Franchising Dispute Resolution – A Guide for Franchisees

Like in any significant and long-term relationship, issues can crop up in franchising. If you’re a franchisee who is facing problems with your franchisor, you might want to officially raise a dispute using the process outlined in the Competition and Consumer (Industry Codes-Franchising) Regulation 2014 (Cth) (the Franchising Code). This article outlines how to do that and offers tips to help resolve your dispute.

General Tips

Before we dive into the step-by-step guide, here are some useful tips for resolving disputes:

  1. Keep your language neutral and respectful – Whether written or verbal, using neutral and respectful language will be better received by the franchisor and any relevant third parties (including mediators or adjudicators). It also presents you as more informed and in control.
  2. Maintain Records – Keep notes of conversations and store all written communications and important documents in an accessible location. You will likely need these if the dispute escalates.
  3. Gather evidence – If you’re going to make a claim, you need to be able to back it up. Usually, this involves compiling evidence, including financial documents, written communications, and sometimes third-party statements. Knowing what evidence is available to support your claim should aid in resolution.
  4. Always understand your rights and responsibilities – Before raising a dispute, it’s crucial to know where you stand and understand the potential consequences. Carefully analyse the franchise agreement and other key documents, and seek independent advice, especially for complex disputes.

Step 1 – Raise the issue informally in a conciliatory manner 

Many disputes can be resolved through a simple conversation. Before starting any formal process, it’s usually beneficial to have an open and respectful conversation about the issue. If you do this, keep a record of what was discussed and any agreed timelines. If a more informal conversation does not yield a result, you can issue a formal dispute notice. 

Step 2 – Issue a dispute notice per the Franchising Code

Clause 40A of the Franchising Code outlines the process for formally raising a dispute by issuing a dispute notice. The dispute notice must include:

  • the nature of the dispute;
  • what outcome the complainant wants; and
  • what action the complainant thinks will resolve the dispute.

We recommend that a dispute notice specifically reference clause 40A to ensure clarity. A simple heading “Dispute Notice issued in accordance with Part 4 of the Franchising Code” should do the trick (and also look for a reciprocal clause in the franchise agreement that can be referenced).

Providing detail is important. For example, when describing the nature of the dispute, provide examples and evidence, and explain the impact.

If you believe the franchisor has breached a provision of the franchise agreement, say that; reference the relevant clause and explain how their conduct contradicts their contractual obligations. 

Similarly, if you believe the franchisor has breached a provision of the Code, including the obligation to act in good faithsay that and, again, reference the specific statutory obligation and explain how their conduct  contradicts that. 

If the dispute notice is being issued in response to a breach notice you have received, specifically note the breach notice is disputed. 

You may want to consider hiring a lawyer to assist with this notice. It’s also essential to check the service requirements for formal notices as outlined in your franchise agreement.

Once the notice is issued, the parties should work together to resolve the dispute, typically by following up with a meeting or requesting a written response by a certain date.

Step 3 – Require Alternative Dispute Resolution 

If three weeks have passed since the dispute notice was issued without resolution, consider escalating the dispute to alternative dispute resolution, such as mediation. Our article here discusses this further. 

Step 4 – Litigation

This step should only be taken with proper advice and awareness of the costs, time commitment, and risks involved. Commencing court proceedings is a very serious step, but it is sometimes necessary. 

Alternative Pathways – Termination of franchise agreement, ceasing operations, or selling

The 4 steps mentioned above are not the only ways to resolve a franchise dispute. Other options include:

  • Requesting termination of the franchise agreement – if you consider the relevant issue could not be remedied, and you wish to cease operating, you may wish to consider issuing a request pursuant to 46A of the Franchising Code for early termination of the franchise agreement. 
  • Simply cease operating – in desperate situations, this can sometimes be the best option, though it’s certainly not risk free. ‘Running the gauntlet’ and just ceasing operations without the franchisor’s consent represents a breach of the agreement, and likely abandonment at law (thus entitling the franchisor to terminate the franchise agreement and seek damages). Legal advice should be sought before this path is pursued. 
  • Selling the franchise business – if your dispute is more of the personal variety, but the business is trading well, you may wish to consider selling the franchised business as a going concern.


In any dispute, knowledge is power. Seeking legal advice from a lawyer experienced in franchising can be invaluable. If you need such advice, feel free to 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