Communication lacking in franchising relationships
A study by Griffith University into franchise conflict has revealed the need for better communication between franchisors and their franchisees.
The study, which was funded by the Australian Competition and Consumer Commission and the Australian Research Council, examined the relationship between franchisees and franchisors and the causes of conflict between the two groups. 350 franchisees from Australia responded.
ACCC deputy chairman Michael Schaper said the study results show that open, honest communication – and an honest assessment of the franchise system – was critical to the success of any franchise.
“Thirty one per cent of the franchisees indicated that communication within their franchising relationship was unsatisfactory. Disturbingly, the study also found that 49 per cent of franchisees relied heavily on their gut feeling when deciding to go into franchising.
“Despite an obligation under the Franchising Code for franchisors to provide accurate disclosure documents to potential franchisees, 41 per cent of franchisees surveyed said they faced surprises after buying their franchise.
“The ACCC has and will continue to take action, where a franchisor blatantly disregards a franchisee’s right to accurate disclosure,” Dr Schaper said.
The study also indicated that many franchisees were failing to make use of available mediation services to resolve the problems that they had with their franchisor. The Franchising Code of Conduct makes explicit provision for access to cost-effective dispute resolution and mediation procedures, yet only two per cent of franchisees surveyed used mediation to resolve conflict with their franchisor.
“The ACCC will look to address some of the issues raised in this study through further education of the franchising sector, with a particular focus on prospective franchisees,” Dr Schaper said.
The ACCC also signalled that it would continue to encourage franchisors to deal with conflict internally. “Ideally, all franchise system should develop effective in-house compliance systems to prevent conflict escalating to the point where a complaint is lodged with the ACCC.”
The research was funded by the Australian Research Council and the ACCC.