputes whilst complying with the Code.

Observe the internal complaint handling procedure in your agreement

Every franchise agreement must contain a complaint handling procedure.  Follow it to the letter.

Make sure the complaint is in writing

The person making the complaint must write to the other party to the franchise agreement and specify:

  • the nature of the dispute;
  • what outcome the complainant wants; and
  • what action the complainant thinks will settle the dispute.

The parties then must try to agree about how to resolve the dispute

Try mediation

Parties may refer a dispute to a mediator.  Once a party asks for mediation the other party must attend the meditation or they will generally be in breach of the Code.

Understand what mediation is and isn’t

Mediation involves meeting with a mediator who is entirely neutral.  The mediator does not propose solutions or make binding judgments; they are there help to the parties resolve the dispute through discussion.  You should think of the mediator as a facilitator of the process, not a judge.

At mediation, the parties will have the chance to explain the problem as they see it. The issues will hopefully be clarified and then the parties should try to consider ways to resolve themThe mediator will attempt to communicate to each side the other side’s concerns.  A mediator may help the parties look at things they agree upon and in so doing, come to a lasting compromise.

Genuinely try to resolve the dispute

Under the Code you have obligations to ‘genuinely resolve the dispute’. The Code defines this as:

  • attending and participating in meetings at reasonable times;
  • at the beginning of the mediation process, making the party’s intention clear as to what the party is trying to achieve through the mediation process;
  • observing any obligations relating to confidentiality that apply during or after the mediation process;
  • not taking action during the dispute, including by providing inferior goods, services, or support, which has the effect of damaging the reputation of the franchise system; and
  • not refusing to take action during the dispute, including not providing goods, services or support, if the refusal to act would have the effect of damaging the reputation of the franchise system.

How to find a mediator

The Office of the Franchising Mediation Adviser can assign mediators to help resolve a franchise dispute.

Once a mediator is appointed the mediator contacts both parties to:

  • arrange a time and place for mediation;
  • confirm who will attend the mediation;
  • arrange for an exchange of documents, as appropriate.

Mediation can be expensive, so be sure to check the mediator’s rates as the costs of the mediation are usually shared equally by the parties.

Each party must be represented at the mediation by a person who has the authority to enter an agreement to settle the dispute on behalf of the party. Legal or other advisers may attend if both parties agree.

Conclusion

If you get into a dispute with your franchisor or franchisee the sensible first step is to seek legal advice. Make sure you find a franchise solicitor with both disputes and franchising experience.

Lachlan McKnight

Next Steps

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