Should I Mediate Or Litigate A Franchise Dispute?

You can resolve your franchise dispute through Alternative Dispute Resolution (ADR), or you can go to court. This article offers you an understanding of the options that may be best depending on your legal situation.

There is no development in business that keeps disagreements. Absolutely, these disagreements breed disputes that are extremely draining to parties to a business. The same case applies when it comes to franchisor and franchisee relationships.

It’s common for franchise disputes to arise, and often they end up in court. However, there are situations where an ADR would be less costly and time-consuming. But when there is a hefty breach of the franchise agreement, the best option would be to litigate.

Dispute Resolution

A franchisee is required to review the franchise agreement, franchisor’s FDD to learn of any helpful information regarding the opportunity. This is the only way a franchisee understands their rights and responsibilities. Again, the franchisee gets to learn of the dispute resolution methods, if any.

If any provision in the franchise agreement , it may include:

• Choice of law

• Any limitations to bring lawsuits

• Equitable compensation

• Mandatory mediations

• Use of arbitration or litigation.

With an experienced lawyer, you can choose to negotiate the terms of the provisions.

For any franchise dispute, it’s advisable to have a franchise dispute and litigation attorney with expertise in franchise law and who has represented various franchises internationally through litigation or arbitration.

Why Mediate, Arbitrate Or Litigate A Franchise Dispute

One main concern for anyone involved in the business is the alternative dispute resolution clause to use.  Research shows that most choose mediation followed by arbitration.

It’s always the dire need of every franchisee or franchisor to maintain a balanced relationship. The reason is that the success is reliant, which means, if the franchisee succeed, the franchisor benefits. Thus, failure for both to avoid disputes may indicate the success of the franchise system.

There is always a good reason to have ways to resolve disputes as they arise. Therefore, the franchisor should have a mediation clause.

Mediation work to bring both parties together. This is often the best way as the franchisor and the franchisee will have to be with one another for a definite period repeatedly.

You should take the below into account if you choose to have mediation:

• In case of any dispute, the franchisor should be willing to share the cost of mediation.

• The acts of mediation are different from litigation, and it depends on the service being offered.

• For better results, the franchisor is better positioned to look for a mediator

Arbitration Or Litigation

Not every franchise dispute is to be resolved through mediation; some cases require an arbitrator or the court. 

If your case has advanced to the point of litigation, the franchisee should grab the opportunity to have a fair case condition. Then, both the franchisee and the franchisor should develop a suitable medium on which to litigate. Meaning, both should have an understanding of the options available for the commenced of a lawsuit.

Finally, both should choose whether to arbitrate or litigate. But this depends on the terms set on the franchise agreement. If no such agreement, a party’s perspective may be used to determine whether to use arbitration or litigation. Thus, it would pay to learn of litigation and dispute resolutions.

This is why it is recommendable to work with a franchise attorney all through.

If you consider litigation, you can be assured of:

• An extensive discovery. Dispositions are also allowed, and parties are not limited to seek information from third parties

• Chance to appeal. If the decisions made seem to favor one party, the other has an opportunity to appeal.

• Public fillings:This could be an advantage or a disadvantage depending on the franchisee’s perspective of initiating their claim. It becomes a disadvantage if there are negative publications. But for the franchisee, this may be an advantage. For instance, if a franchisee wants leverage, having the matter publicly filed would probably be a winning outcome.

Final Take

There are several remedies available to settle franchise disputes. However, choosing the best requires one to be legally advised.

Just like any other commercial litigation, cases can be unique depending on the parties involved, the level of case complexity, and the claim at stake, among others.

Regardless of the mentioned issues, the franchisee must understand the issue surrounding the dispute.

There is so much to deal with in franchise dispute resolutions. Thus, it would be in the best interest of every franchisee to look for an experienced franchise attorney to handle such issues on their behalf. In addition, such a lawyer can help determine the best option to settle disagreements.

It’s vital to have a lawyer who can assist on any aspect of a franchise dispute, from negotiations all the way to trial.