Understanding the dynamics of conflict within business franchise systems

Abstract

High levels of franchising density and impressive growth in both franchise units and sector turnover have seen Australia described as 'the franchise capital of the world'. Some 62,000 franchise units belonging to 960 franchise systems turned over $128 billion in 2005. In the Australian Franchising 2006 survey, 35% of franchisors reported being involved in substantial disputes with franchisees, posing questions in relation to both the nature of power sharing within franchising relationships and the suitability of current sector regulation. This article reports on research on franchising conflict conducted by Griffith University academics in conjunction with the Australian Competition & Consumer Commission. Causes of franchising conflict include system compliance, communication issues, misrepresentation concerns, intervention of third parties as well as profitability concerns. While mediation-type processes have generally been productive in managing franchising conflict, such processes will not always be suitable. A broader range of processes could be utilised, along with systems-based approaches.