Resolving franchising disputes
The Office of the Franchising Mediation Adviser (OFMA) provides a cost-effective dispute resolution scheme for franchisors and franchisees.
The Franchising Code states that parties should first try to resolve their dispute with each other.
If the parties can’t agree on an outcome within three weeks, the Code provides for mediation, which involves an informal negotiation between the parties facilitated by an independent third party. Either party may refer a dispute to mediation.
Mediation is a cost-effective way to resolve franchising disputes without resorting to complex and costly legal action. Participants in mediation should be aware that mediators don’t give legal advice or make decisions like a judge; they assist parties to come together and negotiate an outcome that is acceptable to both parties. Parties can agree to appoint a mediator or request that OFMA appoint a mediator. OFMA has trained mediators with commercial experience located across Australia.
OFMA also operates an early intervention dispute resolution service for the franchising sector. This service is free and enables a party to a dispute to informally raise their concerns with OFMA. OFMA will then contact the other party to the dispute to gauge their interest in settling the dispute quickly.
If the dispute relates to a franchisor's intention to terminate a franchise agreement due to a breach by the franchisee, the franchisee should still take immediate steps to remedy the breach even though there is a mediation taking place.
Once mediation is requested, it becomes mandatory for both parties to attend and to genuinely try to resolve the dispute. A party will be taken to be trying to resolve a dispute if they approach the matter in a reconciliatory manner, including by making clear what they are trying to achieve through mediation. The parties should clearly state their concerns, and what they would like to see happen.
The costs of mediation include the cost of the mediator, room hire and any additional inputs (for example expert reports) that both parties agree are necessary to the conduct of the mediation. These costs are shared between the parties to a dispute, unless agreed otherwise.
In general, parties are also responsible for their own expenses to attend the mediation. If the parties can’t agree on a location, the mediator will decide on a location that is central to both parties and the parties will pay their own travel costs.
Mediation is not always successful or appropriate for parties to a dispute. For example, mediation may not be appropriate if you require urgent relief. If you are unsure whether to proceed with mediation, consult your legal adviser.
The dispute resolution procedure in the Code does not affect a party’s right to take legal action over a franchising dispute. If you are considering taking legal action against another party, you should first obtain legal advice.
See the OFMA website or call 1800 150 667 (free call within Australia) or (02) 9267 0167.