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Franchising Conflict Essay

5144 words - 21 pages



Australia has been described as ‘the franchise capital of the world’ (Walker 2004, p.36) because of its high level of franchising density and impressive growth in both franchise units and sector turnover. Some 62,000 franchise units belonging to 960 franchise ...view middle of the document...

While mediation-type processes have generally been seen as productive and efficient methods of resolving franchise conflict, there is a need to develop a series of complementary processes that can be utilised when they suit the circumstances. The research also raises interesting issues related to how franchise systems manage innovation and change as this appears to be a key source of conflict.

In the Australian Franchising 2006 survey, 35% of franchisors reported being involved in substantial disputes with franchisees, posing questions in relation to both the nature of power sharing within franchising relationships and the suitability of current sector regulation. The particular nature of franchise relationships and their importance to the national economy are such that specific regulatory measures are rightly considered necessary to safeguard the interests of inexperienced franchisees. The Australian Franchising Code of Conduct was introduced in 1998 and is administered by the ACCC. The Code requires disclosure of pertinent information to prospective franchisees and participation in mandatory dispute resolution processes where conflict arises. Following a review conducted in 2006, the disclosure requirements were strengthened earlier this year. It is interesting to note that many of the concerns that were significant both in the introduction of the Franchising Code of Conduct in 1998 and the conduct of the 2006 Matthews Review remain and continue to drive calls for change to the existing regulatory framework. This suggests the need for new approaches.

Government Inquiries
Government and regulatory interest demonstrates that identifying best practice in franchise regulation and dispute resolution is a very topical issue in Australia. The Federal Parliamentary Joint Committee on Corporations and Financial Services is currently conducting an Inquiry into the Franchising Code of Conduct. (See This inquiry appears set to build on the 2006 Review of the Disclosure Provisions of the Franchising Code of Conduct (the Matthews Review) which made significant recommendations relating to the content and timing of disclosures required to be made by franchisors to prospective franchisees.

Substantial franchising industry inquiries have been conducted in 2007-8 in both Western Australia and South Australia. The Inquiry into the Operation of Franchise Businesses in Western Australia was prompted by the circumstances surrounding the closure of the Rockingham KFC store in November 2007. (Small Business Development Corporation, 2008) The recommendations from the WA Inquiry emphasise the importance of franchisee education and effective disclosure requirements, including the need for clarity about rights and responsibilities in relation to renewal of franchise agreements. The Inquiry recommendations in relation to dispute resolution relate to improved flexibility and...

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