The changes to the Franchising Code of Conduct (the Code) has
seen more onerous good faith obligations for both franchisors and
franchisees. To ensure that both parties comply with such
obligations, the Code now requires franchisors and franchisees to
attempt to resolve disputes prior to terminating the agreement on
foot. These are the most frequently asked questions my clients ask
me when a dispute occurs:
I have a dispute with my Franchisor/Franchisee – Where do
The first step in the franchise dispute resolution process
involves the concerned party writing to the other party and
outlining the following:
The nature of the dispute
The desired outcome from the dispute
What actions or conduct will remedy the dispute.
I wrote to the other party but we haven't resolved the
issue – Where to from here?
In the event that parties can't resolve the dispute within
21 days, either party has rights in relation to the dispute
resolution mechanism contained in the franchise agreement and/or
the Code, and may proceed to appoint a mediator to the matter.
We can't agree on which mediator to appoint – Is
there an independent mediator?
In circumstances where the parties are unable to agree on a
mediator to appoint, parties are required to refer the matter to
the Mediation Adviser as per the Code. The current Mediation
Adviser is The Office of the Franchising Mediation Adviser
The matter has been referred to a mediator – Do I have to
Yes, once the matter is referred to a mediator both parties are
required to attend. Failing to attend such discussions will attract
a severe penalty and may be considered conduct that is not in good
faith. The parties must genuinely try to rectify the issues and
provide possible solutions to the dispute in question.
If mediation fails to rectify the dispute, can I still take
legal action against the franchisor/franchisee?
Attending mediation doesn't waive either party's rights
in respect of commencing legal proceedings. Whilst not always
effective, mediation is usually recommended to achieve a commercial
solution to the dispute.
What are the costs of attending mediation?
The Code states that each party must share the costs of
mediation unless the parties can come to cost arrangement.
Mediation costs are subject to:
The respective mediators costs
Materials that both parties agree to (valuations, expert
Each party is required to pay for their own costs involved with
attending the mediation. Whilst a mediation is typically more
cost-effective than commencing legal proceedings, it can still be
costly. It is important to seek legal advice with respect of your
franchise to ensure that you're satisfying all obligations of
the Code with respect to disputes. If you have received a dispute
notice or wish to serve one, contact our franchising expert:
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Do not depart from the contract terms, or encourage the other party to do so, unless you plan to alter the contract.
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