Most franchise agreements contain an obligation to initially use mediation to settle a
dispute between the franchisee and the franchisor. Only if that fails should litigation
be commenced. The reason for this is that mediation is much quicker and far less
expensive than litigation. It is also the best way of the parties to reach an amicable
settlement and re-establish a friendly working relationship.
A mediator’s job is to assist the parties to reach a negotiated settlement of the
dispute rather than to consider the merits of the respective cases and pass
judgement. A major advantage, particularly for a franchisor, is that the mediation is
private. This avoids setting precedents that could affect other franchisees or cause
repercussions in other areas of the business. A major advantage for a franchisee is
the cost saving. Mediators charges are a fraction of the cost of a trial that would
involve two sets of legal representatives and could involve barristers.
A major advantage for both parties is that they, rather than a judge, are in control of
the proceedings; with the mediator simply acting as a neutral facilitator of a
negotiated settlement. A mediator’s role does not include making any
recommendations. The role is simply to try to assist the parties to reach an
agreement.
Everything that is said at a mediation is on a ‘without prejudice’ basis, which means
that if an agreement is not reached, anything that is said cannot and will not be used
later in any subsequent legal proceedings. This enables either party to make
proposals towards reaching an agreement that are not binding piecemeal. Put
differently, this means that remarks and proposals of the parties are non-binding until
everything has been agreed.
A mediation follows a standard format and usually takes place in a neutral location.
The mediator will chair the meeting and each party will introduce themselves.
Starting with the claimant, the mediator will then ask each of them, or their legal
representative if one is appointed, to explain their side of the dispute. This will
include what their desired outcome is, including if appropriate, any counterclaim by
the defendant.
Either side will then adjourn to separate rooms to review their position and the
mediator will then alternate between them to discuss their positions and make
observations and suggestions on how a settlement could be reached. Each meeting
is completely confidential. The emphasis being on control remaining with the parties
and the mediator acting neutrally to make suggestions on how an agreement might
be reached.
If enough movement is made, offers and counteroffers may ensue to a point at which
the joint meeting is reconvened to draft a settlement agreement.
The success of a mediation is in large part dependent on the choice of mediator. It is
unlikely that a mediator with experience of family conflicts or property and
construction will understand the finer nuances of the franchising industry. An
independent solicitor could be jointly appointed but the same issue would arise
because a lawyer, however competent, would rely on a legal background rather than
an understanding of the respective positions of a franchisee or a franchisor.
Not surprisingly there are very few trained mediators who have operated in the
franchising industry as both franchisee and franchisor.
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