Franchising inquiry told of franchisor abuses, dispute resolution problems

The Federal Government’s franchising inquiry has received submissions from more than 15 angry franchisees, alleging unconscionable conduct, misappropriation of franchisee fees, inadequate disclosure and dishonest behaviour.

The Federal Government’s franchising inquiry has received submissions from more than 15 angry franchisees, alleging unconscionable conduct, misappropriation of franchisee fees, inadequate disclosure and dishonest behaviour.

The inquiry has so far received a total of 28 submissions, 22 of which have been published on the internet. (Submissions close on 12 September).

The vast majority of submissions are focused on the personal issues of particular franchisees who have lost their businesses as a result of disputes with franchisors. But while many of the stories include details of broken relationships and illness as a result of the franchisees’ businesses, the names of the franchise chains involved can only be guessed at – in all instances, the names have been blacked out.

One of the central complaints of many of the submissions concerns the dispute resolution process under the Franchising Code.

Jason Gehrke, a director of the consultancy Franchise Advisory Centre and SmartCompany blogger, agrees there could be improvements to franchise dispute resolution.

He says the introduction of mediation to the dispute resolution process to the Franchising Code in 1998 has helped ease franchisee concerns.

“The sooner the pain can be brought to an end the better, and mediation can help with that. Both parties might not come out feeling like they have won, but both parties might not also come out feeling like they have lost.”

He also points out that statistics from the Office of Mediation Adviser show that three out of four mediations result in an agreed outcome. “That’s a pretty good result.”

But there is one area for improvement – the cost of mediation.

“A cash-strapped franchisee whose business is in a tailspin may struggle to meet the cost of mediation. It’s not excessive by any means, but if someone has got the bank breathing down their neck they are going to pay the noisiest wheel.

“In my submission I’ll be advocating for some kind of subsidy for franchisees to partake in mediations.”

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