Getting Out of a Franchise
Resolving Your Franchise Dispute
The best of relationships sometimes fall apart and result in conflict. Business relationships, especially those between a franchisor and a franchisee, are particularly at risk. You should be aware of what your options are if and when a conflict arises.
The franchise agreement typically outlines the mechanism for resolving disputes between the franchisee and franchisor. Usually, conflicts are resolved through arbitration or litigation. In addition to the mechanism for resolving the dispute, the agreement will likely specify which law applies and where the dispute resolution will take place. You may have to give a formal notice, attend meetings, write letters, participate in non-binding mediation, and take other steps before you can even get to arbitration or to court. Every one of those steps can be very expensive.
At Bundy & Fichter, we handle the dispute resolution process, whether it involves negotiation, mediation, arbitration, or litigation. Bundy & Fichter 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 a distinct advantage when representing either side in a dispute.
Arbitration Versus Litigation
When a dispute arises, it is essential to carefully review the franchise agreement to understand how disputes will be resolved. There may be benefits to arbitration over traditional litigation. To franchisors, the most significant advantage of arbitration may be that it is a private process. You can keep the proceedings and, in some cases, the outcome confidential. Litigation is an entirely 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 the lack of a right to appeal an unfavorable decision. For franchisees, arbitration can be very expensive, and the expenses can come due very quickly. Franchisees seldom have the ability to decide on how a dispute will be resolved, but an experienced lawyer may be able to help find ways to minimize the risks that arbitration involves.
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 a franchise agreement, make sure you know what law will govern your disputes and how that law may affect the outcome. Be aware whether your state has laws that supersede the contract as to certain terms that might be more favorable. You need to fully understand the applicability of your state’s laws before signing the contract so that you know the real rules going in.
Discuss Your Concerns In A Free Consultation
If you are seeking to resolve your franchise dispute, contact a knowledgeable franchise lawyer today. contact us.