Franchise disputes: agree a procedure before your first agreement

When preparing an established business for franchising, it is easy to assume that tried-and-tested procedures will prevent conflict. They will not prevent every disagreement: a franchisee may have a different understanding of the support provided, how an invoice should be settled or who is responsible for a delayed opening. A franchise network is a community of independent business owners, so it needs not only shared standards but also a fair way to resolve differences. Put that procedure in place before signing the first agreement, rather than waiting for a solicitor’s letter.

1. Distinguish routine requests from formal disputes

Within a single business, the owner can often resolve misunderstandings through a brief conversation. Once you start working with franchisees, that approach is no longer enough. A franchisee is not an employee of head office, and an instruction from the owner is no substitute for an agreement reached under the contract.

Start by distinguishing three situations:

• Operational request: the franchisee needs help, clarification or a fault fixed.
• Difference of opinion: the parties interpret an obligation differently but are still seeking a shared solution.
• Formal dispute: one party identifies a breach and sets out what they are seeking, while the other contests it or fails to respond.

For each situation, specify a contact channel and the person responsible. The inbox used for orders should not be the only place to raise concerns about head office. Franchisees need to know how to escalate an issue, particularly when it concerns their account manager.

Before launching the network, review misunderstandings with your own suppliers and business partners. Look for organisational causes: unclear arrangements, missing confirmations or conflicting promises. These provide useful material for designing a procedure for your future franchise community.

2. Base the procedure on the applicable law

Poland has no standalone legislation comprehensively governing franchising. A franchise agreement is an ‘unnamed contract’ — one not specifically defined as a distinct contract type in legislation — governed primarily by the Polish Civil Code. The principle of freedom of contract under Article 353¹ allows the parties to structure their relationship, but its terms and purpose must not conflict with the law, the nature of the legal relationship or the principles of social coexistence.

Relevant rules include the general provisions on performing obligations, liability for breaches and limitation periods. Court proceedings and mediation in civil matters are governed by the Polish Code of Civil Procedure. Depending on the subject of the dispute, competition law, industrial property law or personal data protection rules may also apply.

An internal procedure does not replace these rules. Simply raising an issue or beginning ordinary discussions does not automatically stop a limitation period from running. Nor should an obligation to negotiate be presented as an absolute ban on bringing court proceedings. A lawyer should review the wording of the clause, its effects and any exceptions.

3. Design a process from notification to resolution

The procedure should be simple enough for a franchisee to use without preparing a lengthy legal submission. The initial notification need only include a description of what happened, the action being challenged, available documents and the outcome sought.

Then establish the sequence of steps:

1. Acknowledgement of receipt: head office identifies the person handling the matter and gives an expected response date.
2. Gathering each party’s position: both sides present the facts, documents and their interpretation of the obligations.
3. Discussion between decision-makers: representatives with authority to agree a solution take part.
4. Written summary: the parties record their agreement or specify precisely what remains in dispute.

Set timescales that reflect your organisational capacity and the seriousness of the issue. An urgent breakdown that prevents sales requires a different response time from a disagreement over a historical statement. Do not commit to deadlines that head office will be unable to meet.

Arrange cover for absences and provide for the matter to be reviewed by someone whose actions are not being challenged. For the procedure to be credible, it must also work both ways: head office should set out any concerns about a franchisee just as clearly.

4. Plan for mediation and continued operations during a dispute

If direct discussions do not produce a result, mediation is an option. It is voluntary, and the mediator helps the parties reach an agreement rather than issuing a ruling as a court would. The franchise agreement should set out how mediation can be proposed, how a mediator will be selected and how costs will be shared, while leaving room to agree the details once a dispute arises.

A settlement reached through mediation may be approved by a court. Its legal effects depend on its terms and the appropriate procedure; an informal note of a conversation will not necessarily make the arrangements enforceable.

Also agree what happens to the ongoing business relationship. For example, a dispute over one invoice item should not leave uncertainty about payment of the remaining amounts. Set rules for fulfilling undisputed obligations without infringing either party’s rights under the law or the agreement. Distinguish the ordinary discussion process from situations requiring urgent legal protection or the preservation of evidence.

5. Test the procedure before signing

Run a simulation: a franchisee claims that head office has not delivered an agreed service, while head office considers it complete. Check who receives the notification, where the evidence is held and who can approve a solution. If the answers depend entirely on the owner’s memory, the procedure needs improvement.

Agree the key principles in the contract and provide clear contact instructions. Do not leave the franchisee’s fundamental rights solely in a document that head office can change at will.

Practical takeaway: before signing the first agreement, prepare a one-page dispute procedure, test it against a specific scenario and have it checked for consistency with the contract. A clear procedure will not eliminate conflict, but it makes disputes easier to resolve without damaging the business relationship.