On this page

Sometimes things go wrong, but it’s no one’s fault

If a franchise is not doing well, it doesn’t always mean someone is at fault, or a law has been broken. This can be due to things a franchisor or franchisee can’t control, such as changing consumer tastes, more competition, or big world events.

It’s important to have trusted independent advisors, like an accountant or a business advisor, who you can turn to when things get difficult.

Steps when there is a disagreement

If there is a dispute, there are 2 steps that either the franchisor or the franchisee can follow.

  1. Tell the other party in writing

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

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


    This is called a notice of dispute.

  2. Follow the process in the code or franchise agreement

    If you have written to the other party about the dispute and can’t agree on an outcome within 21 days, follow the process in the code or franchise agreement.

    Either you or the other party can choose which process to use. Both options allow you to refer the matter to an alternative dispute resolution process.

    The code has minimum standards for dispute processes that must be included in a franchise agreement.

Where to get help

The ACCC does not act on behalf of individual franchisees or groups of franchisees. Find out more about what the ACCC does in franchising.

If a group of franchisees is concerned that their discussions may breach competition laws, they can notify the ACCC that they plan to use the class exemption for franchisees to collectively bargain with the franchisor.

Ombudsman

The Australian Small Business and Family Enterprise Ombudsman (ASBFEO) is an independent advocate for small business owners and franchisees.

The Ombudsman also assists small businesses and family enterprises with business disputes. They can:

  • let you know about dispute resolution processes and your options to resolve a dispute
  • help franchisees and franchisors access alternative dispute resolution services
  • appoint a dispute resolution service provider if a party to a dispute - a franchisee or franchisor - asks them to
  • name franchisors who have not participated meaningfully in alternative dispute resolution.

Visit the Australian Small Business and Family Enterprise Ombudsman (ASBFEO). You can make an enquiry online or call their information line on 1300 650 460.

State Small Business Commissioners

State Small Business Commissioners support small businesses with information, guidance and access to dispute resolution services.

Ways to try to resolve a dispute

Alternative dispute resolution processes

Alternative dispute resolution means either mediation or conciliation. You can use one or more of these processes to try and resolve a dispute.

Mediation is when parties try to negotiate an outcome for their dispute with the help of an impartial person - the mediator. The mediator facilitates the negotiation but doesn’t get too involved in discussions.

Conciliation is like mediation, but a conciliator takes a more active role in discussions. They may offer advice about the subject matter of the dispute and can make recommendations for the parties to consider. Like a mediator, they are impartial and do not make decisions for the parties.

Multiple party mediation or conciliation is when franchisees who have similar disputes with the same franchisor try to resolve their dispute together. This can be through either mediation or conciliation. Franchisees are allowed to discuss their disputes with each other, even if there are confidentiality obligations in their agreements, if their franchise agreement was entered into, extended or renewed from 1 July 2021.

The Australian Small Business and Family Enterprise Ombudsman helps franchisees and franchisors access alternative dispute resolution services.

Arbitration by agreement

Arbitration is another way for franchisors and franchisees to resolve the dispute or parts of the dispute.

Arbitration is only an option if both parties agree in writing to try to resolve a dispute this way. The disclosure document will say if the franchisor and franchisee have agreed in their franchise agreement to resolve disputes by arbitration. If not, you can still try to agree outside of the franchise agreement.

Arbitration is a more formal process than mediation and conciliation. In arbitration, the parties present their case to an independent person - an arbitrator - who decides how to resolve the dispute.

If you and the other party have agreed in writing to resolve a dispute by arbitration, either party can begin the process by asking the Australian Small Business and Family Enterprise Ombudsman to appoint an arbitrator. The code has a procedure for how to conduct the arbitration.

Dispute resolution rules

Acting in good faith and confidentiality

Once a party has raised a dispute, both parties must attend and try to resolve the dispute in good faith.

Confidentiality obligations may apply to information that is disclosed or obtained in an alternate dispute resolution process or arbitration.

Paying for dispute resolution

In a conciliation, mediation or arbitration, each pays about half the costs of settling the dispute and conducting the process, unless they agree otherwise. Each party must pay their own costs of attending the process.

If you take legal action, you could end up paying for more than half the costs.

Passing on the costs

When settling a dispute, franchisors can’t pass on their legal costs to franchisees.

Franchisors can't:

  • ask franchisees to pay for the franchisor’s legal costs of settling a dispute
  • include terms about who pays for the legal costs of settling a dispute in the franchise agreement.

Legal advice

The code does not stop you from taking legal action over a franchising dispute. If you are considering taking legal action against another party, you should first get legal advice, as legal action can be expensive.

Some disputes in franchising will be about contract law. Not all government agencies assist with this.

Your legal representative is also the only person who can represent you in court.

Location of the dispute resolution

Franchisors can’t make franchisees resolve their disputes:

  • outside the state or territory where their business is based
  • outside Australia.