Introduction to The Code

The Franchising Code of Conduct applies to all franchises in Australia. It provides a process for resolving franchise disputes.

The Franchising Code of Conduct provides that any party to a franchise agreement may refer their problem to a mediator of their choice or to the OMA to appoint a mediator.

The Code is a mandatory code under the Trade Practices Act. This means that if you are in a franchise relationship you must comply with the provisions of the Code.

If a franchisor or franchisee requests a mediation then the other side must attend and try to resolve the dispute. If the other side refuses to attend they will be in breach of the Code and possibly also in breach of the Trade Practices Act.

Should one side not attend mediation then the other side may start legal proceedings for breach of the Trade Practices Act. Alternatively, it might contact the Australian Competition and Consumer Commission (ACCC) asking it to investigate and take action.

Franchisors and franchisees have successfully used mediation to resolve a wide range of disputes including disputes about rent, training, support and supply of products.

Mediation involves an independent and neutral mediator who helps the parties negotiate a settlement they can live with. A mediator does not hand down a decision like a judge, but helps the parties reach their own agreement.

All franchise agreements entered into from 1 October 1998 must contain a dispute resolution clause that complies with Part 4 of the Code. See below Dispute Resolution Clauses for Franchise Agreements.

Copies of the Code of Conduct are available from the Australian Competition and Consumer Commission (ACCC); Telephone (02) 6243 1111 or see www.accc.gov.au. (There is a link to the ACCC website at the bottom of this site.)

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How the OMA can help YOU

The OMA has a specialist panel of mediators across Australia. These commercial mediators are trained in mediation are familiar with franchising issues. Their role is to facilitate a commercial outcome.

The OMA will appoint a mediator for a dispute covered by the Franchising Code of Conduct upon request.

Call us for a confidential and free discussion on 1800 150 667 (Australia only).

Unfortunately, we are unable to give you legal advice as our role is limited to appointing mediators. It is not the role of our mediators to give legal advice either.

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How Can I Resolve A Franchise Dispute?

If possible, it is best to avoid disputes before they begin. Good communication between a franchisor and franchisees is often the key to avoiding disputes. It is also very important to have procedures to follow should a dispute arise. Having easy to follow procedures for resolving disputes gives everyone the tools they need to identify a problem, discuss the problem and hopefully work out a solution that will work for those involved.

A franchisor and franchisee can set up their own procedures to deal with disputes. Some franchise systems have their own internal dispute resolution processes. It is wise to implement a simple system for resolving disputes at the earliest possible time after they begin.

An internal dispute resolution procedure usually provides for negotiation involving different levels of management sometimes going as high as the Chief Executive. If a solution cannot be found, some systems have a preferred mediator whom they ask to become involved.

Franchise agreements made after 1 October 1998 must have a clause providing something similar to the following:

1. If a dispute arises the complainant must tell the respondent in writing:

(a) the nature of the dispute; and

(b) what outcome the complainant wants; and

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

2. The parties should then try to agree about how to resolve the dispute.

3. If the parties cannot agree about how to resolve the dispute, then either party can refer the matter to a mediator, or ask the OMA to appoint a mediator from its national panel of mediators.

4. Both parties must attend the mediation and try to resolve the dispute.

5. The parties share the cost of the mediation equally unless they agree otherwise.

6. The parties pay their own costs to attend the mediation unless they agree otherwise.

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What are the Advantages of using the OMA?

-   OMA Mediators must have appropriate training and assessment as a Mediator before being able to join the Panel,
-   OMA Mediators have specialist knowledge in franchising and in mediating franchise issues – many Mediators are well known and regarded throughout the industry,
-   The Mediator through the OMA is a neutral person,
-   We appoint the mediator rather than give 3 names of different mediators – this saves time and prevents further dispute about the identity of the mediator,
-   OMA Mediators have support and advice from our Office – we spend quite a large amount of time supporting the  Mediators in difficult cases,
-   Our staff have legal training or experience and can manage the increasing legal questions on the mediation process that are arising for the parties and for Mediators, although we cannot give legal advice,
-   We assess each file to appoint a Mediator who is suitable for that dispute according to the information we have,
-   We have quality control procedures in place for mediations that are conducted so that we can discuss any issues affecting the quality (not the content) of the mediation with the parties and the Mediator,
-   We ensure that mediation is a process where the Mediator is focused on assisting the parties to reach their own      agreement rather than on telling the parties what they should do.

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Steps ...

If you cannot resolve a dispute with a franchisee or franchisor you can ask the OMA to appoint a mediator to assist you to resolve the dispute. Before the OMA can appoint a mediator you must have completed the steps 1 to 3 below.

1.When a dispute arises you must write to the other parties (to the dispute) setting out:

a)What the dispute is about,

b)What outcome you want,

c)What action you think will settle the dispute.

One way you can do this is by posting or faxing a completed copy of a Notice of Dispute form to the other parties involved in the dispute. See the Notice of Dispute form.

2.If 3 weeks have elapsed since the Notice of Dispute was sent you may proceed to step 3.

3. Write to the OMA and request that a mediator be appointed. Please provide full contact details of the parties involved in the dispute and a copy of the Notice of Dispute so that the OMA may progress the appointment as quickly as possible.

4. The OMA will appoint a mediator within 14 days of receiving a written request to do so.

5. The OMA will send written confirmation of the mediator appointment to the parties involved and will also provide the parties with the mediator’s contact details and his/her brief professional resume.

6. The mediator will contact the parties to prepare for the mediation and to arrange the meeting time and venue. The cost of the mediation is shared between the parties involved. There may be travel expenses for remote locations. See below for an esimate of costs. The mediation will be held at a time and place agreed between the parties or as decided by the mediator.

7. Once the OMA appoints the mediator the mediator will contact the parties and:

- send them a mediator appointment agreement for them to sign before the mediation can take place

- ask for a payment of his/her estimated fees and possible room hire to be paid prior to the mediation
  meeting.*

* Note: Once the mediation has taken place an adjustment will be made depending on how long the meeting actually lasted compared with the mediator’s estimate.

- discuss with them where and when the mediation will be held

- ask whether any preparation should occur for the mediation such as preparing a summary of the
  problem to send to the other party and the mediator before the mediation.

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Alternatives to Mediation

Under the Code, if neither party wants to go to mediation then it is not compulsory. This would most likely mean that court action would be started. Court action is often not a viable option because of the cost involved.

Mediation is usually much faster and cheaper than court action. Around 75% of mediations conducted through the OMA result in a binding settlement that both parties are prepared to live with.

Mediation may not be appropriate if you require urgent injunctive relief (a court order to stop someone from doing something) or where there is criminal conduct. If you are unsure about the suitability of mediation ask the OMA or your legal adviser.

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What is Mediation?

Mediation is an informal negotiation where the mediator assists the parties to identify and explore options for settlement.

Mediation is especially effective for franchise disputes because it is quick, confidential and very cost effective.

Mediation involves an independent and neutral mediator who helps the parties negotiate a settlement they can live with. A mediator does not hand down a decision like a judge, but helps the parties reach their own agreement.

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Preparing for Mediation and What to Expect

Mediation is very similar to a well managed negotiation. It is wise to prepare well for the mediation so that you are sure of your options, alternatives and what you need for a solution to be workable and long-term. It is important to clearly state your concerns and your needs so that everyone understands what you need and why.

Here are some points that you might consider prior to the mediation:

1.What is the dispute about?

2.When did the problems begin?

3.Prepare a brief summary of the problem to read at the mediation. Try to focus on the problem rather than talking about who is to blame.

4.What would you need to achieve from an agreement? (For instance, a plan to improve sales, sell the business, advertising, etc). In answering this question be very specific.

5.Why have we been unable resolve this problem ourselves?

6.What would have to change for us to be able to resolve future disputes?

7.What are your alternatives if you are unable to resolve this dispute at mediation (live with the problem, change how you do things, go to court)? And what costs are involved in these options? How realistic are these alternatives?

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What Happens at the Mediation

When the mediation occurs the mediator will allow the parties to state the problem as they see it. The mediator will help the parties consider what is a reasonable outcome for them.

The parties can bring advisers if they wish but it is not compulsory to do so.

The mediator will usually meet with the parties separately during the meeting.

At the end of most mediations there will be an agreement which the parties make. The mediator will assist them to write it down. That written record will normally be a binding contract.

The mediator will also hand out forms which the parties can send to the OMA after the mediation giving their opinion of the mediation. The OMA values any feedback from parties which have been to mediation.

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The Cost of Mediation

Mediation is a very inexpensive process when compared with litigation.

The maximum fee for the mediator is $275 (incl GST) per hour with a maximum of 3 hours' time for preparation before the mediation.

The cost of the mediation is shared between the parties involved (unless otherwise agreed). On average, mediations cost each party approximately $1400.

The parties pay these fees directly to the mediator. There is no fee payable to the OMA.

Additional expenses which the parties also share might include the cost of room hire and any necessary travel expenses of the mediator.

The parties would pay their own expenses for any preparation for, or representation at the mediation, such as legal, financial or other advice.

If one party would like the mediation to be held in their city, then it is common for that party to pay half the travel costs of the other party to travel to that city. If such an agreement is not reached, the OMA will appoint a mediator located somewhere between where the parties reside and each party will pay their own travel costs to attend.

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Franchising Code of Conduct

The Franchising Code of Conduct is a mandatory Code prescribed under the federal Trade Practices Act which became fully operative on 1 October 1998. The Code supersedes the voluntary Franchising Code of Practice of 1992. Copies of the Code are available from the Australian Competition and Consumer Commission (ACCC). A manual on how to comply with the Code is also available from the ACCC.

A franchise agreement entered into on or after 1 October 1998 must provide for a complaint handling procedure that complies with clauses 29 and 30 of the Franchising Code of Conduct.

Part 4 of the Code contains the dispute resolution provisions. These cover disputes arising out of franchises.

All franchise agreements entered into from 1 October 1998 must contain a dispute resolution clause that complies with Part 4 of the Code.

The parties are free to go to court or appoint their preferred mediator or to use the OMA's mediators.

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Notice of Dispute

The following is the Notice of Dispute. The parts in italics are there to help you complete the form. Download Notice of Dispute (word document).

Notice of Dispute

Clause 29(1) of the Franchising Code of Conduct

To: (Name of Franchisor or Franchisee)

Attention: (Name of the Person to receive the Notice)

I/We hereby set out the details of a dispute as required by clause 29(1) of the Franchising Code of Conduct:

(a) NATURE OF DISPUTE:

(explain what the dispute is about)

(b) DESIRED OUTCOME:

(write what you want to achieve)

(c) ACTION REQUIRED TO SETTLE THE DISPUTE:

(explain what you want the other side to do to resolve the dispute)

If we cannot agree how to resolve this dispute then I/we will contact the Office of the Mediation Adviser to appoint a mediator.

Yours sincerely,

(Sign your name/s)

(Complainant)

Date: (write the date)

> download Notice of Dispute (word document)

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Become an OMA Mediator

Should you wish to become a member of the OMA National Panel of Mediators please contact us for a copy of the necessary criteria which include:

- completion of an approved 28 hour mediation training course;
- satisfactory assessment as a mediator;
- familiarity with franchising.

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Contacting the Office of the Mediation Adviser

The OMA can be contacted in the following manner:

Telephone:1800 150 667 (toll-free within Australia) or 02 9267 0167

Facsimile:02 9264 8268

Email:office@mediationadviser.com.au

Post: Office of the Mediation Adviser

Suite 205 , 370 Pitt Street, Sydney NSW 2000

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