Disputes in franchising are not uncommon, but what is the best way to resolve these and where do you start?
If you find yourself with an issue as a franchisee you must follow some critical steps outlined by the Franchising Code of Conduct (the Code). The Code is a mandatory code that applies to all businesses that are involved in a franchise agreement.
Seeking legal advice regarding your franchise dispute will assist you throughout the process to know what is expected and ensure that your issues are properly articulated and expressed fully.
Throughout a dispute both parties must act in good faith. According to the Code this means that the parties should be honest and not act arbitrarily, they should also co-operate to achieve the purposes of the franchise agreement.
A franchise dispute resolution process is two pronged typically, whilst we seek to resolve the issue promptly between the parties the other prong is that action is also taken to pursue the matter in court and have a mediator or judge decide the outcome. Both of these actions are pursued simultaneously so that most disputes are settled before a client has to attend court, depending on their instructions.
Under the Franchising Code of Conduct (Code) the steps below apply and you must ensure that these steps are taken. If the steps are not taken correctly then the next stage cannot commence until it has and this will inevitably result in delays.
Firstly, you must inform your franchisor in a notice of dispute.
(1) The complainant must tell the respondent in writing:
(a) the nature of the dispute; and
(b) what outcome the complainant wants; and
(c) what action the complainant thinks will resolve the dispute.
The parties must try to resolve the dispute and if they cannot agree within 3 weeks either party can refer the matter to a mediator for mediation. There is a process in the code around mediation and how it is arranged.
Mediation is a formal process whereby the parties meet and discuss the matters identified in the Notice of Dispute. A mediator’s role is not to be the judge but rather to assist the parties in coming to a workable resolution. The process will usually go a full day, depending upon the number and complexity of the issues.
Having legal advice and representation is highly desirable so that the legal matters can be discussed as between lawyers. We have significant experience in negotiating against a franchisors. Favourable outcomes are often possible.
If mediation is unsuccessful, then the Code does not dictate the steps beyond this point. It is up to the parties to pursue the matter in court.
While litigation is the method of last resort, if your case has merit, it can be the way to go.
A franchise lawyer will be able to give you options and further advice about how to get your dispute resolved and this may mean preparing examining the evidence further and drafting the documents to start the proceeding. There will always be another opportunity to mediate the dispute (by way of further formal mediation) before a trail of the issues. Most cases resolve out of court.
Call one of our franchise law experts today to discuss your matter and seek a quick resolution so that you can get back to running your business.
Please note: the above article is not legal advice. Every circumstance is different. It is critical that you obtain legal advice in relation to your personal circumstances before taking any action.
© PCL Lawyers 2020
Author: Glenn Duker