McMinn Franchise Mediation Adviser – Franchising Solutions

The popularity of the internet and e-commerce has proven to be problematic for established franchisors and franchisees. Claims made by franchisees in recent years have seen this as a new form of encroachment as established franchising systems have not originally considered online presence at the time of drafting franchising agreements.

The result of many cases has been dependent on the wordings within franchising agreements and takes into account if the franchisee held an exclusive territory to which the franchisor has encroached and breached. Modern day franchise offerings have begun documenting in more defined detail about which advertising channels are considered to be exclusively granted to the franchisee and what activities including online sales the franchisor may perform online.

Under the Franchising Code of Conduct, the mandatory franchise disclosure document requires prior disclosure from the franchisor to a franchisee of information relating to the franchise territory and whether it intends to sell the same goods or services online.

Exclusive territories are commonly agreed upon where the franchisor agrees not to establish a competing business or allow another franchisee to operate within the outlined boundary established. Franchisors commonly market to attract prospective franchisees as an exclusive territory is seen to be a major selling point. On the other hand, exclusive territory also limits the franchisees ability to advertise outside of the defined exclusive area. Advertising in local publications can encroach on another franchisees defined area; mobile franchises that are service based usually prohibit franchisees from advertising their direct phone numbers and often puts in place marketing restrictions on franchisees maintaining their own website and social media profiles.

Case Study

Business owner Dean operates Uncle Ben’s Gold Coast Removalists which is part of the well-established Uncle Ben’s service based franchise network. The franchise has franchisees operating Nationwide, although Dean owns his truck, he is required to have the franchise 1300 number marketed on his truck and not his own mobile number, he is required to keep the consistent image and logos displayed by the franchise network. Dean will not be able to market his business in publications that circulate in many franchised territories. He may however be able to utilize ecommerce websites that help consumers compare removalists.

Opportunities are being created by the internet in which franchising agreements have not clearly defined the limitations of online advertising; therefore it is important to speak to a franchising lawyer who can assist with any questions about your obligations as a franchisee.

According to the recent Franchising Australia Survey, there are approximately 1100 franchise brands operating in Australia. The Australian Government’s Franchising Code of Conduct is setup up to help resolve any disputes between the franchisee and franchisor and can be contacted on 1300 472 375 or via email adviser@franchisingcode.com.au

Any concerns from either party of the franchise, it is essential for the party raising the dispute to file a Notice of Dispute to formally begin the process of mediation. Both parties are given a time frame of 3 weeks to try to resolve the dispute by negotiation, if the 3 weeks has lapsed without an agreed resolution, request for a mediator can be initiated and an independent mediator will be appointed with both parties paying a share of the mediator’s fees.

What Happens at Franchise Mediation?

Planning is important towards achieving a successful outcome and ensuring time is not wasted at mediation. Understanding what process to expect when entering mediation can make it less daunting.

Written Agreement

All parties involved in the mediation process will be required to sign the agreement in which it presents the basis on which they agree to mediate.

Mediation Overview

The mediator will provide an introduction regarding the outline of the meeting and indicate their role throughout the process. The mediator will make a statement outlining their understanding of the dispute and the documents each party have provided.

Party Opening Statements

The party who has raised the dispute is given the opportunity to begin by giving an opening statement regarding the facts and any breaches made to the Franchising Agreement. The second party is then able to state their case and address issues raised by the applicant.

Mediator Insight

The mediator will provide an overview of the dispute raised and clarify with both parties if necessary. As an accredited legal practitioner, they will discuss the ramifications if the dispute remains unresolved, their professional experience can provide both parties with an indication towards the costs, time involved and commitment required to resolve the dispute in court.

Offers of Resolution

Both parties will enter separate rooms and the mediator will negotiate on behalf of both parties to try and settle the dispute. The mediator will go back and forth to both parties to understand and put together offers that would achieve the best outcome for both parties.

Resolution

Upon reaching an agreement, the mediator will assist in writing an agreement for both parties to sign. Failing to reach a resolution after 30 days of mediation, either party can request the mediator to terminate the mediation with a resolution to be determined following commencement of court proceedings.