Australia is thriving with over 1300 franchise businesses in a range of industries, earning over $181 billion dollars in revenue and continually growing. However, in recent times, more franchisees have found themselves in a dispute against their franchisor. These problems generally arise for two reasons. Either the franchisee has not been advised correctly or the franchisor is not fulfilling their obligations.
Everyone flourishes when they know they can take control. Here are my top tips that franchisees should follow in order to have the best chance in winning a dispute against a franchisor.
1. Refer to initial advice and documentation
Look at the advice you were given initially. The important things to check for include any evidence or signs of negligence and misrepresentation. Were you provided with misleading information about the sale? Were there things the franchisor did not disclose to you in order to protect themselves? Were you provided with misleading books? Make sure you have documentation and correspondence in writing, whether in the form of email chains, files or agreements with the franchisor.
2. Check the franchisor’s fulfilment of obligations
Figure out if your franchisor is fulfilling their obligations. From the outset, were you provided with accurate and correct legal and accounting advice? Check if proper disclosure was made and find out if they are properly spending money on promotion and advertising that you are paying for that purpose. Have they provided adequate training? Where is all the supply or stock coming from? It is an issue if stock is coming exclusively from only one main location. Ensure that all hidden costs are identified accordingly.
3. Franchising Code of Conduct
The law is a powerful tool and often favours franchisees. Utilise the Franchising Code of Conduct to your advantage – know what rights and obligations you are entitled to. The Code regulates the franchisor and franchisee relationship in various ways. Assess the disclosure document and franchise agreement which should have been provided prior to any contract signings. A dispute resolution procedure is required to be followed. Also, review details about the marketing funds that the franchisor provided from the outset.
If issues cannot be resolved through direct negotiation, it is helpful to bring in an impartial third party facilitator, such as a mediator. A mediator will bring together both parties involved in a meeting designed to find a solution. Prepare for a mediation by assessing what the problem is, what is the desired outcome and what steps need to be made to achieve that.