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How to Resolve Franchise Disputes

dispute resolution

Dispute resolution

Franchising is about teamwork and relationship. In any kind of relationship you will encounter frictions, whether you like it or not. Here’s my view on how to resolve franchise disputes.

Disputes are often inevitable. Franchisors are doing their best in forming a franchise agreement that will work for them and for the franchisees. Franchisees are also doing their best in complying with the agreed franchising terms.

Unfortunately, there will be times that what’s written in the franchise agreement can’t be met by either franchisors or franchisees. Since there are high expectations from both sides toward the franchise agreement, a small mistake can damage the relationship built carefully and with good intentions.

Now, when it happens to you, what should you do to resolve disputes? Here are some steps you can consider to take:

1. Let’s have a talk over coffee

A friendly dialog is the first and foremost you need to do in resolving any disputes. Both franchisor and franchisees need to be professional and level headed in this friendly dialog.

Remember, the aim of this dialog is to solve problems, not to point fingers at each other. A good communication is often all we need to resolve disputes, including those in franchising.

2. A mediator can be a big help

If you can’t settle the disputes on your own, you probably need to highly consider the help of a mediator. As mediation is not considered as a legal process, it involves no witnesses, no discovery and no fees. In mediation, the aim is not to pick a winner; the aim of mediation is to settle disputes without pointing fingers on each other.

If both of you are members of local franchise association, you can ask for their help to be a mediator. All in all, choosing the right mediator is the key in mediation.

3. Call for arbitration

Unfortunately, a healthy communication is not always about being able to mend broken expectations and conflicting perspectives. If this is your case, you need an alternative dispute resolution (ADR) in the form of arbitration. An arbitrator is a legal “referee” that is neutral. Arbitration aims to resolve the dispute in a legal binding manner.

Whenever possible, you need to find ways to solve problems at this stage, as arbitration is proved to safe a lot of money in the form of legal costs of litigation.

4. Litigation – the last resort

This is the last resort when disputes just can’t be resolved in ‘friendly’ manner. At this stage, a legal proceeding – litigation – is needed to enforce a franchisee and a franchisor’s legal rights.

Litigations are resource consuming – they cost you fortune and it can take months, even years in resolving your dispute case. Litigations are the ‘right place’ to point fingers – presenting evidences, convincing judges, and such.

One last suggestion

I’m not a lawyer, so you need to consult with a franchise lawyer to learn about your options better. I do have one, last suggestion: Keep yourself on Step 1; be level-headed and understand that no franchisee or franchisor is perfect. People make mistakes – intentionally or unintentionally, but everything can be discussed in a friendly manner.

Remember, franchising is about teamwork and relationship – if your franchisor failed, you would fail, too – and vice versa. ‘Killing’ one won’t make your business better. If your franchisor loses, you lost – again, this applies on the other way around.

Ivan Widjaya
Let’s talk franchising

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