The Code provides mechanisms for parties to a franchise agreement to try and resolve disputes in a timely and cost effective manner.
Note: On 1 June 2020 amendments to the Franchising Code were introduced for New Vehicle Dealership Agreements. These amendments include that franchisees that have entered into a new vehicle dealership agreement and that each have a dispute 'of the same nature' with their franchisor, can ask the franchisor to deal with the franchisees together about the dispute.
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.
Dispute resolution services are provided by the Australian Small Business and Family Enterprise Ombudsman (ASBFEO). The ASBFEO can provide information on the dispute resolution processes under the Code, options to resolve disputes and access to mediation services to franchisees and franchisors.
Your local Small Business Commissioner (if available) may also be able to provide you with dispute resolution services including by a appointing a mediator.
Once mediation is requested, it becomes mandatory for both parties to attend and to genuinely try to resolve the dispute.
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 Department of Industry, Science, Energy and Resources has responsibility as the Mediation Adviser, who is appointed under the Code. If you cannot agree on who should be the mediator, either party may ask the Mediation Adviser to appoint a mediator.
The ACCC cannot appoint a mediator, or oversee the mediation process.
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).
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.
The ASBFEO can assist in the resolution of franchising disputes by referring the parties to trained mediators with commercial experience located across Australia. Visit the ASBFEO website, email firstname.lastname@example.org or call 1300 650 460.