7 things you need to know about franchise disputes

Sarah Stowe

Disputes between franchisors and franchisees can be difficult and take a long time and a significant amount of money to resolve.

You’ll be sure to save both time and money if you are well informed about the process and it certainly can help to be well advised and/or represented.

Here are seven points to keep in mind when problems arise with your franchisor:

1. START EARLY

It is crucial to identify and address business problems early. Failure to do so may cause irreparable damage to the business and/or not allow enough time or money to recover even if the problem is solvable.

2. USE THE CODE

Regardless of the nature of the dispute and what your franchise agreement says about dispute resolution, you can always rely on the dispute resolution process in Part 4 of the Franchising Code of Conduct. In fact, you have the right to choose between the process in the agreement and the one in the Code.

3. COMMUNICATE

Communicate the full extent of the issues to the franchisor.

Tell them in writing:

  • what the problem is (and why it is their problem too)
  • what you want to achieve to overcome it, and
  • what you expect them to do about it

4. NEGOTIATE

There are at least as many aspects to any issue as there are interests involved. A successful business operator knows when to stick to their guns and when to compromise. Remember, giving up on a minor issue to keep the peace may pay off in the long run. Be open to a resolution which involves steps you may not have considered.

5. MEDITATE

Unless the matter is incredibly urgent, you should be generous with your franchise partner and allow them up to three weeks to address your concerns. The Code says so.

6. MEDIATE

If talking to the other party doesn’t work, engaging a professional mediator to assist can be just the motivation needed to achieve a resolution. Either party may appoint a mediator and the other must:

  • attend
  • share the cost of the mediation; and
  • genuinely try to resolve the dispute. The Code says so.

In our experience, the vast majority of disputes settle at mediation.

Mediation works when each party has prepared well by setting out its position and supporting it with evidence and, where relevant, the legal basis for the position.

7. LITIGATE

If all else fails, going to court may be your best option to exercise your rights. You are going to need a really good lawyer.

Ilya Furman is the founder of Franchise Legal with lawyers in Melbourne, Sydney, Brisbane and Adelaide.

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