The Franchising Code of Conduct is a mandatory code that governs the conduct of participants in franchising industry. It is legislated by the Australian Government under the Competition and Consumer Act 2010. The Code provides a process to help franchisors and franchisees resolve disputes and thus has many benefits for both parties. Here’s why they should use it:
Regulatory Compliance: As the Code is mandatory, all Australian franchisees and franchisors are bound by its provisions, including its dispute resolution procedures. Non-compliance can result in penalties and orders for compensation, so adhering to it is a matter of legal requirement.
Structured Process: The Code provides a simple, structured process for resolving disputes. In the event of a dispute, a complainant must send a Notice of Dispute to the other party that identifies: (a) the nature of the dispute; (b) what outcome the complainant wants and; (c) what action the complainant thinks will resolve the dispute. Once a dispute is notified, the parties are required to negotiate in good faith and if the dispute is not resolved within 21 days, any party may refer the matter to an ADR practitioner for mediation or conciliation.
Neutral ADR: Dispute Resolvers provides persons who are independent and experienced in franchising disputes to act as mediators and conciliators. They help the parties to achieve a fair resolution.
Cost-Effective: Resolving disputes through the Code’s ADR procedures, is be much more cost-effective than litigation. Court proceedings can be lengthy and expensive, and in most cases, it is beneficial to resolve disputes as quickly and inexpensively as possible.
Preserve Business Relationships: The ADR procedures under the Code are designed to help preserve the franchisor-franchisee relationship which relies on mutual trust and for the mutual success of both parties.
Confidentiality: The dispute resolution process under the Code is kept confidential. This can protect the reputations of both parties and prevent potentially damaging information from becoming public.
Quick Resolution: The Code sets specific time frames for each step of the dispute resolution process, which can help to ensure a speedy resolution. This means parties can move on from the dispute more quickly and return to focusing on their business.
Flexibility: The Code allows for flexibility in resolving disputes. If a parties chooses an ADR process the other party is required to attend, participate in good faith and share half of the cost of the ADR process.
Multi-Party Disputes: Franchisees can now join together to support each other in their common dispute with the franchisor. Two or more franchisees with similar disputes under their franchise agreements with the same franchisor can now refer the dispute to a single ADR practitioner for a single ADR process. Even if the franchisor does not agree to a group mediation the ADR practitioner may conduct the ADR process and the franchisor must attend and participate in ‘good faith’.
Both franchisees and franchisors can use the Franchising Code to resolve disputes. It offers an efficient, cost-effective, and structured way of reaching a resolution with an ADR process, which can be beneficial to al parties involved.
