The franchise agreement normally specifies the mechanism to handle a dispute between the franchisee and franchisor. Usually, disputes are resolved through arbitration or litigation. In addition to the mechanism to resolve the dispute, the agreement will likely state what law applies and where the dispute resolution will occur. You may have to give a formal notice, attend meetings, write letters, participate in non-binding mediation and other steps before you can even get to arbitration or to court. Every one of those steps can be very expensive.

At Bundy & Fichter PLLC, we handle the dispute resolution process, whether it involves negotiation, mediation, arbitration or litigation. Bundy & Fichter PLLC represents both franchisees and franchisors in the Pacific Northwest and across the United States. Their intimate knowledge of how each side views the franchise relationship gives them an edge when representing either side in a dispute.

Arbitration Versus Litigation

There are several dispute resolution mechanisms, but most often, franchise disputes are resolved in arbitration or litigation. It is important to read the franchise agreement carefully to see how your disputes are going to be resolved. There may be benefits to arbitration over traditional litigation. To franchisors, the biggest benefit to arbitration may be that it is private. You can keep the proceedings and, sometimes, the outcome confidential. Litigation is a completely public proceeding. Either way, even if there is a confidentiality provision, the franchisor has to disclose the litigation and its outcome in the FDD. Another benefit to arbitration is that it can be faster and is easier to control than litigation. There are disadvantages to arbitration, including that there is no right to appeal a bad decision. You need the advice of an experienced franchise attorney to help you devise a franchise dispute resolution system that is appropriate for your franchise.

What Law Governs Your Franchise Agreement?

Franchise agreements will also include a choice of law provision (what state’s law will govern) and a choice of venue (where the litigation or arbitration has to occur). Different states have different laws regarding franchises. Some states’ laws benefit franchisees while others benefit the franchisor. Before you sign or draft a franchise agreement, make sure you know what law will govern your disputes and how that law may affect the outcome.