Franchise Mediation – A Users Guide

Unlike litigation, mediation is a quicker, more affordable, and less stressful option (though not entirely stress-free!). While outcomes aren’t guaranteed due to the non-binding nature of the process, our experience shows that most franchise disputes are successfully resolved through mediation or shortly thereafter. Suppose you’re involved in an upcoming mediation or contemplating this route. In that case, it’s crucial to understand the essentials of franchise mediation, the process involved, and how to effectively prepare for mediation day.

What is a franchise mediation?

The Franchising Code mandates that if a party has evoked the prescriptive dispute resolution process (usually by issuing a dispute notice) and the dispute has not resolved within three weeks after such evocation, then either party can refer the dispute to alternative dispute resolution (ADR). The most common type of ADR is mediation. If one party refers the matter to mediation, the other party must attend in good faith and a failure to do so would represent a breach of the Franchising Code. 

Currently, the Australian Small Business and Family Enterprise Ombudsman (the ASBFEO) coordinate most franchise mediations, though a private mediator can also be appointed. 

Franchise mediation is a negotiation process facilitated by an impartial mediator. While the mediator lacks the authority to make binding decisions or findings of fact, their pivotal role is to steer the involved parties toward a mutually agreeable resolution.

What happens at franchise mediation?

Curious about the ins and outs of franchise mediation? While the process varies, here’s a general overview:

Before Mediation:

  • A pre-mediation conference sets the stage, introducing parties and providing the mediator with a dispute overview. This usually takes place via a video call, a week or two before the mediation. 
  • Parties may exchange short position papers, summarizing their legal positions and desired outcomes.
  • A confidentiality agreement is signed by all parties and their representatives.

On Mediation Day:

  • The parties,  the mediator, and any representatives convene, either physically or electronically, often for a full day.
  • The mediator introduces their role, emphasizing the benefits of a mediated settlement over litigation. They will also confirm the confidential nature of the mediation process. 
  • Each party makes a brief statement, often echoing their written position papers.
  • Discussions following those statements may include mediator questions, rebuttals, or fact-related queries.
  • The franchisee and franchisor parties then move to separate rooms (physically or electronically) for offers to be exchanged, facilitated by the mediator.
  • Whether a settlement is reached or not, everyone reconvenes at the end of the mediation, and the mediator outlines the next steps.

Flexibility is key in mediation, where negotiations can unfold in unexpected ways. Even if a resolution isn’t immediate, ongoing negotiations are common in the weeks post-mediation. If a settlement occurs, it’s typically documented in a deed of settlement and release, covering practicalities like business surrender or the return of intellectual property.

How to prepare for franchise mediation

Prepare effectively for franchise mediation with these key steps:

  • Craft a Strong Position Paper – Ensure your position paper is well-crafted, presenting your legal argument and causes of action clearly. Quantify any damages suffered as best you can. Having a well drafted position paper will put you in a strong position for opening statements.
  • Know Your Case Inside Out – Familiarize yourself with your case, including key dates and documents. This knowledge reduces unnecessary searching and boosts your confidence during mediation.
  • Understand Best and Worst Case Scenarios – Anticipate potential outcomes by understanding both your best and worst-case scenarios if the franchise dispute escalates. This contextual awareness is crucial.
  • Organize Relevant Documents – Have an organized and indexed folder of key documents readily available. While mediation focuses on negotiation, the need to review essential documents may arise.
  • Build a Support System – Franchise Mediation can be stressful, and having support is vital. Whether it’s an ‘in person’ support person or a trusted friend you can call, having someone there for you on the day is invaluable.

The lawyers at Magnolia Legal have attended countless franchise mediations. If you need assistance with a franchise mediation, or even just preparing your position paper, we would love to help. Please contact us for an obligation free initial chat. 

Disclaimer: This article contains general information only and does not constitute legal advice. Magnolia Legal disclaims any liability arising from reliance on this article. Our terms of use apply