The Franchise Mediation Process

If negotiation hasn't led to a resolution, the mediation process begins with clear procedural steps.

 

What Is Franchise Mediation?

The two mandatory dispute resolution processes set out in the Franchising Code of Conduct (the Franchising Code) are mediation and conciliation.

Mediation is a facilitative dispute resolution process, which means that a third party (the mediator) will assist (or facilitate) the parties to resolve the dispute.

The mediator does not provide advice or make any determinations about the dispute. 

In this resource guide we consider the process of franchise mediation. 

 

Step 1 - Notice of Dispute

Under Part 5 of the Franchising Code - Resolving Disputes, a party to a franchise agreement (known as the complainant) who has a dispute with another party to the franchise agreement (known as the respondent), may take action either under:

• the complaint handling procedure set out in their franchise agreement; or
  
• the complaint handling procedure set out in the Franchising Code.

If the complainant decides to take action under the complaint handling procedure set out in the Franchising Code, the complainant must first issue a Notice of Dispute.

The Franchising Code provides that the complaintant must tell the respondent in writing (the Notice of Dispute):

(a)  the nature of the dispute;

(b)  what outcome the complainant wants; and

(c)  what action the complainant thinks will resolve the dispute.

The parties should then try to agree how to resolve the dispute, but if they cannot agree within 3 weeks either party may refer the matter to mediation or conciliation.

 

Step 2 - The preliminary conference

If the parties decide to resolve the dispute through mediation, a mediator will be appointed, either by agreement between the parties or by ASBFEO.

The mediator will usually contact each party and arrange a separate preliminary conference.

The purpose of the preliminary conference is to:

• answer questions,
• explain the franchise mediation process and the underlying principles,
• explore whether mediation is the most appropriate process for the dispute,
• discuss the mediator’s role,
• confirm who will be attending the mediation and in what capacity,
• discuss the role of any advisers who will be attending the mediation,
• exchange documentation and if required set a timetable for the exchange of documentation,
• confirm the date time and place for the mediation.

There may be a follow up to the preliminary conference, for example if documentation is not exchanged as agreed.

Documentation may include the documents that each party is relying on in the dispute. Documentation may also include a position paper, where each party sets out their "position" in relation to the franchise dispute.

 

Step 3 - The Mediation Day

Pre-mediation meeting

On the day of the mediation, the mediator may meet separately with each of the parties and their representatives before the mediation starts.

This will enable the mediator to set the tone for the day and to gauge the attitude of the respective parties.

 

Mediator’s opening statement

After the parties have met separately with the mediator, the mediator will begin the formal proceedings.

The mediator’s opening statement will normally cover the following issues:

• The role of the mediator in the mediation
  The mediator’s role is to facilitate. The mediator does not impose decisions upon the parties, but is there to assist the parties to reach an agreement.

• The procedure that the parties will follow
  
  

• The confidentiality of the mediation process;
  Generally the matters discussed in mediation and the documents prepared for mediation are confidential. However there are many exceptions to this rule. Often a mediator will use the expression “mediation is confidential unless otherwise required by law”.
  
  
• The authority of the parties present at the mediation;
  The parties present at the mediation must have authority to settle the dispute.
  
  
• The time constraints of the parties present at the mediation;
  Mediations often continue into the evening. Consequently a mediator must know at the outset whether any of the parties have time constraints.
  
  

• The proposed rules of courtesy to be followed by the parties.
  
  

The parties’ opening statements

After the mediator's opening statement, each party will have the opportunity to explain its position (without interruption from the other party). This is known as the party's opening statement.

At the end of each of the respective party’s opening statements, the mediator may summarise the key issues raised by the party.

 

Identifying the issues and setting the agenda

After the parties have each completed their opening statements, in addition to summarising the key issues, the  mediator may list an agenda of issues for discussion.

The mediator may also prioritise those issues in the order that the parties wish to deal with them.

 

Joint Sessions

If the parties are comfortable in attending a joint session together, they will discuss the issues summarised by the mediator or set out in the agenda, in what is known as a "joint session".

During the joint session the mediator should use his or her skills as a facilitator to

• keep communication open between the parties;
• stick to the issues or the agenda; and
• find common ground between the parties.
  
  

Private Sessions 

It is likely that after the joint session, the parties will separate into separate rooms. 

The mediator may spend time privately with each party exploring the issues and reality testing each party’s position.

The mediator will not discuss the matters raised in a private session with the other party unless they are specifically authorised to do so.

This is generally the stage of the mediation where the parties start exploring the options for settlement.

 

Settlement

If the franchise dispute settles at mediation, the mediator will ensure that any oral agreement reached between the parties is accurately reflected in a written agreement or heads of agreement.

It is generally good practice that if the dispute is settled, the parties enter into a written agreement or heads of agreement on the day of mediation.

If the parties do not enter into a written agreement or heads of agreement on the day of the mediation, there is a risk that a party will change its position and the matter will not settle.

 

Tips for Success in Mediation

Firstly, ensure that the person who attends the mediation has the authority to settle the dispute. 

Secondly, allow enough time to enable the process to work. Mediations will normally run for the entire day, and can often run into the evenings.

Thirdly, be realistic about settlement proposals. Remember that mediation is your opportunity to settle the matter on your own terms, rather than having a Court impose terms on you.

 

What happens if Mediation Fails?

Mediations are not always successful.

This can be for a number of reasons including the timing of the mediation in the dispute resolution process.

If mediation is not successful the parties can attempt to negotiate the dispute without facilitation, or resort to litigation.

The parties can always revisit mediation or conciliation, after the issues in the dispute are carified and the parties are in a better position to settle.

 

 

Disclaimer

The information in this article is general in nature and is not intended to address the circumstances of any person or other entity. Although we do our best to provide timely and accurate information, we do not guarantee that the information in this article is accurate or that it will continue to be accurate in the future.