How to manage franchise disputes: top tips

No-one wants a dispute in their franchise system and there are ways to work with franchisees to put the relationship back on track.

The issue of disputes, and how lawyers can have an impact on this process, was a topic at the National Franchise Convention 2015 in the legal symposium.

Hong-An King, assistant mediation advisor, Office of the Franchising Mediation Advisor, and Meghann Robinson, legal counsel for McDonald’s Australia, discussed this in a panel session.

King said the cause of dissatisfaction is not necessarily what the franchisee raises as an issue with the franchisor.

“Franchisees often need support but don’t realise it,” she said.

The top number of disputes brought about by franchisees concern exiting the franchise but digging deeper uncovers that the issue is in fact a call for more support, she said.

“Collaboration is key in a franchise relationship,” said Robinson.

The worst ways to handle a dispute

  • Issue a breach notice at an early stage
  • Don’t investigate all the financials
  • Don’t offer training
  • Treat the franchisee as a number not as a franchisee

“When threatened with┬áthe end of the relationship franchisees respond really badly,” King added.

If a dispute does reach mediation there are some ways to proceed to ensure the best result.

King said it is important to find a common ground of values for both parties.

Lawyers can help franchisees through this if there is a focus on achieving resolution but can also be a hindrance if they inflame the process. “Using legal terms in the process can make it harder for franchisees to understand,” said King. “It can be really important for mediators to allow the franchisee to speak and lawyers may need to step out of the room,” she added.

The franchisee’s family can also play a key role in settling disputes at mediation, she said.

When it came to the franchisor approach, handling the decision making correctly is important.

Robinson said “Franchisors need to have faith in the people who are dealing with the issues, and not get involved and change their decisions.”

King highlighted what is required of the franchisor in mediation. “The person attending mediation must have the authority to make a binding agreement.”