A franchisee has threatened to complain to the ACCC. Is there a better way?

The Australian Competition and Consumer Commission (ACCC) is the body responsible for administering the Franchising Code of Conduct, which is a mandatory industry code under the Trade Practices Act (TPA).

Franchisors who operate their businesses in accordance with the code and the TPA should have no reason to fear a complaint to the ACCC.

Unfounded complaints will be seen for what they are if there is no substance to them, however if a complaint is made, franchisors must be prepared to deal with the inconvenience of responding.

This may mean detailed replies to ACCC correspondence, and if necessary, providing documents or attending meetings on the issue. The cost in terms of a franchisor’s time, management resources and any legal expertise utilised during the process is not to be underestimated, but being forthright and co-operating fully with the ACCC will help reduce these costs and minimise the time involved.

If a franchisor has done nothing wrong, they have nothing to fear.

However such a rational approach is not always exercised when a franchise system is believed to be under attack by hostile franchisees. The idea of a dispute between two parties unexpectedly being subject to the intervention of a third can thoroughly upset reasonable people who feel they are being backed into a corner.

Their responses can become increasingly unreasonable as they develop a mistaken sense of vilification, and unfortunately this only tends to inflame the situation, rather than expedite a resolution.

So if a franchisee does threaten to complain – even if the complaint has no substance – it is worth looking at how the franchisor/franchisee relationship deteriorated to the point where such threats are being made. After all, in franchising as in other types of partnership, it takes two to tango.

Franchisors should first examine what is behind the complaint. Is the complaint the real issue, or is it the only way the issue can be expressed if a franchisee feels they can’t be heard any other way? Disputes in franchising tend to skirt around and focus on the edges of a core issue, and take some time to get to the heart of the issue itself.

This might explain why mediation as a method of dispute resolution is so successful, with the Office of the Mediation Adviser indicating that about three out of four mediations result in an agreement between the parties involved.

The mediation process reopens the arteries of communication between franchisee and franchisor that are easily clogged by bad blood from compounding errors and misunderstandings.

Mediation is not a magic wand that suddenly makes everything right again, but is a process that involves a sometimes arduous and emotionally painful journey for either party to come to grips with the issue, its repercussions, and possible solutions.

Detailed monitoring systems within a franchise network can act as early warning indicators of impending complaints or unrest. Are standards dropping? How are sales? Are expenses under control? How is staff turnover? What is morale like? Are customers receiving the service or quality the brand is supposed to deliver?

Many disputes can be ultimately sourced to unmet expectations by either party, for example, a franchisee’s expectation as to an acceptable level of profitability, lifestyle, support or other factors, or a franchisor’s expectation as to the capabilities of a franchisee diligently work in the business and follow the system.

Improved monitoring systems can pick up problems and result in early intervention to resolve them. Franchisors that monitor their franchisee’s businesses closely enough to identify what the cause of a problem is, and identify why, how, when and by whom it should be fixed, are able to pro-actively avoid icebergs than can otherwise sink a franchise relationship.

But in business, as in life, not everything is perfect. If a franchisee threatens to complain to an external body about the franchisor because the relationship and/or business has gone off the rails, it’s worth examining the track to see how well-built and maintained it is in the first place.

Indeed, there may well be some lessons arising from a threatened or real complaint that could genuinely add value to a franchise system in the long run. Franchisors which can focus on the lesson will inevitably also come to a solution. This is part of the evolution of business.

Jason Gehrke is a director of the Franchise Advisory Centre and has been involved in franchising for 18 years at franchisee, franchisor and advisor level. He provides consulting services to both franchisors and franchisees, and conducts franchise education programs throughout Australia. He has been awarded for his franchise achievements, and publishes Franchise News & Events, Australia’s only fortnightly electronic news bulletin on franchising issues. In his spare time, Jason is a passionate collector of military antiques.

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