top of page

When is the right time to use mediation to resolve a franchise dispute?

Updated: May 16, 2023

The short answer is; sooner rather than later.

The reason for this is that generally the longer a dispute remains unresolved the more the parties become entrenched and determined to defend their positions. It is not long before solicitors are consulted, and legal letters start to be exchanged. Costs soon rack up and the longer it goes on the worse it gets. The focus is on winning, or successfully defending and counterclaiming. Both sides will usually try to find other issues to introduce to add weight to their arguments. At this stage the parties are focussed on going to court rather than trying to find an alternative solution that avoids confrontation.

If either of the parties has gone public about the dispute, as is often the case, both will feel that their reputations are at stake. This puts a speedy resolution even further out of reach. Before long the litigation starts in earnest. Directions about track allocations are made by a judge at a case management conference. The process becomes increasingly difficult to stop. Both sides are now in too deep to back down. Costs mount up inexorably, raising the stakes ever higher. By now compromise is the last thing on anyone’s mind. The case progresses to trial in open court, barristers are engaged, and court hearings take place. There may be a trial of preliminary issues and then separate trials for liability and damages. The process involves mountains of documents, witness statements and exchanges of evidence, as the months go by the costs keep on rising. The parties are no longer in control of the process and the outcome will be decided by the judge.

So where in this, all too common, chain of events was there an opportunity for the parties to engage the services of a mediator to look at the problem objectively and dispassionately? The answer is obviously; as soon as it became clear that the parties couldn’t resolve the dispute on their own.

Nobody likes to compromise but, in most cases, a skilled mediator will be able to identify a solution that both parties can recognise as a good outcome. That is more likely to be achieved in the early stages of a dispute, before increasing legal costs have raised the stakes and positions have become intractable.

In a dispute between a franchisee and a franchisor some unusual dynamics are involved. In many cases the parties will benefit from an amicable outcome to the dispute because it may be advantageous for them to continue to work together. The franchisee will have invested in the franchise and worked hard to develop the local business. The franchisor will want to retain the management service fee income from the territory and avoid damage to the brand that could result from an inability to satisfy local customer demand. A mediated settlement is far more likely to be amicable if it is concluded quickly. Also, because it is the parties themselves who control the outcome rather than them having a decision imposed on them by a judge.

The sooner a mediator is appointed the sooner they will be to extricate themselves from the dispute at the lowest possible cost, with the least reputational damage and put the dispute behind them and move on. In this respect, mediation is the solution.

21 views0 comments


bottom of page