It is inevitable that almost all franchisors will eventually face some form of legal dispute from disgruntled franchisees alleging misleading, deceptive or unconscionable conduct or breach of contract.
The long-term impact of such disputes, both in monetary terms and in resources and mental energy consumed, can come at great cost to franchisors.
It is therefore crucial to understand the main ‘danger zones’ from which legal disputes can arise and put the strategies in place to minimise risk, and to improve your outcomes if they reach court or mediation.
This is one of the key messages from Bill Morgan of Morgan Mac lawyers who hosted a webinar series on the defensive strategies that franchisors should implement to manage and reduce the impact of disputes on their business.
Webinar One focused on the ‘danger zones’ from which legal disputes can arise, most commonly alleging misleading conduct, unconscionable conduct or breach of contract.
The ‘danger zones’ include initial communication or interviews with potential franchisees. As these are often oral, franchisors must be aware of the language they use and limit the number of people who are authorised to communicate with potential franchisees. Other risk minimisation strategies include a form for potential franchisees to sign following oral communication that clearly outlines that no, or only specific, representations were made.
Listen to the recording of webinar one here.
Webinar Two dug deeper into further defensive strategies that franchisors can put in place in order to minimise the risk of legal disputes.
These include areas such as marketing for new franchisees, the recruitment process, and franchise operations. If the right risk management systems, and supporting documentation, are implemented across all of these areas then franchisors will be much better positioned to defend future legal disputes that may arise, ideally in mediation saving significant legal costs and brand damage, or in court if necessary.
Listen to the recording of webinar two here.
According to Mr Morgan, the best place for franchise businesses to start in this regard is to first accept that they will face such disputes.
“Legal disputes are inevitable in franchising, but the important thing for franchisors is how they manage them,” he says. “There are certain things that franchisors should be putting in place at the beginning of their relationship with franchisees, which will maximise their chances of defending legal disputes, either in court or in mediation. So accept that there will be disputes and then focus on the strategies to minimise risks in this area.”
Bill Morgan is a partner at Morgan Mac Lawyers (Brisbane). Bill has been involved in complex commercial litigation for over 20 years including numerous proceedings in the Federal Court of Australia and the Supreme Court of Queensland, with particular emphases on consumer protection litigation, franchising disputes, contractual disputes, property disputes and insolvency and bankruptcy proceedings.
In any dispute his focus is to understand each client’s legal and commercial objectives and to implement an efficient and cost effective strategy that maximises a client’s prospects of resolving the dispute and achieving the best outcome in the circumstances. He has enough experience to know that in litigation success in a court hearing cannot be guaranteed but that the application of legal skill will give a client an advantage and the best prospects of obtaining a successful judgement from the Court or achieving a suitable negotiated settlement outside Court.