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The use of mediation to resolve franchise disputes.

Updated: May 16, 2023

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


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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