Blog

The Role of Mediation in Resolving Franchisee Disputes

Just as in the case of other industry, there exist certain rules and codes that govern the Franchising industry as well. The Franchising Code of Conduct in Australia was introduced on July 1, 1998 and resolving franchise disputes has been one of the core components of this code.

The code doesn’t have a lengthy and expensive process that can be part and parcel of going the legal way; when a dispute is dragged through court, the decision may be very cut and dry and leaves no scope for exceptions etc. This is where the mediation process proves to be more effective and offers more than a black & white option where only one party can win while the other loses. Instead, it results in a win-win situation where both parties are able to live with the outcome.

Things that don’t always work

At the point when such outcomes are reached, the one who mediates will summarise the outcome through a written agreement that both the parties sign and agree to adhere to. Of course, not everyone agrees that mediation is the best solution and this process typically falls into 2 distinct categories.

• The first is that the expense of this process can be extremely high, especially if one of these participants isn’t financially comfortable and is finding it a challenge to make ends meet.
• The second is that the outcome could have been significantly different if this particular issue had been taken to court; which means the mediation process has sold one of these parties short on the actual outcome they may have been able to achieve otherwise.

While both these criticisms may be right in a certain light, what has to be taken into account is that efficient mediation brings an issue to a close in a much shorter timeframe than the lengthy process of fighting this out in a courtroom. The amount of time and energy that can be lost on going through the litigation process can be tremendous. In most instances, the cost of mediation impacts franchisees more than franchisors in these disputes.

If the franchisee’s business is underperforming or has shut down entirely and they don’t have the financial power to go through the mediation process, that can pose a problem as well; any amount they spend on dispute resolution (mediation or legal), will be potentially viewed as unaffordable.

The OFMA or The Office of the Franchising Mediation Adviser is an Australian government-funded body and works in tandem with the Franchising code we mentioned at the outset. Its website mentions that on an average each participant would incur about $1,200 for the mediation. The positive side is that when you compare this to the hundreds and thousands of dollars that could be spent if the case is taken to court, mediation to resolving franchising disputes proves to be a boon.

Other benefits of mediation

• Litigation is very different from mediation; the former is about enforcing legal rights. While mediation is all about meeting needs.
• Mediation can result in both the parties meeting their specific needs by placing these above their legal rights.
• Mediation can also bring these disputing parties together as they both compromise in some way to find a via media that will be more conducive to both the parties.

If you want to know more about setting up a franchise business or want some advice on mediation, feel free to get in touch with us at The Franchise Institute. You can call us on 1300 855 435 or fill in this contact us form and we’ll reply as soon as we can.

Thanks for reading,
The Franchise Institute Team
1300 855 435