October 11, 2013

Top 10 Tips for Successfully Mediating Franchising Disputes

Nervously counting down the days until a trial? With so much at stake, there may be other options with less risk – and that are less fraying on your nerves.

Whether you are a franchisee or a franchisor involved in a dispute, at some point you may have considered the possibility of settling. Although a settlement leaves both sides unhappy, it does end the dispute while avoiding the cost and uncertainty of a trial.

Currently most civil cases settle before ever getting to trial in Ontario. In franchising, there is a special incentive to settle since both sides typically have an ongoing business relationship. Settling out of court protects the brand and avoids any negative publicity a trial might attract. So, it’s not surprising that many franchise agreements have mediation clauses or similar provisions that come into play before either side can arbitrate or proceeds to trial. It is also common for one side to propose mediation, or for a court to tell the parties to try mediation before a trial date is set.

In mediation, both parties tell their side of the story in a low-key, non-adversarial setting. The mediation will be conducted by either a professional mediator or retired judge agreed to by both sides. The mediator tries bringing the parties together, looking for areas of agreement and common interests. The mediator’s goal is to negotiate a settlement that both sides can accept with no clear winners or losers. To get the most out of mediation, follow these 10 simple tips:

  1. Know the strengths and weaknesses of your case, and realistically assess the same for the other side.
  2. Understand all of the business and even personal issues, not just the legal ones.
  3. Evaluate your BATNA (Best Alternative To a Negotiated Agreement).
  4. Brainstorm any non-monetary solutions.
  5. Go in with an open mind.
  6. Listen carefully to the other side.
  7. Bring a representative who has the authority to settle the dispute.
  8. Speak with the mediator about overcoming barriers to settlement.
  9. Think in terms of how close you are rather than how far apart you are.
  10. Sign draft Minutes of Settlement with all of the essential terms where both sides are in agreement before leaving the session.

For franchising, mediating with people who are in a long-standing business relationship poses unique challenges. For one thing, there is the potential for a great level of mistrust that’s often built up over years. Moreover, both sides may be deeply entrenched in their positions after years of fighting. What is important is remembering the goal of mediation: Resolving the dispute without going to trial. It could be the best option for everyone.