Author: Dr. Giovanna Del Bene
According to the 2024 Assofranchising Italia report, the franchising sector is experiencing significant growth, generating a turnover nearing €34 billion and contributing 1.8% to the national GDP.
The data highlights franchising as a significant entrepreneurial and employment opportunity. However, franchising networks are characterized by high and increasing levels of conflict, resulting in extensive litigation.
Given the unique relationship established between parties in a franchising agreement, disputes should be resolved swiftly and confidentially to avoid adverse impacts on both networks and franchisees. Franchising is not merely a contract but a comprehensive business project oriented towards expansion rather than production or service provision.
The primary legal framework for the sector is Law No. 129/2004, which governs commercial affiliation. Article 1, paragraph 1, defines franchising as:
“A contract, under any designation, between two legally and economically independent legal entities, whereby one party grants the other, in exchange for payment, access to a set of industrial or intellectual property rights related to trademarks, trade names, signs, utility models, designs, copyrights, know-how, patents, technical and commercial assistance or consultancy, incorporating the franchisee into a system comprising multiple franchisees across the territory to market specific goods or services.“
Unfortunately, Law No. 129/2004 focuses almost exclusively on formal requirements and the pre-contractual phase, without addressing the ongoing franchising relationship, which should be guided by loyalty, fairness, good faith, transparency, and complete information.
Recognizing the nature of disputes that arise in franchising relationships, the legislator determined that such disputes are better suited for resolution through conciliation rather than judicial rulings. Consequently, franchising was included in the list of matters subject to mandatory mediation under Article 5 of Legislative Decree No. 28 of March 4, 2010, as amended, concerning civil and commercial mediation.
Among the most frequent causes of litigation in franchising are:
- Inadequate or missing pre-contractual disclosure obligations for franchisees under Law No. 129/2004.
- Breach of contractual terms.
- Non-compliance with brand standards.
- Legal issues concerning the identification of know-how and the validity of the franchisor’s trademark rights.
- Breach of confidentiality obligations.
- Unfair commercial practices by either the franchisor or the franchisee, such as: opening outlets too close to one another; online sales by the franchisor that compete with the franchise network without sharing royalties; franchisees starting parallel businesses or selling competing products/services during the contract.
- Financial disagreements or inadequate commercial and training support.
Given the above, it becomes clear why the legislator mandated mediation in the franchising sector. Key advantages include:
- Saving time and money.
- Flexibility, including online mediation options.
- Preserving commercial and personal relationships between the parties.
- Direct participation of parties, enabling customized and predictable solutions.
- Confidentiality throughout the process.
- Mediation is not listed among the proceedings (judicial or arbitral) that Law No. 129/2004 requires franchisors to disclose to franchisees.
Mediation in franchising serves not only as a dispute resolution tool but also as a means to enhance communication and foster constructive conflict management, promoting collaboration and trust. Furthermore, mediation can address the legislative gaps in Law No. 129/2004 and improve franchising contracts, which remain largely unchanged 20 years after the law’s introduction.
© THINX Srl – November 2024