Franchise Disputes

Franchising laws are different and unique and you must have a qualified and experienced franchise lawyer to resolve your dispute.

The dispute resolution process must be carried out having regard to the Franchising Code of Conduct and your franchise agreement. It is more involved than other litigation and business disputes therefore it is crucial to have an experienced franchise lawyer act for you.

Whether you are a franchisee or a franchisor, we can assist. Our franchise dispute lawyers in Sydney and Melbourne have significant knowledge and expertise in this area to help you resolve your franchise dispute and enforce your rights.

Franchising and franchise disputes can touch on a broad range of legal topics, including:

  • compliance with the Franchising Code of Conduct;
  • contract law;
  • employment law;
  • intellectual property law;
  • the Australian Consumer Law; and
  • ACCC investigations.

Franchise Mediation

As mediation is an essential part of the dispute resolution process it is crucial for franchisees and franchisors to understand the process and their rights. Mediation is useful to resolving disputes, but you need to be prepared. Often franchisors have an unfair advantage being more experience in these settings having attended mediation before.

Both parties should have a clear concise outline of your dispute. This will assist in getting a resolution sooner. It will also be a better result and the resulting agreements can be appropriately drafted so bind the parties to the agreement.

Having legal representation that understands the law and the commercial consequences helps to properly represent your issues to the franchisee or franchisor. Being able to negotiate a fair commercial outcome for our clients is key. We understand not only the legal issues but the continuing commercial relationship between franchisees and franchisors post mediation.

For disputes that don’t settle at mediation we are experienced in handling complex franchise disputes. Our lawyers provide high quality and professional legal advice and robust defence of our clients.

Considerations for Franchisees in a Franchise Dispute

It can often seem like a David and Goliath battle for franchisees, where the franchisor has greater power. We have helped many franchisees get their desired outcome in mediations and court-based litigation. If you have been accused of a breach or have been misled or other issues with your franchisor we can help.

We take a considered approach from the outset, outlining the legal issues and quantifying the claim and loss to you. We also work quickly before mediation stage to try and negotiate a resolution. We are mindful in business disputes that as a business owner you want to get back to running your business profitably – quickly.

For franchises it is important to understand their legal position before any mediation in a franchise dispute. Having a lawyer to help you get compensation, where appropriate, and remedies to prevent further loss to the franchisee is crucial. We assist with the negotiation phase initially and also draft tight settlement agreements to ensure the parties are bound to any agreement made at mediation.

In many cases franchisors will have in-house legal counsel and it is important to not compromise your position and have a strategy to deal with the dispute.

Our franchise lawyers have helped many franchisees in Melbourne and Sydney with dispute resolution, mediation and litigation. We are well experienced to help you resolve your dispute and get back to your business quickly.

We have helped franchisees with claims for false and misleading conduct, breach of contract, leasing issues, renegotiate supply agreements and pricing and more.

Considerations for Franchisors in Franchise Disputes

If you are a franchisor having to deal with a franchisee dispute it is best to get an outline of the best method before a dispute becomes litigious. Getting early advice can prevent disputes and breaches from being escalated and help save you money in the long run.

Given the scrutiny that Franchisors have in the media it is prudent that you consider the issues carefully and have the right legal representation. For franchisors with in-house lawyers we can offer high level professional legal support in complex disputes and, of course, litigation.

Franchisors considering terminating a franchise agreement on the basis of the franchisee’s repudiation should seek legal advice from an experienced franchise dispute lawyer before doing so.

If the purported repudiation is later found not to have triggered a right to termination, the franchisor would then be found to have wrongfully terminated the contract and find themselves owing damages to the franchisee.

It is important as a franchisor to understand your legal rights and responsibilities, particularly in this everchanging regulatory landscape.

Franchisors should also consider any potential for reputational damage when dealing with disputes. Having the right representation helping you deal effectively with your franchisees will help avoid any brand damage internally and externally of your franchise network.

Franchise laws are federal laws and thus cover Australia-wide. We can help you with any franchise matter wherever you are located. Our team not only handle franchise disputes, but can provide legal advice or prepare franchise documents for potential franchisees or franchisors.

Speak to a franchise expert about your dispute on 1300 907 335 or complete the enquiry form on this page.

FAQs

How does a franchise dispute arise?

Under a franchise agreement, the franchisor grants the franchisee the right to carry on a business using the trademark, logo, and advertising of the franchisor. In exchange, the franchisee pays the franchisor a franchise fee and, in some cases, payment for goods or services, or a percentage of sales. Details of each franchise agreement will vary from case to case.

The franchise agreement will usually require the franchisee to comply with an operations manual that sets out how the franchised business is to be run.

Franchise agreements set out the terms and conditions with which the franchisee must comply. They often include conditions about the payment of fees and royalties, adherence to the franchise system, protection of intellectual property, and quality management, amongst others.

Many of those conditions are put in place to protect the value of the franchised brand. If a franchisee does not live up to expectations or does not protect the intellectual property of the brand, it could have a detrimental effect on the rest of the franchise.

Franchise disputes arise when one of the parties does not do what they have agreed to do.

For a franchisee, this could be non-payment of money – and usually is. Often, though, it is the franchisee who has the issue – for example of the franchisor wants to change the franchise system unilaterally and fundamentally – or if the Territory demarcation if not adhered to.

If the franchisee doesn’t comply with its obligations under the franchise agreement, disputes will inevitably arise.

Although in most franchise agreements, the franchisor will hold more power than the franchisee, franchisors should be wary of being overly restrictive or oppressive, as that could open them up to potential liability.

If a franchise agreement is not drafted appropriately or is extremely prescriptive about the way in which the franchisor is to carry on its day-to-day business, the franchisor could find itself liable, or jointly liable, for the actions or omissions of the franchisee.

If the franchisor contributed in some way to loss or damage suffered by a third party, the franchisor can also be found liable, or jointly liable, by the Court.

In circumstances where the franchisor is at fault, there may be more than one franchisee who has suffered loss or damage as a result. In those cases, it may be possible to commence a class action against the franchisor.

This would allow the franchisees to pool their resources against the franchisor and minimise their individual legal costs. This strategy can be particularly useful when up against a very large franchisor with significant resources to call upon.

What happens when there is a breach of an essential term in a Franchise Agreement?

Franchise agreements are, essentially, contracts. Although there are additional obligations under the Franchising Code of Conduct that aren’t found in many other contracts, the general law of contracts still applies.

If a franchisee breaches an essential term of the franchise agreement, the franchisor will often have a right to terminate the agreement. The termination must be subject to the terms and conditions of the agreement.

In addition, the franchisor may also be entitled to damages.

A breach can also be where a party doesn’t breach the agreement but acts in a way that indicates they no longer intend to abide by the contract. This is known as “repudiation” and can also be resolved with the assistance of a franchise lawyer.

Breaches of franchise agreements can be costly for either party. If an agreement is not properly terminated or the breach not correctly dealt with the other party may be entitled to damages. Having a lawyer with deep understanding of the Code and franchise law generally is essential.

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