Mediation – a guide for franchisors

Mediation has a high success rate. Current statistics indicate that 8 to 9 out of 10 disputes that go to mediation settle on the day or within days thereafter. But what is mediation and how can you get the best out of it?

In line with the direction of travel in the court system over the last 10+ years, franchise agreements now put greater emphasis on mediation as part of a dispute resolution procedure, indeed, in some cases the franchisor or franchisee is prevented from starting court proceedings or arbitration until they have first attempted mediation, although if the remedy sought is urgent, such as an injunction, mediation can be bypassed.

How does mediation work?

Mediation is a confidential process. Anything said at a mediation cannot be used in court if the dispute continues. This encourages a “cards on the table” approach. Any deal agreed at mediation is not binding until the parties sign a document recording the terms of settlement. A mediator is not a judge to determine the rights and wrongs of a dispute. His or her role is to facilitate discussions and to encourage the parties to move towards each other. They help take the sting out of what might otherwise be a confrontational meeting. Mediation is particularly useful if there is an ongoing relationship in which the Franchise Agreement has not been terminated but has to continue on terms. However, it is also useful when the relationship has been bought to an end, to resolve issues over money, any ongoing business, customer data etc.

Attending the mediation meeting

Parties can attend with their lawyers or without but to help encourage settlement I think there should usually be equality of arms. Although the setting can be informal do not take a casual approach to it. Preparation is key, including setting out a position statement detailing the reasons for your confidence. You need to anticipate the opponent’s arguments and, if relevant, take documents to the mediation that will rebut any of those arguments.

Understand the full value of your claim, and the costs you have incurred, as well as opponent’s claim and costs. Take a view on your best outcome but be prepared to be flexible as to your expectations. In particular, ensure that all decision makers in your organisation are present ideally, physically or if not, by telephone.

Finally

Be prepared to walk away if the final terms on offer are not acceptable but make sure you have heard your opponent’s final offer before making that decision.

Be prepared for a long day and don’t drink too much coffee!