Former Wendys franchisee claims $1 million at mediation after store lockout

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A former Wendys franchisee is in mediation today with the ice-cream chain over a claim of $1 million.

Peter Coventry had the franchise for two Wendys stores in Alice Springs and claims the stores were “churned”. 

Coventry is the founder and chairman of the National Franchisee Coalition and is being supported in the mediation by Peter Strong, the executive director of the Council of Small Business Australia, and independent federal senator Nick Xenophon. 

Former Wendys franchisee, Trevor Banks, told SmartCompany Coventry had been part of “what was loosely termed as the coalition” – a group of 30 or 40 franchisees who rallied against Wendys some time ago for more profitability within the stores.

“Since then many franchisees have walked away mid-term,” he says.

Banks says Coventry’s stores were “quite profitable” but he was behind in the rent for a few weeks.

“He had a meeting with the business consultant at the time who gave him a couple of months to implement plans and programs,” he says.

“But within two or three days Wendys moved in and changed the locks.”

Coventry is claiming Wendys failed to show good faith in the way it seized the stores.

SmartCompany understands this is the fourth mediation in five years between Wendys and its franchisees but Wendys says it has not been involved in a “formal mediation” since 2011.

A spokesperson for Wendys told SmartCompany the chain was unable to comment.

“Mediation is a confidential process through which both parties attempt in good faith to resolve a dispute,” the spokesperson said in a statement.

Jason Gerkhe, director of the Franchise Advisory Centre, told SmartCompany the Franchising Code of Conduct encourages franchisors and franchisees to solve disputes via mediation. 

“A mediation doesn’t prevent the parties from undertaking a litigation, but it generally provides an opportunity to resolve the dispute before going to the expense and aggravation of litigation,” he says.

“Litigation is what’s known as a zero sum game, for one party to win the other party has to lose but mediation is an opportunity for parties to come together and agree between themselves rather than have an outcome imposed on them by a court.”

Gehrke says mediation advisors generally have a 75% success rate at mediating an agreement between the parties so it can be a very effective form of dispute resolution.

The downside is that the mediation process is confidential so other franchisees may not be aware of any reoccurring problems.

But Gehrke says it is the choice of both parties to resolve the dispute by that method.

“I wouldn’t necessarily say four mediations involving Wendys in the last five years is a bad thing,” he says.

“It’s better that there are more mediations than there are litigations because mediation by definition means parties are taking a more conciliatory approach.”

Coventry, Strong and Xenophon all declined to speak to SmartCompany.

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Cara Waters is the former editor of SmartCompany. Previously, Cara was a senior reporter at the Financial Times website FT Adviser in London and she also worked for The Sunday Times in London.

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