Franchise Disputes and Complaints – Causes, Types, Resolution

RESOLVING FRANCHISE DISPUTES – COMPLAINTS MANAGEMENT

Franchise disputes happen in most cases due to the reluctance of franchisees to seek legal advice, especially the services of franchise consultants and lawyers. This amounts to going into a business deal with reckless abandon.

Disputes between the franchisor and franchisee may be a frequent feature, but whatever the case, the causes of these disputes are varied and may differ from franchise to franchise. Legal services are usually needed to guide against cases like these.

Both the franchisee and the franchisor need legal services and protection during the contract duration, but franchisors are known to employ the services of franchise lawyers to oversee the legal framework of their business. In most cases, franchisees are usually advised on getting legal help during franchise signing contracts.

How to Avoid a Franchise Agreement Dispute?

Franchise disputes are common place, but an effective way to avoid this or greatly reduce its occurrence is through seeking legal advice on the matters raised in the franchise disclosure document which usually contains all the terms of contract.

This and other documents as may be presented by the franchisor should properly be studied by both the franchisee and the lawyer who is in a best position to offer helpful advice on terms and conditions laid out therein that are exploitative.

The franchisor is obligated to supply this document to the franchisee by the Franchising Code of Conduct Bureau.

Regulations by the Franchising Code of Conduct Bureau

It is required by the franchising code of conduct that before prospective franchisees sign a franchise agreement with the franchisor, they must first provide evidence in form of a statement, stating that they have sought legal advice about the franchise contract and are satisfied with the terms laid out in the document or they can either a certificate that absolves the franchisor that the franchisee has been informed about seeking legal advice, but has chosen not to.

This regulation by the Franchising Code of Conduct is aimed at reducing franchise disputes considerably.

What Should the Legal Advice Focus On?

Due to the sensitivity of the franchise agreements to be signed, the legal advice should especially guard against gray areas that are most likely to lead to franchise disputes. The area most likely to generate a franchise dispute usually lies around the commercial risks usually caused by the terms set forth in the franchise document.

This areal may likely generate conflict or dispute especially as it has to do with the allocation of resources and benefits.

What the Disclosure Documents Usually Contain

The disclosure documents presented to prospective franchisees usually contain legal language that if not properly interpreted may mislead the prospective franchisee, as he/she may not be versed in legal matters.

Because of the legal nature of the document, it is only reasonable that the interpretation of the disclosure document be carried out by a legal expert who advises against contract terms that are not favourable to the prospective franchisee. Going through the long and in most times bulky contents of the document is best done by the legal expert, as the prospective franchisee is most likely to get distracted.

HOW TO RESOLVE FRANCHISE DISPUTES?

Resolution of Franchising Disputes

Although it is best to avoid disputes altogether, yet, when they happen, a way of resolving the dispute has to be found. Usually the first step is through the informal method, where both the franchisor and franchisee meet to strike a consensus.

However, this step is challenging as it has to be tactfully done without the interruption of business proceedings. First, both parties have to agree to commit to not approaching the courts until all options are exhausted.

This process is usually led by legal experts who mediate between the two parties, that is, the franchisor and the franchisee to come to a conclusion acceptable by both parties.

Resolution through Mediation

In a bid to avoid the courts, another option of franchise dispute resolution is through seeking mediator between both parties. This is usually where the Office of the Franchise Mediation Officer comes into play.

The mediation may seek to achieve two aims, which is either the restoration of normal business relationship between the franchisee and the franchisor with some alterations to the franchise agreement or the termination of the contract/agreement between the franchisor and the franchisee with either the payment of compensation or no payment as the case may be.

Whatever, the outcome, this option saves both parties the stress of legal proceedings which may adversely affect the conduct of business.

The Establishment of an Ombudsman

The Ombudsman creates an alternative to franchise dispute resolution through the creation of an Ombudsman who mediates disputes in the resolution, thereby avoiding expensive litigation expenses, while at the same time, creating a platform where trust between both parties is restored. The Ombudsman option is created to reduce litigation to a large extent between both parties.

When Litigation Becomes Necessary

After the exhaustion of all mediatory effort, without any tangible solution, the last resort is usually through litigation. Now, before a matter is taken to court, it means that a party is aggrieved or that an initial business agreement has been breached.

The plaintiff has to adequately respond to the raised issue by the complainant. Another situation where litigation becomes necessary in franchise disputes is when the breach of contract is serious, and the party concerned with the breach in contract is unreasonable.

With the above explanation, it can be seen that franchise disputes are a regular occurrence and in most cases, almost unavoidable, but as they happen, what is of utmost importance is how these disputes are handled, as handling them effectively can maintain business relationship between both parties and even building strong business ties, while ineffective resolution of these franchise disputes can tear businesses apart.

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