A Business Resolution Will Always Be Better Than Anything a Judge, Arbitrator or Jury Decides
Consider two options when a franchisor or franchisee has a dispute they are not able to resolve. One option is to file a lawsuit, spend the next year or more tied up in depositions, hearings and court, and pay the hefty expenses associated with a lengthy dispute. The second option is to spend a day or two in mediation at a fraction of that cost, and resolve the dispute with less conflict. Can there ever be a doubt?
A Personal Perspective
I have been a franchise lawyer for over 45 years. During that time, I have had many franchisor clients take action against a franchisee who had unilaterally left the system or was not paying their bill. Or they had a franchisee who felt they had been wronged and hired a lawyer seeking millions of dollars in relief. Often, a legal action would get filed, and, before long, both parties had become angry and litigious, with legal fees and tempers going through the roof.
Early in my career, I realized this was not the smartest way to settle business disputes. For that reason, I began suggesting to all my franchisor clients that we insert a clause in their franchise agreements requiring they and their franchisees sit together in a room with a neutral third party knowledgeable in franchising who would help them try to resolve their differences. This clause is known as compulsory mediation. Some clients (and some franchisees) would balk, concerned that this would add more expense with no resolution.
A funny thing happens when everyone is forced to sit face to face with a strong mediator. They get a chance to hear and be heard, without a lawyer filtering what they or the other side has to say. Over the course of a few hours, they typically realize a few things. First, the other side, who they chose to do business with in the first place, is usually not out to get them. Second, the other side does have some valid points or concerns. Third, they do not want to spend the next few years fighting with each other, with all the emotional and financial costs of a long dispute. And by the end of the day, if the mediator is creative, the franchisor and franchisee will find a business outcome that helps them get on with their lives, whether as franchisor-franchisee or through an amicable “divorce.”
In a lawsuit or arbitration, one party has to lose. In fact, by the time the case is completed, both parties may feel that they lost when they consider the time and money spent. However, I have been involved in a number of mediations, both as franchisor counsel and as independent mediator, where my knowledge of franchising and the needs of each party made it possible to find a creative business solution that either saved the relationship or allowed both parties to come away with what they needed. That is the beauty of mediation – an opportunity to get past the emotions and find a business solution that both parties can move forward with!
Whether voluntary or required by contract, there are few situations where the parties to a franchise dispute should not consider retaining a mediator to help them resolve their dispute.