What can I do if I am in dispute with my franchisee?

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We are seeing more and more high-profile disputes with some of Australia’s leading franchises as franchisees work together to challenge the imbalance of power often between the franchisee and the franchisor.

High profile cases like Mortgage Choice, Retail Food Group, Ultra Tune, Nando’s and 7-Eleven have shed light on the fact that all is not well in the franchise world.

As the economy changes and the way business is conducted pressure is often put on franchises and one of the most prevalent sectors is the food, drink and hospitality industry.

The Franchising Code of Conduct is a mandatory industry code across Australia that regulates the conduct of franchising participants towards each other.

It regulates the conduct of franchisees and franchisors, including the obligation to act in good faith and for franchisors to disclose important information before a franchisee enters into a franchise agreement. This means parties must act honestly, and not arbitrarily.

The Australian Competition and Consumer Commission (ACCC) is responsible for the administration and enforcement of the Franchising Code. The new Franchising Code of Conduct commenced on 1 January 2015.

What do you do if you have a dispute with your Franchisor?

The Franchising Code of Conduct requires that franchisors develop internal procedures for handling disputes with franchisees. This procedure must be set out in the franchise agreement and meet minimum standards set by the Code.

The Code also provides a procedure for resolving disputes.

When a dispute arises, either party may initiate the complaint handling procedure under the Code, or under the franchise agreement.

The Code requires you to first try to resolve your dispute with the other party by sending them a notice of dispute which clearly outlines:

  • the nature of the dispute
  • what outcome you want
  • what action will settle the dispute.

If you can’t agree on an outcome within three weeks, either party may refer the matter to mediation, which involves an informal negotiation between the parties facilitated by an independent third party.

Mediators attempt to assist franchisors and franchisees to resolve their dispute without going to court. Mediation is mandatory for both parties to attend and to genuinely try to resolve the dispute.

If Mediation is not successful then the parties can consider court proceedings which is often costly, lengthy and stressful.

It is important to get solid legal advice if a dispute arises with your franchisor and know your legal rights. At FC Lawyers, we have acted successfully for a wide range of franchisees in a variety of industries.

If you are in a dispute with your franchisee or have any other franchising questions, please contact our team today.