The Office of the Franchising Mediation Adviser (OFMA), formerly the Office of the Mediation Adviser (OMA), was established in 1998 by the Australian Government Office of Small Business.

The role of OFMA is to appoint mediators to assist franchisors and franchisees to resolve their problems without going to court.

Contact OFMA for a confidential and free discussion about how mediation can help you to resolve your dispute.

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The Franchising Code of Conduct is a mandatory Code prescribed under the Federal Trade Practices Act 1974 (Cth), which became fully operative on 1 October 1998. This means that if you are in a franchise relationship you must comply with the provisions of the Code.

A franchise agreement entered into on or after 1 October 1998 must provide for a complaint handling procedure that complies with Part 4 of the Franchising Code of Conduct (See Dispute Resolution Clauses for Franchise Agreements.) The Code provides that any party to a franchise agreement may refer their dispute to a mediator of their choice or if they cannot agree on one, then to OFMA to appoint a mediator. If a franchisee or franchisor requests mediation, then the other side must attend and try to resolve the dispute. If the other side refuses to attend they will be in breach of the Code and possibly of the Trade Practices Act.

The parties are free to go to court or appoint their preferred mediator or to use an OFMA mediator. Franchisors and franchisees have successfully used mediation to resolve a wide range of disputes including training, support, rent and the supply of goods and services.

A copy of the Franchising Code of Conduct is available from the Australian Competition and Consumer Commission (ACCC) by telephoning 1300 302 502 or visiting www.accc.gov.au/content/index.phtml/itemId/304806

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OFMA has a specialist panel of franchise dispute mediators in each State and Territory throughout Australia. Their role is to facilitate a commercial outcome.

OFMA is unable to give legal advice, as our role is limited to appointing mediators under the Code. It is not the role of OFMA mediators to give legal advice either.

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Mediation is an informal negotiation process, where an independent and neutral mediator assists the parties to better undertstand the issues in dispute and identify and explore options for settlement. A mediator will not hand down a decision like a judge, but rather helps the parties to reach their own agreement.

Mediation is especially effective for franchise disputes because it is quick, confidential and very cost effective.

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If possible, it is best to avoid disputes before they begin. Good communication between a franchisor and franchisees is often the key to avoiding disputes. It is also very important to have procedures to follow should a dispute arise. Having easy to follow procedures for resolving disputes gives everyone the tools they need to identify a problem, discuss the problem and hopefully work out a solution that will work for those involved.

A franchisor and franchisee can set up their own procedures to deal with disputes. Some franchise systems have their own internal dispute resolution processes. It is wise to implement a simple system for resolving disputes at the earliest possible time after they begin.

An internal dispute resolution procedure usually provides for negotiation involving different levels of management sometimes going as high as the Chief Executive. If a solution cannot be found, some systems have a preferred mediator whom they ask to become involved.

Dispute Resolution Clause for Franchise Agreements

Franchise agreements made after 1 October 1998 must have a clause providing something similar to the following:

1. If a dispute arises the complainant must tell the respondent in writing:

(a) the nature of the dispute; and

(b) what outcome the complainant wants; and

(c) what action the complainant thinks will settle the dispute.

2. The parties should then try to agree about how to resolve the dispute.

3. If the parties cannot agree about how to resolve the dispute, then either party can refer the matter to a mediator, or ask the OFMA to appoint a mediator from its national panel of mediators.

4. Both parties must attend the mediation and try to resolve the dispute.

5. The parties share the cost of the mediation equally unless they agree otherwise.

6. The parties pay their own costs to attend the mediation unless they agree otherwise.

According to the Franchising Code of Conduct, a party will be taken to be trying to resolve a dispute if the party approaches the resolution of the dispute in a reconciliatory manner, including doing any of the following:

• attending and participating in meetings at reasonable times;
• at the beginning of the mediation process, making the party's intention clear as to what the party is trying to achieve through the mediation process;
• observing any obligations relating to confidentiality that apply during or after the mediation process;
• not taking action during the dispute, including by providing inferior goods, services, or support, which has the effect of damaging the reputation of the franchise system;
• not refusing to take action during the dispute, including not providing goods, services or support, if the refusal to act would have the effect of damaging the reputation of the franchise system.

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If you cannot resolve a dispute with a franchisee or franchisor you can ask OFMA to appoint a mediator to assist you to resolve the dispute. Before OFMA can appoint a mediator you must have completed the steps 1 to 3 below.

1. When a dispute arises you must write to the other parties (to the dispute) setting out:

(a)What the dispute is about,

(b) What outcome you want,

(c) What action you think will settle the dispute.

One way you can do this is by posting or faxing a completed copy of a Notice of Dispute form to the other parties involved in the dispute. See the Notice of Dispute form.

2. If 21 days have elapsed since the Notice of Dispute was sent, you may proceed to step 3.

3. Write to OFMA and request that a mediator be appointed. Please provide full contact details of the parties involved in the dispute and a copy of the Notice of Dispute so that OFMA may progress the appointment as quickly as possible.

4. OFMA will appoint a mediator within 14 days of receiving a written request to do so.

5. OFMA will send written confirmation of the mediator appointment to the parties involved and will also provide the parties with the mediator’s contact details and his/her brief professional resume.

6. Once a mediator has been appointed by OFMA, he/she will contact each party separately to prepare for the mediation and to arrange the date, time and place of mediation. The mediator will most likely request that relevant documents be sent to him/her.

7. The mediator will also send to each party a mediator appointment agreement for them to sign before the mediation can take place and ask for a payment of his/her estimated fees and possible room hire to be paid prior to the mediation meeting.*

* Note: Once the mediation has taken place an adjustment will be made depending on how long the meeting actually lasted compared with the mediator’s estimate.

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Mediation is a very inexpensive process when compared with litigation.

The maximum fee an OFMA mediator may charge is $275 (incl GST) per hour with a maximum of 3 hours' preparation time prior to the mediation. The cost of the mediation is shared equally between the parties (unless otherwise agreed).

These costs may include:

• The mediator's fees


• Room hire fees


• The cost of any additional input (excluding expert reports) agreed by both parties to be necessary to the conduct of the mediation


• The mediator's travel expenses (in some cases)

On average mediation costs each party approximately $1,400. These fees are payable directly to the mediator, there is no fee payable to OFMA.

Parties are expected to pay their own expenses for any preparation for, or representation at the mediation, such as legal, financial or other advice.

Location of Mediation

Mediation can be held wherever the parties agree. Where the parties are in different cities, it is general office procedure that we ask one party to travel to the other, with the non-travelling party contributing to half a return economy airfare of the travelling party. If neither party is willing to travel to the other, the OFMA will appoint a mediator in a third neutral place and both parties would be expected to bear their own travel expenses to attend.

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Mediation is informal and similar to a meeting around a table. Parties may bring lawyers or other advisers if they both agree on this but it is not compulsory for them to do so.

A mediation meeting with generally go something like this:

1. The person making the complaint will explain his or her side of the story to the other party


2. The mediator may then ask some questions


3. The other party will then put forward its side of the story


4. The mediator may choose to ask further questions


5. There is a general discussion of the issues raised


6. The mediator may meet with each party separately to discuss the issues


7. This may be followed by further separate and joint meetings until a resolution can be found. Ocassionally the mediation may need to be adjourned until another day.


8. At the end of most mediations there will be an agreement which the parties make. The mediator will assist them to write it down. That written record will normally be a binding contract.


9. At the conclusion of the mediation, the mediator will hand out feedback forms which the parties can send to OFMA giving their opinion of the mediation. OFMA values any feedback from parties which have been to mediation.

Preparing for Mediation:

It is wise to prepare well for the mediation so that you are sure of your options, alternatives and what you need for a solution to be workable and long-term. It is important to clearly state your concerns and your needs so that everyone understands what you need and why.

Here are some points that you might consider prior to the mediation:

1. What is the dispute about?


2. When did the problems begin?


3. Prepare a brief summary of the problem to read at the mediation. Try to focus on the problem rather than talking about who is to blame.


4. What would you need to achieve from an agreement? (For instance, a plan to improve sales, sell the business, advertising, etc). In answering this question be very specific.


5. Why have we been unable resolve this problem ourselves?


6. What would have to change for us to be able to resolve future disputes?


7. What are your alternatives if you are unable to resolve this dispute at mediation (live with the problem, change how you do things, go to court)? And what costs are involved in these options? How realistic are these alternatives?

OFMA believes it is wise to obtain legal advice before the mediation.

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• OFMA mediators must have appropriate training and assessment as a mediator before being able to join the panel


• OFMA mediators have specialist knowledge in franchising and in mediating franchise issues – many mediators are well known and regarded throughout the industry


• An OFMA mediator is a neutral person and not selected by either party


• OFMA appoints the mediator rather than giving 3 names of different mediators – this saves time and prevents further disputes about the identity of the mediator


• OFMA mediator's receive support and advice from our office – a significant amount of time is spent supporting mediators in difficult cases


• Our staff have legal training or experience and can manage the increasing legal questions on the mediation process that are arising for the parties and for mediators, although we cannot give legal advice


• We assess each file to appoint a mediator who is most suitable for that dispute according to the information we have been given


• We have quality control procedures in place for mediations that are conducted so that we can discuss any issues affecting the quality (not the content) of the mediation with the parties and the mediator


• We ensure that mediation is a process where the mediator is focused on assisting the parties to reach their own agreement rather than on telling the parties what they should do.

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Under the Code, if neither party wants to refer the dispute to mediation then it is not compulsory. This would most likely mean that court action would be started. Court action is often not a viable option because of the cost involved. Mediation is usually much faster and cheaper than court action. Around 75% of mediations conducted through OFMA result in a binding settlement that both parties are prepared to live with.

Mediation may not be appropriate if you require urgent injunctive relief (a court order to stop someone from doing something) or where there is criminal conduct. If you are unsure about the suitability of mediation ask OFMA or your legal adviser.

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The following is the Notice of Dispute. The parts in italics are there to help you complete the form. Download a Notice of Dispute template.

Notice of Dispute

Clause 29(1) of the Franchising Code of Conduct

To: (Name of Franchisor or Franchisee/Master Franchisee)

Attention: (Name of the Person to receive the Notice)

I/We hereby set out the details of a dispute as required by clause 29(1) of the Franchising Code of Conduct:

(a) NATURE OF DISPUTE:

(explain what the dispute is about)

(b) DESIRED OUTCOME:

(write what you want to achieve)

(c) ACTION REQUIRED TO SETTLE THE DISPUTE:

(explain what you want the other side to do to resolve the dispute)

If we cannot agree how to resolve this dispute then I/we will contact the Office of the Franchising Mediation Adviser to appoint a mediator.

Yours sincerely,

(Sign your name/s)

(Complainant)

Date: (write the date)

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Should you wish to become a member of the OFMA National Panel of Mediators please contact us for a copy of the panel application form and a copy of the necessary criteria which include:

• completion of an approved 38 hour mediation training course;


• satisfactory assessment as a mediator;


• familiarity with franchising;


• experience as a mediator.

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Telephone: 1800 150 667 (toll-free within Australia) or 02 9267 0167

Facsimile: 02 9264 8268

Email: office@franchisingmediationadviser.com.au

Post: Office of the Franchising Mediation Adviser
Suite 205, Level 2, 370 Pitt Street, Sydney NSW 2000

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	The Australian Competition and Consumer Commission (ACCC) aims to educate, inform and assist small business operators, in understanding your rights and responsibilities under the Trade Practices Act. www.accc.gov.au
	The NSW Department of State and Regional Development has a NSW Small Business website which provides reliable and ready-to-use information for people involved in starting, managing, owning or operating a small business in New South Wales. www.smallbiz.nsw.gov.au
	The Franchise Council of Australia Limited (FCA) is the peak body for the franchise sector in Australia, representing franchisees, franchisors and service providers to the sector. www.franchise.org.au

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