Common Problems in Franchise Agreements

The purpose of a franchise agreement in Australia is to ensure that the rights and interests of both parties are protected. It is in the best interests of the franchisor to protect their brand, while it is in the interests of the franchisee to be provided with sufficient support to operate the franchise business.

Where a franchise agreement does not clearly articulate the parties rights and obligations, disputes can and will arise.  Commonly, problems arise when:

  • Either party is unclear about the level of support to be provided / received under the franchise agreement;
  • The standards communicated, either in negotiations or as part of the franchise agreement, are unrealistic;
  • Payments or obligations are worded in a way that is confusing or lacking clarity, resulting in disputes over money; and
  • A standard franchise agreement is used which is not specific to or aligned with the business being franchised.

A standard franchise agreement may not provide sufficient protection for your rights and interests, which is why it is important to speak to a franchise lawyer when undertaking a franchise business.

Every business involved in a franchise agreement in Australia is bound to operate in line with the Franchising Code of Conduct. The Code outlines the behaviour, which is expected of every franchisor and franchisee, while also providing a framework for dispute resolution.

In relation to dispute resolution, the Code requires that every franchisor must outline an internal procedure for handling complaints between parties:

  • Every party to a franchise must act in good faith. This means is that parties must be honest, and must act as a reasonable person in the same position would act.
  • When resolving a dispute, parties must actively try and resolve it in a cooperative and honest manner.

The Code gives parties to a franchise agreement the peace of mind to know that there is a system in place in the event that a dispute happens.

The procedure for resolving disputes must be outlined in all franchise agreements:

  • The first step to be taken in resolving a dispute is to make contact with the other party and outline what the dispute is about, and how you think you can settle the issue.
  • If the parties cannot settle the dispute, the matter may proceed to mediation.

If you need legal advice about your franchise agreement, Robinson Nielsen Legal have the skills and experience to assist you. It is preferable to take preventative action up front where possible and ensure your franchise agreement is precise, accurate and aligned to your business operation.

If you have you a franchise dispute, our firms experience as franchise dispute resolution practitioners means we can guide you to the outcome you desire by managing the dispute and allowing you to focus on your business objectives.

Call Robinson Nielsen Legal to discuss how we might assist you: 07 3036 0649 or tracey@robinsonnielsen.com.au