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Skip to 0 minutes and 9 secondsBefore a franchisor finalises their selection of dispute resolution method, it pays to consider what they want out of the dispute.

Skip to 0 minutes and 22 secondsDo they want to stay in the business with the other party but need to resolve some niggling problems? Or are they willing to stay in business with them but want to send a message to others who might try the same thing? Do they want to get the territory back, so they can sell it to a more suitable operator? Have they got enough resources to see this dispute through to the end? These resources include people and stamina, as well as time and money. The amount of resources they will require will depend on how entrenched the parties have become and whether they select mediation, arbitration, or litigation.

Skip to 1 minute and 5 secondsWhat does the relevant contract require? And does the law of either disputant's country impose specific requirements, such as that litigation must be conducted in a particular language or venue. Whether franchisors are dealing with a civil law system or a common law system will also have a bearing on the amount of time senior executives will need to be available if a matter goes to court. Expert witnesses and lawyers can be very expensive.

Skip to 1 minute and 37 secondsIf you arbitrate, will you be able to register the arbitral awards in the courts of the other party? If not, then arbitration might not be the best method of resolving this dispute. You also need to consider whether the dispute is covered by any insurance you hold, or whether the cause of the dispute is something like fraud or criminal activity that may not be covered by litigation insurance. On the subject of litigation insurance, do you need to notify your insurer that you have been threatened with litigation? If you win, and the other party is ordered to pay you money, will they have the financial resources to pay? Or will your victory be pyrrhic?

Skip to 2 minutes and 20 secondsAre you about to sell your business or to float it publicly. If so, it would be much easier to do this with no major disputes outstanding. And last but not least, how much publicity are you prepared to manage? Mediation is a confidential process, but disputes resolved through arbitration and litigation are not as easy to keep out of the public glare.

Factors in dispute resolution

Before a franchisor finalises their selection of a dispute resolution method, it pays to consider what they want out of the dispute:

  • Do they want to stay in business with the other party, but need to resolve some niggling problems?
  • Are they willing to stay in business with the other party but want to send a message to others who might try the same thing?
  • Do they want to get the territory back so they can sell it to a more suitable operator?
  • Have they got enough resources to see this dispute through to the end?

These resources include people and stamina, as well as time and money. The amount of resources required to resolve a dispute will depend on many factors. These include how entrenched the parties have become, the language of the dispute, geographic considerations, and the method of resolving the dispute.

Important questions that need to be asked before the appropriate dispute resolution strategy can be identified:

  • What does the relevant contract require? And, does the law of either disputants country impose specific requirements, such as that litigation must be conducted in a particular language or venue?
  • Does the target country adhere to a civil law or common law system? This will impact on the form and expense of litigation proceedings.
  • If you arbitrate, will you be able to register the arbitral award in the courts of the other party? If not, then arbitration might not be the best method of resolving this dispute.
  • Is the dispute covered by litigation insurance?
  • Will the loser have the resources to pay any damages awarded?
  • Are there plans to float the franchise publically? If so it would be much easier to do this with no major disputes outstanding.
  • Is there a risk of brand damage if the dispute goes public? Mediation is a confidential process, but disputes resolved through arbitration and litigation are not as easy to keep out of the public glare.

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International Franchise Law: the World is Yours

UNSW Sydney

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