2010 Budget - Benefits for franchises: Dispute Resolution

Written on the 25 May 2010

Although most business commentators report there wasn’t much in the budget for business, franchises will benefit from improved mediation services.

The 2010 Budget, handed down by Federal Treasurer Wayne Swan on Tuesday night (May 11), included $2.7 million worth of support for early intervention in same industry business disputes, which includes franchising.

According to Small Business Minister Dr Craig Emerson, the funding will create faster and simpler dispute resolution processes.

“We want to help small businesses unfortunate enough to find themselves in dispute by providing fast, inexpensive dispute resolution processes,” Dr Emerson said.

“The vast majority of people who get tangled up in a dispute want to get it settled as quickly as possible – that’s why we have allocated this money.”

The early intervention services will allow parties to discuss, and hopefully resolve, disputes with a convenor before going to formal mediation, which can be costly, stressful and time-consuming.

Asia-Pacific Centre for Franchising Excellence Director, Professor Lorelle Frazer said the dispute resolution funding was likely to reduce the level of significant conflict in the franchise sector.

“The most common causes of disputes in the franchise sector are related to system compliance, level of profitability and unrealistic expectations due to a lack of due diligence,” Professor Frazer said.

“Creating a service that franchise sector participants can contact for guidance and advice at the first signs of conflict is likely to reduce levels of significant conflict – providing sector participants take advantage of this valuable service.”

Franchising Australia 2008 research findings reveal 17 percent of franchisors were involved in substantial disputes within the previous 12 month period, which involved 2 per cent of franchisees.

“Most of the franchisors involved in disputes tended to be larger, older systems, involved in retailing, which suggests they may be more complex and have particular characteristics that lead to conflict in the franchisor-franchisee relationship if not addressed early,” Professor Frazer said.

By making a phone call to the dispute resolution service, businesspeople will be able to informally talk through their concerns at an early stage and receive guidance on what their next steps might be in resolving their dispute.

The dispute resolution services funding also covers businesses operating under the Horticulture Code of Conduct and Oil Code, and is in addition to existing formal mediation services under these Codes and the Franchising Code of Conduct.