Franchising code amendments - dispute resolution
The long awaited dispute resolution provisions under the Franchising Code of Conduct (the...
The Franchising Code of Conduct (the Franchising Code) is a mandatory set of rules all Australian franchised businesses must abide by.
If you want to franchise your business, you will have to comply with the Franchising Code.
There are a number of areas which are covered by the Franchising Code including:
The Franchising Code provides that the franchisor and the franchisee must both act in good faith towards the other.
The obligation to act in good faith cannot be limited or excluded by either the franchisor or the franchisee.
The disclosure document arguably forms the foundation to compliance with the Franchising Code by franchisors. The disclosure document includes information such as:
At least 14 days before a franchisee enters into, renews or extends a franchise agreement or pays a non-refundable deposit in relation to a franchise agreement, a franchisor must give the franchisee:
In addition, if the franchise business is to be operated from premises and the premises are leased to the franchisor or an associate of the franchisor, the franchisor must give to the prospective franchisee at least 14 days before the franchisee enters into, renews or extends a franchise agreement, or pays a non refundable deposit in relation to the franchise agreement:
The Franchising Code requires that a franchisor provide a franchisee with certain rights in relation to franchise agreements, in particular:
A franchisor can only terminate a franchisee in accordance with the provisions set out in the Franchising Code:
The Franchising Code sets out a detailed procedure for resolving disputes.
Step 1 – Written Notice of Dispute
The complainant, whether they are the franchisee or the franchisor, must write to the other party with details of the complaint. The Franchising Code stipulates that the letter must include the following information:
Step 2 – Direct negotiation between the parties
The Franchising Code mandates that before any other action is taken the parties to the complaint must endeavour to resolve the dispute between them.
Step 3 – Appointment of a mediator
If the parties have tried to resolve the dispute between them and have failed, after 21 days of the written notice of dispute being given, either party may refer the matter to a mediator.
Step 4 – Mediation
When mediation is required by a party, the Franchising Code stipulates that before any other action is taken the parties must engage in mediation.
This is just a brief overview of the Franchising Code and does not cover all of the Franchising Code’s provisions.
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.