Disputes can arise in any relationship, and the franchisor and franchisee relationship is no exception. Fortunately, if you have a dispute with your franchisor, you have a number of options.

In many cases franchisees are able to resolve their concerns by simply talking to their franchisor. This is obviously the most favourable — and cheapest — way to deal with your dispute. Nevertheless, there are times when direct negotiations fail and the parties may be unable to resolve their differences without help.

The Code of Conduct

The mandatory Franchising Code of Conduct provides a dispute resolution procedure for parties to a franchise agreement. It says that the party with concerns must first give the other party a written notice outlining its concerns and setting out the steps it feels will resolve the dispute. The parties then have three weeks to try to come to an agreement.

If the parties canÍt resolve their dispute themselves, the Franchising Code allows either party to commence mediation. Bringing in an impartial third party can often help here.

Both parties can agree to appoint a mediator of their choice, or either party can ask the Office of the Franchising Mediation Adviser (OFMA) to appoint a mediator.

The mediation process

Mediation is designed to find a compromise that both parties can live with. The mediator does not make decisions — its role is to facilitate discussion between the parties and help them reach their own agreement. If this occurs, the parties will then usually be asked to sign a binding contract reflecting their agreement. According to OFMA, around 70 percent of its disputes are settled at mediation.

Preparation and a genuine desire to find a solution are essential. If you are not prepared to make any concessions, then the process is less likely to succeed. Likewise a good understanding of your rights can give you an idea of what you are entitled to and whether your expectations are reasonable. During mediation it is important to clearly state your concerns and the outcome you are seeking.

Cost

Mediation is far more cost-effective than bringing a legal action against your franchisor. The average OFMA mediation lasts around seven hours and costs each party $1200 plus room hire (if required). The parties must pay their own travel costs to attend the mediation.

Early intervention

A new early intervention dispute resolution service for franchisees and franchisors was introduced on July 1, 2011. This free service is also delivered by the OFMA.

You can now contact the OFMA in the early stages of a dispute and informally discuss your concerns. The OFMA will then contact the other party to discuss the issue and gauge their interest in settling the dispute quickly. Successful early intervention will prevent a matter proceeding to the formal mediation stage and is obviously less costly.

Legal options

There will be some situations where mediation fails to reach a suitable outcome.

The option of taking legal action is open to you at all times but it is usually best to consider it as a last resort.

No one wants to be caught up in a franchising dispute, but sometimes they are unavoidable. Dealing with your dispute quickly and appropriately can prevent the relationship with your franchisor unravelling.

Dr Michael Schaper is a deputy chairman of the ACCC