In light of the recent release of the franchising inquiry’s report and recommendations for change, a senior lawyer has offered some advice on how franchisees can go about resolving disputes with their franchisor.
The Fairness in Franchising inquiry’s report was released in March, after being pushed back several times, which found the current system “manifestly failed to deter systemic poor conduct and exploitative behaviour” which has “entrenched the power imbalance” favouring franchisors.
But according to Robert Bryden, founder of Robert Bryden Lawyers, there are certain steps that franchisees can use to get a leg up when negotiating to resolve disputes with their franchisor.
Refer to initial advice and documentation
The first step, according to Mr Bryden, is for franchisees to arm themselves with the facts.
“Look at the advice you were given initially,” he said.
“The important things to check for include any evidence or signs of negligence and misrepresentation. Were you provided with misleading information about the sale? Were there things the franchisor did not disclose to you in order to protect themselves? Were you provided with misleading books?
“Make sure you have documentation and correspondence in writing, whether in the form of email chains, files or agreements with the franchisor.”
Check the franchisor’s fulfilment of obligations
The next step, he said, is compare those documented conditions and requirements with what is actually being delivered by the franchisor, and whether their obligations under the agreement are being met.
“From the outset, were you provided with accurate and correct legal and accounting advice?” Mr Bryden said.
“Check if proper disclosure was made and find out if they are properly spending money on promotion and advertising that you are paying for that purpose. Have they provided adequate training? Where is all the supply or stock coming from? It is an issue if stock is coming exclusively from only one main location.
“Ensure that all hidden costs are identified accordingly.”
Know your rights under the Franchising Code of Conduct
“The law is a powerful tool and often favours franchisees, [so it pays to] utilise the Franchising Code of Conduct to your advantage,” Mr Bryden explained.
“Know what rights and obligations you are entitled to. The Code regulates the franchisor and franchisee relationship in various ways. Assess the disclosure document and franchise agreement which should have been provided prior to any contract signings.
“Also, review details about the marketing funds that the franchisor provided from the outset.”
According to Mr Bryden, dispute resolution procedures must be adhered to by both parties.
Mediation can help resolve more complex disputes
Some disputes are not able to be resolved directly between the franchisee and their franchisor, which is where bringing in an impartial facilitator, such as a mediator, can be “helpful”, he said.
“A mediator will bring together both parties involved for a meeting designed to find a solution.
“Prepare for a mediation by assessing what the problem is, what is the desired outcome and what steps need to be made to achieve that.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.