Plan Franchise Dispute Resolution in New Zealand

Before you franchise an existing business, decide how disagreements will be handled when a conversation with the founder is no longer enough. A clear dispute process protects working relationships and helps keep small problems from becoming expensive legal arguments. For a growing franchise community, this is a practical launch requirement, not simply a clause to leave with the solicitor.

1. Understand the legal framework

New Zealand has no franchise-specific legislation and no government franchise registration requirement. There is also no statutory franchise disclosure regime. That does not mean franchise relationships operate outside the law.

The franchise agreement and general contract law are central to resolving disagreements. The Contract and Commercial Law Act 2017 may be relevant to matters such as misrepresentation and cancellation. The Fair Trading Act 1986 prohibits misleading or deceptive conduct, unsubstantiated representations and unconscionable conduct. Its unfair contract terms provisions can also apply to qualifying standard form small trade contracts.

The Commerce Act 1986 matters where a dispute concerns competitive behaviour, such as resale price restrictions. A dispute clause cannot make otherwise unlawful conduct acceptable.

Membership of the Franchise Association of New Zealand (FANZ) is voluntary, but members must comply with its Code of Practice and Ethics. The Code requires an approach to dispute resolution that begins with mutual negotiation, and member agreements must contain appropriate dispute resolution provisions. These are membership obligations, not a statutory code applying to every New Zealand franchise.

Ask a New Zealand franchise solicitor to check your proposed process against your agreement, applicable law and any membership obligations before recruitment begins.

2. Design a route from complaint to resolution

Start with the disagreements most likely to arise in your existing business: inconsistent quality checks, disputed invoices, delayed approvals or conflicting interpretations of an operating standard. Then map how each would move through a fair process.

A workable structure should identify:

• An initial contact: the person who receives concerns and acknowledges them.
• An informal discussion: an opportunity to clarify the facts and seek a practical solution.
• A formal written notice: a description of the issue, relevant obligations, supporting information and requested outcome.
• Internal escalation: review by someone with authority to settle the matter, preferably not the person whose decision is challenged.
• External assistance: mediation or another agreed route if direct negotiation fails.

Set realistic response periods rather than promising immediate resolution. Distinguish acknowledging a complaint from investigating it and making a decision. Explain what happens if a deadline is missed or the parties agree to extend it.

Give franchisees a route for raising concerns about the founder. A process that sends every complaint back to the person being challenged is unlikely to build confidence.

3. Make the agreement support the process

Your solicitor should translate the agreed structure into clear contractual provisions. Avoid using a generic clause without checking how it would work in practice.

For mediation, specify how a mediator will be selected if the parties cannot agree, how costs will be allocated, and who must attend with settlement authority. Mediation helps parties negotiate; the mediator does not impose a decision. Arbitration is different: an arbitrator determines the dispute and generally issues a binding award. Decide deliberately whether arbitration belongs in your agreement.

Clarify what happens while a dispute remains unresolved. Which operating obligations continue? How should disputed invoices be handled? Do not assume that raising a complaint suspends payment, compliance or enforcement obligations.

Preserve appropriate access to urgent court relief. A serious safety issue or misuse of confidential information may require action before the ordinary escalation process finishes. The clause should also avoid purporting to prevent lawful complaints to regulators.

Check that formal notice requirements are usable. Identify valid delivery methods, service addresses and responsibility for keeping contact details current. An elaborate process is little help if nobody knows whether an emailed complaint counts as formal notice.

4. Test the process before granting a franchise

Use a pilot operation to run a simulated disagreement. For example, have its manager challenge a failed quality inspection and request that a corrective action be withdrawn. This tests the procedure without suggesting the pilot has an independent franchisee’s legal status.

Ask someone other than the founder to receive the complaint, gather evidence and prepare a response. Check whether the relevant operating standard is clear, records are available and the proposed reviewer has authority to resolve the issue.

Keep a proportionate dispute register recording the concern, evidence, decisions, deadlines and outcome. Handle personal information consistently with the Privacy Act 2020, restrict access and avoid unnecessary personal commentary.

Finally, record any settlement clearly, including actions, responsibilities and completion dates. Review recurring complaints for underlying system problems rather than treating every disagreement as individual non-compliance.

Practical takeaway: Before recruiting your first franchisee, map one fair escalation process, have it legally reviewed and test it with a realistic disagreement. A usable process gives both parties a clearer path to resolution.