Franchise Dispute Resolution
Greyson Legal | Franchise Lawyers are experienced Franchise dispute lawyers.
We are experts in dealing with franchising disputes and have assisted a number of clients to resolve their franchise dispute - in doing so avoided lengthy and costly franchise litigation.
Franchising disputes between a franchisor and franchisee arise from time to time for a variety of reasons.
Unresolved disputes can have adverse affects on the franchisee, the franchisor and the franchise network.
Why Do Franchise Disputes Arise?
To minimise franchise disputes, it is important prospective franchisees understand their rights and obligations under the franchise agreement and at law.
We recommend prospective franchisees obtain a full review and advice of the franchise agreement before signing any franchise agreement.
Contact Greyson Legal | Franchise Lawyers for further details.
Generally, when a franchise model is developed it aims to create a mid to long term relationship between the franchisor and franchisee. For this reason many franchise agreements include initial terms of 3 or 5 years with additional renewal terms.
However, as with any relationship of some length disputes can arise. Franchise disputes may occur for any number of reasons, such as:
Poor communications between franchisor and franchisee
The franchisor requiring the franchisee to undertake additional and expensive fitout as a condition to granting a renewal term
Franchisors insisting franchisees only purchase franchisor approved products or services from franchisor approved suppliers
Lack of franchisor support for franchisees
Threat of termination of the franchise agreement by the franchisor for minor breaches by the franchisee
Disagreement about fees payable under the franchise agreement
The Franchisor requiring franchisees to undertake further training at the franchisee’s expense
Disagreements about territory exclusivity
The franchisor's recommended franchise management systems not working effectively
The franchisor requiring the franchisee to give discounts to customers, honour loyalty cards or be involved in promotional activities at the cost of the franchisee
The franchisor making unilateral changes to the franchise agreement
Franchisors expending money from the Marketing Fund for unauthorised purposes
Franchisors failing to comply with the Franchising Code of Conduct
Franchisors acting in a way that is misleading and deceptive
And, of course franchisors can have legitimate concerns about the conduct of their franchisees as well, for example, where franchisees:
fail to comply with the Franchise Procedures Manual
do not meet minimum performance criteria
fail to meet their obligations under the franchise agreement
abandon their franchise and/or set up a separate business in breach of non-compete obligations.
How to deal with a Franchise Dispute
Where a franchise dispute does occur, it is recommended in the first instance that franchisees and franchisors seek to resolve that dispute themselves.
Often that may not be easy where there is a power differential in favour of the franchisor and the franchisor is reluctant to negotiate.
Most franchise agreements contain a dispute resolution procedure. Failing that, the Franchising Code of Conduct sets out a procedure to assist franchisors and franchisees in resolving disputes.
Where a franchise dispute cannot be resolved amicably, it may be necessary to either:
refer the matter for mediation, such as, through the Australian Small Business and Family Enterprise Ombudsman (ASBFEO); or
escalate the franchise dispute by way of franchise litigation through formal court proceedings.
If you are involved in a franchise dispute or considering taking legal action, contact Greyson Legal | Franchise Lawyers, for advice and assistance.
A few clients we have helped with their franchise dispute
Leave Franchise System and Re-brand
We acted for a franchisee within the fitness industry that was in a franchise dispute alleging:
the franchisor conducted itself in a misleading and deceptive manner;
the franchise system was ill conceived and poorly developed by the franchisor;
lack of support and training by the franchisor;
a flawed royalty mechanism;
the franchisor failed to provide annual financial statements in relation to the Marketing Fund in accordance with the Franchising Code of Conduct and used the Marketing Fund for unauthorised purposes;
among other allegations.
Despite failed initial attempts to negotiate directly with the franchisor, we were able to assist our client with their mediation and ultimately to leave the franchise system, re-brand and trade on their own account.
Franchise Deed of Surrender
We assisted a franchisee within the tile industry whereby our client alleged the franchisor:
made a number of misrepresentations prior to the franchisee entering into the Franchise Agreement about the level of gross income the franchisee could generate, leads the franchisee could expect and the conversion rates of customers;
had not acted in good faith;
breached other obligations.
We were able to negotiate the early release of our client from the Franchise Agreement, including preparing a Deed of Surrender on agreed terms and conditions, such as, the restraint of trade clauses no longer applying and the franchisee being permitted to continue trading on their own account.