Let’s start by accepting that not all franchisors act ethically and not all franchisees follow the franchise model and work hard to support and grow the brand. But this blog isn’t about bad franchises, it is about those that are successful for both the franchisor and the franchisees.
As in any work environment, even in the best franchises, a disagreement can sometimes arise. If it is not resolved, it can develop into a dispute, and if that isn’t settled, one party or the other will probably reach for the franchise agreement and then call their solicitor. Either way, this will generally lead to a ‘dispute resolution’ clause in the franchise agreement. Most such agreements set out a process for resolving disputes and state that before litigation is commenced, the parties will engage in a mediation. This will involve appointing a mediator.
The choice of mediator is very important. The symbiotic relationship between a franchisee and a franchisor is almost unique to the franchising industry, and a far higher success rate will be achieved by a specialist franchise mediator.
So; how can everyone win in a mediated settlement?
In a mediation, the parties are in control of the outcome as opposed to a court case in which they delegate the decision to a judge. A court always produces a winner and a loser. In many cases, two losers, because cost awards can sometimes appear to be unfair, and both parties will have invested a large amount of time and emotional energy that is impossible to recover.
A mediator’s role is not to pass judgement but to help the parties to find a solution for themselves. In some situations, this could be to agree to a compromise; in others, it might be to help one party see that their position is not as winnable as they thought it was. Sometimes, it could assist one of the parties to see the futility of winning a pyrrhic victory.
If the mediation is successful, a large amount of time and money will have been saved by the parties either compromising or arriving at a similar decision as a court, but without the legal costs.
Ethical franchisors and diligent franchisees have much to lose by litigating because it is difficult to re-establish a working relationship after they have faced each other in court. The advantage of a mediated settlement is that the parties, rather than the mediator, have decided how the dispute should be settled. This greatly assists them in putting the matter behind them and, in many cases, returning to an amicable working relationship.
