If you have a dispute in the course of running your franchise it is important that you manage it quickly and appropriately, so that you can move past it and get back to running your business.
When you set up your franchise agreement it is a requirement of the Franchising Code of Conduct (which all franchises are required to abide by) that there is an internal procedure for handling complaints built into your franchise agreement.
Despite the guidance of the Code of Conduct it can be difficult to know where to start — especially if your dispute is causing you stress or difficulty.
This short guide explains how to resolve a franchise dispute and gives you guidance on making a complaint about a franchisor.
Need help resolving a dispute? Not sure where to start? You're not alone. Get expert advice on resolving franchise disputes.
What form do franchise disputes take?
When a party contemplates buying a franchised business a potential franchisor is required to provide, among other things, a disclosure document that outlines the information a franchisee would need to make an informed decision about whether to buy.
After deciding to purchase a franchise, a franchise agreement is entered into.
If either party to the franchise, either the franchisee or the franchisor, disagrees with something in the course of the franchise agreement, a dispute may arise.
Disputes can vary in severity and consequence and may take the form of:
- Disputes over the expectations around work to be completed, or support provided for the franchisee.
- Failure to comply with the requirements of the brand, such as selling at a certain price or to a certain standard of presentation.
- Misrepresentation or misleading conduct on the part of a party to the agreement.
- Disputes about payments, or royalties.
A dispute may require a simple discussion to resolve, or it may require legal action. When you have a complaint about a franchisor you may feel compelled to take legal action because you are frustrated or disappointed. The best option is to attempt to resolve your dispute by going through the process of making a complaint and then proceeding to mediation.
Will I have to go to court to resolve my franchise dispute?
All franchise agreements are governed by the Franchise Code of Conduct which outlines a process to follow in the event of a dispute. The first step in resolving a franchise dispute is to follow your internal procedure for handling complaints.
- Write a letter to the other party. This letter needs to outline what your dispute is about, what kind of outcome you want, and what kind of action you think will settle your dispute.
- If your matter is not resolved within three weeks then either party may refer the dispute to mediation. Mediation is an informal negotiation between the parties which is facilitated by an independent third party. Mediation is confidential and any decision made is legally enforceable.
- Mediation and dispute resolution services are governed by the Australian Small Business and Family Enterprise Ombudsman. This organisation can provide you with information on the dispute resolution process in more detail.
If your dispute cannot be managed through mediation then it is possible that your matter will proceed to court. In some cases, mediation may not be the most appropriate option, for example where you require urgent assistance through something like an injunction.
What is the difference between mediation and litigation?
Mediation is informal and the parties have a great deal of control over the outcome.
- The mediation process gives both parties the opportunity to be heard, and to air grievances.
- Each party has control over the outcome, and the independent mediator helps the parties to see both sides of the disagreement.
- Mediation is a cost effective way to resolve disputes and can be a helpful way to resolve a complaint about a franchisor.
Litigation by contrast is formal, and can be expensive for parties to a dispute. In litigation parties have very little control over the outcome in a litigation situation.
Need help resolving a franchise dispute?
Sometimes it can seem hard to know where to start - but AANDI Lawyers is here to help. We are experienced in dispute resolution and managing franchise disputes. Our team can help you to recover from losses that can arise as part of a franchise dispute, and will help you to negotiate a swift resolution to your franchise dispute.