Posted by Elizabeth Gore-Jones
on 22 May 2015
We are often engaged by franchisees who want out!
The reasons for this are varied. They can include breaches of the franchise agreement by the franchisor, not making enough money, sick of it, don't get along with the franchisor, unreasonable demands of the franchisor, business not living up to expectations or promises and the list goes on.
So, what can a franchisee do in these circumstances?
If you want out of your franchise, we recommend speaking directly with the franchisor. If the parties can lay their cards on table and negotiate an outcome then that will hopefully be a good outcome for all parties.
If this doesn't work, or the relationship between both parties has become so strained that a mutual agreement is going to be very difficult to reach then, if the franchisee is resolved it wants to leave the franchise system, the franchisee has a few choices including:
1. seek to resolve the matter through mediation; or
2. engage a franchising lawyer.
If you go to mediation you will have an independent party to assist the parties to reach a decision. The OFMA can assist in this process and the mediation rules in the Franchising Code of Conduct must be followed.
If you are not sure of your legal rights, you could consider engaging a franchising lawyer. The lawyer will generally take your instructions as to what has happened and review your documents and correspondence. The lawyer will then advise you about your rights, potential causes of action and options to help you to reach an outcome.
You lawyer may be able to undertake negotiations directly with the franchisor on your behalf and may be able to put some pressure on the franchisor to settle in the event there have been infringements of the law or breaches of the agreements.
If you do go to mediation, you may prefer your lawyer to attend at mediation with you if you are not feeling confident or you want the backup of a legal representative (the franchisor may have to agree before your lawyer can attend with you).
Often the outcome will come down to negotiation. You need to ensure you are aware of all matters that may affect you in a negotiated outcome. Just say the franchisor agrees to allow you to exit the system but you really wanted to operate a similar business however you did not negotiate a release from the restraint of trade provisions. You need to know what your agreement says to help to ensure you reach the outcome you want (or as close to it as you can get).
Disclaimer - This information is of a general nature only and is not to be relied upon as legal advice. you should seek legal advice for your own circumstances. Contact The Franchise & Business Lawyers to obtain advice about your specific situation.
