Franchise agreements are the ticket to a fair and healthy relationship between franchisee and franchisor. Without a proper franchise agreement, either party may be treated unfairly if a dispute arises. There are a variety of stipulations that can be included in franchise agreements to ensure disputes are resolved in an efficient and fair manner. Mediation and arbitration are two effective tactics that repeatedly provide amicable solutions. While these clauses often provide substantial benefits over litigation of disputes, there are situations where they may be inappropriate or counterproductive, increasing the complexity, time and cost of diffusing the situation. As a franchisee, it’s up to you to stay informed about the fine print of your contract, which includes understanding the different tactics involves in dispute resolution. To give you a head start, here is what you need to know about mediation.
Including mediation clauses in franchise agreements can provide a wide range of benefits to both parties, and can be very effective during the early stages of disputes to encourage a timely and cost-effective resolution. Particularly, mediation offers the greatest advantages for disputes between franchisors and existing franchisees when there is a mutual interest in preserving the franchise relationship.
With that being said, mediation is most effective when it is voluntary, and agreed to by both parties. In the absence of a mediation clause in franchise agreements, parties may agree to mediate without having to comply with a specific aspect of the franchise agreement. Additionally, a mediation clause can act as an obstacle to a franchisor who would rather proceed immediately to court instead of considering mediation. If you have any other questions, Law Works Guelph specializes in franchise law and can help guide you through the intricacies of your franchise agreements to help achieve a resolution.