Dominique Hogan-Doran SC has been appointed as a Mediator for resolution of franchising disputes pursuant to the Australian Franchising Code of Conduct, a mandatory code prescribed by regulation under s. 51AE of the Competition and Consumer Act 2010.
The aim of the new Code (effective from 1 January 2015) is to improve the transparency and clarity of commercial transactions and reduce the costs of disputes that occur in the franchising industry. The new Code:
- introduces an obligation under the Code for parties to act in good faith in their dealings with one another
- introduces financial penalties and infringement notices for serious breaches of the Code
- requires franchisors to provide prospective franchisees with a short information sheet outlining the risks and rewards of franchising
- requires franchisors to provide greater transparency in the use of and accounting for money used for marketing and advertising and to set up a separate marketing fund for marketing and advertising fees
- requires additional disclosure about the ability of the franchisor and a franchisee to sell online
- prohibits franchisors from imposing significant capital expenditure except in limited circumstances.
The Franchising Code also requires parties to first try to resolve their dispute with each other by writing to the other party and telling them:
- the nature of the dispute
- what outcome they want
- what action will settle the dispute.
If the parties can’t agree on an outcome within three weeks, either party may refer the matter to mediation, which involves an informal negotiation between the parties facilitated by an independent third party.
Mediation is a cost-effective way to resolve franchising disputes without resorting to complex and costly legal action. Parties can agree to appoint a mediator or request that the Mediation Adviser appoint a mediator. Alternatively, the Small Business Commissioner in each state (if available) may be able to appoint a mediator.
Parties can contact the Office of the Franchising Mediation Adviser by making a free telephone call to 1800 472 375 to discuss their complaint, find out what assistance is available and whether the Code applies to their business relationship. They can also complete the On-Line Enquiry to lodge a complaint for immediate attention.
If you are a franchisee or a franchisor involved in a dispute and decide to use the Code’s dispute resolution process, then the Code requires that the other party must comply. In the first instance, the Code requires the parties to attempt to resolve their dispute by negotiation and, if that fails, to participate in mediation.