Disputes can arise, but being able to deal with them effectively and efficiently is critical to the success of any franchise.
Franchisees and franchisors share a special business relationship: they depend on one another for the success of their business.
However, sometimes things can go sour in any relationship and disputes can arise. What can you do if you’re having a disagreement or dispute with your franchisee or franchisor?
Communication is key. It is important to raise issues early to avoid unnecessary escalation. Avoid blaming one another as this can distract from reaching a solution.
Focus on interests rather than positions. Do not focus solely on the outcome you want. Consider your needs, goals and objectives.
Be aware of your alternatives. What will you do if you are unable to reach a negotiated agreement with the other party? What other action can you take?
Seek franchising or legal advice. Speak to a solicitor or consultant who specialises in franchising. They can help you to work out options for resolving the issue.
Mediation process
If you are unable to resolve the matter directly with the other party, you can use the mediation process under the Franchising Code of Conduct. Mediation is like an informal business meeting, where the goal is to reach a negotiated agreement. The mediator is a neutral and independent person who helps the parties to decide how to resolve their dispute and work together to reach a binding settlement agreement. The mediator does not make a binding decision like a judge.
The first step is to send a notice of dispute to the other party. The notice of dispute must be in writing and include the following
- the nature of the dispute
- what outcome you want
- what action you think will resolve the dispute.
Once the notice of dispute has been sent, the parties should then try to resolve the issue. If there is no resolution after three weeks, either party may refer the matter to a mediator.
“It is important to raise issues early to avoid unnecessary escalation.”
Write to the Office of the Franchising Mediation Adviser (OFMA) to request the appointment of a mediator. The OFMA will appoint a mediator within 14 days.
Once a mediator is appointed, both parties must attend the mediation. Failure to participate may attract a penalty of up to $54,000.
Six main benefits
There are six main benefits of using mediation to resolve conflict…
- mediation is confidential
- it lets everyone have their say
- it is cost-effective, and much cheaper and quicker than using the courts (on average, each party pays $1200 for mediation through the OFMA)
- mediation leads to results that meet the parties’ real needs, which may include maintaining the business relationship
- parties may resolve differences or issues that may not have been apparent before mediation
- mediation allows an independent person to help the parties understand each other, communicate, identify options and come to an agreement.
An early intervention service for more straightforward disputes is also offered by the OFMA. A mediator will try to formulate an agreement between the parties by telephone and email. This is a free service, but also voluntary, so the other party can refuse to participate.
Disagreements can arise within a franchise system, and importantly, being able to resolve disputes effectively and efficiently is critical to the success of any franchise business.
Cecily Zhu, Assistant, Franchising Meditation Adviser, OFMA
This article first appeared in issue 13 of the Inside Small Business quarterly magazine
