Q I have some concerns about the way the new owners of my franchise system are handling operations. What should my first step be in this case?
Your first step should be for you and your lawyer to review the terms of your franchise agreement that address how disputes between the franchisee and franchisor are handled. This will help you understand the formal dispute resolution process, the steps involved and the time and cost associated with a formal complaint.
If you feel you might be able to address your concerns during a more informal discussion, it is almost always better to handle potential problems by simply discussing them with your franchisor, rather than immediately resorting to a formal complaint. Often, the formal process would only be used if discussions with your franchisor do not resolve your issues.
Q: What is the role of a mediator? What are my options if his or her ruling does not go the way I would like it to go? What is the difference between a mediator and an arbitrator?
A mediator is a dispute resolution expert who works with you and your franchisor in an attempt to arrive at a co-operative resolution to a problem or set of problems. Mediators do not formally ‘rule’ on matters. They may provide opinions or views on possible reasonable compromises, but ultimately, a mediated resolution is only binding on the parties if they agree to it.
An arbitrator is also a dispute resolution expert, but rather than seeking a co-operative resolution, the arbitrator essentially serves as a ‘private judge’ to hear the issue in dispute and make a decision. An arbitrated resolution is usually binding on the parties; they will have agreed in advance to be bound by the arbitrator’s decision.
Often, a franchise agreement will set out the process and terms governing the mediation and/or arbitration of disputes between you and your franchisor. However, even if the franchise agreement does not have these provisions, the parties are free to agree on one of the processes to resolve a dispute, instead of going to court.