What are the Types of Franchise Disputes and How to Deal with Them?
No relationship can be existed without its conflicts and it goes double in case of business relations. If we talk about franchisee-franchisor relationship, it is not always mounting. On the one time, franchisor feels that he has full authority and rights to enforce systems and standards whereas, the franchisee on the contrary wants to work as an independent entity and like every business, disputes occur here too.
Let us read what are the general claims of both the parties and how should they deal with these disputes:
Franchisor Claims
Franchisors might sue a current or terminated franchisee to collect the money owed.
Franchisors may sue franchisee who do not abide by system standards
When the franchise starts selling other things in his outlet or establishes an independent firm)
Franchisee Claims
Lack of support from franchisors
Franchise Failure
When the franchisor provided wrong information just to encourage the franchisee to sign the franchise agreement at the initial stage of buying a franchise.
How to resolve a Franchise Dispute cost effectively and quickly as possible?
First, before entering into a Franchise Agreement ensure you understand your rights and obligations, the other parties rights and obligations.
Second, ensure the Franchise Agreement has a dispute resolution clause. Such a clause may appear something like this:
1st Step Mutual Negotiation
The best way to settle the disputes is looking for a mutualsolution than taking any legal action.
2nd Step Meditation
The solution cannot be found, then both the involved parties i.e. the franchisors and franchisees need to resolve the dispute by way of mediation. And if this mode of settlement fails then franchisor ad franchisee can take a legal help.
3rd Step Arbitration
If still the parties did not agree at mediation, Arbitration is the next step. In arbitration, the parties opt for a private dispute resolution procedure instead of going to court.
Key features are:
Procedure can be tailored so as to suit the complexity and nature of the dispute .
Faster and more cost effective than a Court proceeding.
The arbitrator makes a decision that will be binding on the parties.
The key point in all relationships is an open and an effective communication. Hopefully the article provides great help and guidance to the franchisees and franchisors in settling down their franchise disputes.