Searching for Answers: The Cause and Resolution of Conflict in Franchising

The aim of this research was to explore the dimensions of franchisor and franchisee power and control in the franchising relationship in the Australian franchising sector. In a franchising arrangement the franchisee is heavily dependent on the franchisor, particularly in the early stages where the learning curve is steep. It is generally agreed that the franchisor wields the most power, although it is the mere perception of power rather than reality that is of most importance. The perceived imbalance of power of franchisees was a primary determinant for introducing legislation in the franchising sector in Australia and thus providing a more level playing field between franchisors and franchisees. As a result, most of the franchising matters that come to the government regulator’s attention have the same essential element where the franchise is not performing in the way the franchisee expected. From the regulator’s perspective, these concerns fall into three broad categories; exploitation and scams, structural pressures and poor relationship management. Enforcement actions have been successful in discouraging scams. However, the most challenging complaints concern allegations and disputes resulting from structural and/or poor relationship management issues. Hence, a ‘grey area’ in franchising surrounds the nature of the franchising relationship and the problems that occur as a result of structural and poor relationship management pressures. The current research is a preliminary study of the issues. A qualitative approach was adopted to gather information from a wide variety of informants involved in the franchising sector. A cross section of franchisors, franchisees, franchising lawyers and advisors were selected and interviewed to explore the nature of the problems experienced in franchising and the resolution of disputes and distribution of power. The interviews converged on three main themes. Firstly, there was general agreement that franchising resembled a partnership