Resolving Franchise Disputes through Mediation
The Office of the Franchising Mediation Adviser
The Franchising Code of Conduct applies to all franchises in Australia. It provides a process for resolving franchise disputes. Under this process a person with a franchise dispute must send a letter or Notice of Dispute to the other party setting out:
(a) the nature of the dispute; and
(b) what outcome the complainant wants; and
(c) what action the complainant thinks will settle the dispute.
A template Notice of Dispute can be found on the OFMA website, or you can contact OFMA directly and they will send one to you.
After the letter or Notice is sent to the other person, both parties are required by the Code to try to settle the dispute.
Many disputes are settled at this stage and mediation is therefore unnecessary in such cases.
If the parties cannot settle the dispute within 3 weeks of sending the letter or Notice of Dispute then either party may write to OFMA requesting that a mediator be appointed.
The parties are free to go to court or appoint their preferred mediator and are not required to use OFMA’s mediators.
Once a mediator is appointed, both sides must attend the mediation and try to resolve the dispute. Failure to do so would be a breach of the Code and possibly of the Competition and Consumer Act (formerly the Trade Practices Act).
According to the Franchising Code of Conduct, a party will be taken to be trying to resolve a dispute if the party approaches the resolution of the dispute in a reconciliatory manner, including doing any of the following:
• attending and participating in meetings at reasonable times;
• at the beginning of the mediation process, making the party\\'s intention clear as to what the party is trying to achieve through the mediation process;
• observing any obligations relating to confidentiality that apply during or after the mediation process;
• not taking action during the dispute, including by providing inferior goods, services, or support, which has the effect of damaging the reputation of the franchise system;
• not refusing to take action during the dispute, including not providing goods, services or support, if the refusal to act would have the effect of damaging the reputation of the franchise system.
The mediation will be held where and when the parties agree or as the mediator decides.
What is mediation?
Mediation is informal and is like a meeting around a table. The mediator is an independent person who helps the parties to decide how to resolve their dispute and to work together to reach a binding settlement which they both can live with.
A mediator is not like a judge and does not decide the outcome.
Advantages of Mediation
- is confidential (to the extent permitted by law)
- allows everyone to have their say
- is cost-effective and much cheaper and quicker than the courts
- leads to results that meet the parties’ real needs
- allows an independent person to help the parties understand each other, communicate, identify options and come to agreement
Most OFMA mediations take approximately 6 or so hours on the same day.
Going to court is generally prohibitively expensive and causes considerable stress over a longer period. Almost all court cases are settled before a judge hears the matter. Mediation means the case is settled in a fraction of the time and at much less expense.
Once OFMA appoints the mediator, the mediator will contact the parties and
- send them a mediator appointment agreement for them to sign before the mediation
- ask for a payment to be made before the mediation to cover fees and mediation room hire fees
- discuss with them where and when the mediation will be held
- ask whether any preparation should occur for the mediation such as preparing a summary of the problem to send to the other party and the mediator before the mediation
When the mediation occurs, the mediator will allow everybody to state the problem as they see it. The mediator will help the parties decide what is a reasonable outcome for them.
The parties can bring advisers if both parties agree, but it is not compulsory to do so.
The mediator will usually meet with the parties separately at some stage during the meeting.
At the end of most mediations there will be an agreement which the parties make. The mediator will assist them to write it down. That written record will normally be a binding contract.
The mediator will also hand out feedback forms, which the parties can send to OFMA after the mediation giving their opinions of the mediation.
The mediator’s fees are $275 (inclusive of GST) per hour for preparation (to a maximum of $825) plus $275 per hour for the mediation. The costs of the mediation are shared equally between the parties (unless otherwise agreed). These costs may include:
• The mediator\\'s fees
• Room hire fees
• The cost of any additional input (excluding expert reports) agreed by both parties to be necessary to the conduct of the mediation
• The mediator\\'s travel expenses (in some cases)
The average mediation through OFMA costs each party about $1400. This is much cheaper than court action.
There is no charge until the mediator is appointed at which stage the mediator will ask each side for a payment in advance to cover expected fees and costs.
OFMA has established a specialist panel of franchise dispute mediators with mediators in each State and Territory. They have all been trained in mediation. All are experienced mediators and have experience in franchise matters.
The panel is subject to quality control and review by OFMA.
OFMA is funded by the Office of Small Business in the Federal Department of Industry Tourism and Resources. The role of OFMA is specified in the Franchising Code of Conduct.
OFMA staff have 13 years’ specialist experience resolving franchise disputes by mediation.
The Franchising Code of Conduct is a mandatory Code prescribed under the Competition and Consumer Act. Failure to comply with the Code is a breach of the Act.
Copies of the Code are available from the Australian Competition and Consumer Commission (ACCC) or on its website under Publications www.accc.gov.au. A manual on how to comply with the Code is also available from the ACCC.
Part 4 of the Code contains the dispute resolution provisions. These cover disputes arising out of franchises.
All franchise agreements entered into from 1 October 1998 must contain a dispute resolution clause that complies with Part 4 of the Code. Such a clause must provide for the option of mediation.