Resolving franchising disputes

The Code provides mechanisms for parties to a franchise agreement to try and resolve disputes in a timely and cost effective manner.

Complaints and disputes

Franchisors must develop an internal procedure for handling complaints. This procedure must be set out in the franchise agreement and meet certain minimum standards set by the Code.

The Code also provides a procedure for resolving disputes. If a dispute arises, either party may initiate the complaint handling procedure under the Code, or under the franchise agreement.

The Code requires you to first try to resolve your dispute with the other party by writing to them outlining:

  • the nature of the dispute
  • what outcome you want
  • what action will settle the dispute.

If you can’t agree on an outcome within three weeks, either party may refer the matter to mediation, which involves an informal negotiation between the parties facilitated by an independent third party.

Mediation

Once mediation is requested, it becomes mandatory for both parties to attend and to genuinely try to resolve the dispute.

The Office of the Franchising Mediation Adviser (OFMA) is the appointed Mediation Adviser under the Code.

Alternatively, the Australian Small Business and Family Enterprise Ombudsman (ASBFEO) or your local Small Business Commissioner (if available) may be able to appoint one for you.

If you cannot agree on who should be the mediator, either party may ask OFMA to appoint a mediator.

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.

The ACCC cannot appoint a mediator, or oversee the mediation process. Parties can agree to appoint a mediator or request that OFMA, the ASBFEO or Small Business Commissioner appoint a mediator on their behalf.

Note: The Code prohibits franchise agreements from containing a clause that requires mediation to be conducted, or an action/proceeding to be brought outside of Australia, or in a particular state or territory (other than where the franchisee is based).

Legal action

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.

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.

Contact the Mediation Adviser

The OFMA is the appointed Mediation Adviser under the Code. OFMA can assist in the resolution of franchising disputes by referring the parties to trained mediators with commercial experience located across Australia.

Visit the OFMA website or call 1800 472 375 (free call within Australia). 

More information

Franchising investigations