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by Simon Lord,
last updated 21/05/2012

in this article:

2nd October 2008 - Kamikaze conflicts and publicising disputes can lead to disaster

One of the issues raised by the government's Discussion Document on Franchising is that of the imbalance of power between franchisor and franchisee. All franchise agreements give most of the power to the franchisor for the protection of the system as a whole, and there have certainly been occasions where this power has been mis-used by poor franchisors. When a franchisee feels they have had a raw deal, it's therefore not surprising that sometimes they will turn to the media rather than mediation to air their issue. The media loves a David versus Goliath story and, in these situations, it is always the franchisee who is cast in the role of David. This happens as a result of what one Australian academic has referred to as 'kamikaze conflict'.

Griffith Law Professor Jeff Giddings says conflict is inevitable in franchise relationships, but steps can be taken to manage conflict effectively.  'People enter franchise systems to reduce the risk involved in small business, but often don't appreciate the ramifications of losing substantial control over their contribution. And money's involved, which heightens the likelihood of conflict.  It doesn't mean all conflict has to end badly, but it is not possible to predict where any particular conflict will end up.'

During a seminar being held later this month in Brisbane, Professor Giddings will discuss tension points in the franchisor-franchisee relationships where conflict is more likely to occur and the dynamics of ‘kamikaze conflict.' The seminar is co-hosted by the Asia-Pacific Centre for Franchising Excellence and Australian law firm Herbert Geer.

'Some conflict can be resolved in a rational way if both parties see there's more to be gained by not taking action; however, when people can't see any way out problems grow and can evolve,' says Professor Giddings. 'Kamikaze conflict exists when one party takes pleasure in the suffering of others and becomes more focused on causing harm than what's in either party's best interests.'

Professor Giddings will explore techniques used by franchisors that have been successful in minimising and handling conflict effectively. He will also discuss whether third parties such as accountants, business brokers, solicitors, franchisee associations, franchisor associations and others actually fan the flames.

At Franchise New Zealand, we have previously noted the damage that a public dispute can do to a franchise and its franchisees, but a recent example has put a dollar value on it. We had some correspondence with a disgruntled franchisee who asked why, if the franchise they had been involved with was supposed to be so good, had they ended up selling a store that cost them over $800,000 last year for under $150,000? Perhaps part of the answer is that for the last few months this particular franchisee has appeared in the media several times telling everyone what an appalling business it is.

Of course, there is more to the issue than just the press coverage but it certainly won't have helped attract suitable buyers - and it won't have helped the value of other franchisees' stores, either. Publicity in these situations is always a double-edged sword. If you have a dispute with a franchisor or franchisee, a good motto might be "Mediation not Media". Read more on mediation.



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