Handling Franchise Disputes

In the United Kingdom, the franchise industry works a little differently than it does in other countries. For the most part, there are no specific laws pertaining to franchise companies which require them to act in a certain way – the laws which apply to the operation of a franchise company are basically the same as the laws which apply to any other kind of company in the United Kingdom. However, the United Kingdom is home to the British Franchise Association, a trade organisation which is used by many franchise companies to aid in the event of disputes.

The British Franchise Association was created by franchise companies in 1977 with the purpose of helping the franchise industry to grow by ensuring a high standard among its member companies, assisting in disputes between franchisees and franchisors and providing accreditation to companies which meet the right standards for being a franchise company that operates with the best practices known by the franchise industry of the U.K. Generally speaking, the British Franchise Association does not have the legal ability or obligation to assist when there are disputes in the franchise industry; however, franchise companies which are members of the British Franchise Association will often take its advice into consideration and will work through the British Franchise Association to achieve the fairest possible results through mediation.

Not all companies in the United Kingdom who operate in the franchise industry or around its fringes choose to become members with the British Franchise Association or to have anything to do with the British Franchise Association, but a good number of them do. In recent years there has been some call for special regulations of franchising to come into effect in the United Kingdom; however these attempts seem to have little hope of taking effect. Even if this happens, the chances that the British Franchise Association will become in charge of mediating disputes through some kind of legal stipulation are unlikely – complaints against the British Franchise Association have been made saying that it almost always comes down in favour of the franchisor when a dispute is taken to it for mediation, and while this may not be a fully unbiased view of the matter there is enough controversy to ensure that the British Franchise Association will remain an informal means for companies to resolve their differences.

There are two principal ways that the British Franchise Association will help to resolve a dispute if it is asked to; these are the routes of mediation and arbitration. When companies choose to use the British Franchise Association for its mediation or arbitration assistance, they do so as a way to avoid paying higher legal fees and spending more time on their dispute in the legal system of the United Kingdom. British Franchise Association mediation and arbitration provide an easier way for them to come up with an answer to their dispute and reach an agreement quickly so that they do not continue to waste time and money while they figure out what can be done.

Of the two possibilities for resolving a dispute, mediation is the easier and less costly one – in the event that mediation is chosen, both parties will be able to walk away from the mediation at any stage. They will be able to go through the British Franchise Association to record the offers that they make and the statements that they make so that there is a clear and undeniable record of the communications which have transpired between the two parties. If an agreement is reached between the two parties then that agreement will be drawn up as a legal document which will then be binding under the United Kingdom law.

While the techniques used by the British Franchise Association during mediation procedures follow a certain structure, they are not as strict as the method of arbitration. This is because mediation allows companies the freedom to determine the pace at which their communications proceed and when the mediation process is finished, although the mediator party may have an opinion in regard to the situation it will be simply for the purpose of coming up with a solution that both parties will agree upon.

The arbitration procedure of the British Franchise Association is much more structured. It takes longer than the mediation procedure in many cases and it costs more because of the extra resources and time which the British Franchise Association puts into it. When two parties decide that they are going to engage in arbitration through the British Franchise Association they sign an agreement to abide by the terms of whatever the arbitrator decides. Once the arbitration is finished the arbitrator has the ability to confer a reward upon one party or the other, and the legal document which has been signed by both parties ensures that they will do as the arbitrator says.

In either case, it is a good idea for both parties to an argument to have the use of a lawyer who is well versed in franchise disputes and who knows how to help draft an agreement that both parties will find acceptable as well as how to interface with the British Franchise Association and help guide a company through the process of mediation or arbitration.

Let’s take a closer look at the processes of mediation and arbitration so that you can know what to expect if you choose to work within the framework set down by the British Franchise Association for franchisees and franchisors to resolve their disputes more effectively.

The mediation process can be started with the British Franchise Association by a single party, although it requires the cooperation of both parties to reach a successful agreement. In the event that the other party does not respond to the attempts at mediation, this may be brought to bear against them in the event that the dispute goes to court under the standard laws of the United Kingdom. The party which wants to start the mediation process must make an application to the British Franchise Association and then provide confirmation in writing that is has made an attempt to directly resolve the situation in question with the other party. If the British Franchise Association does not want to become involved in the mediation of a dispute, they are under no obligation to.

Once confirmation has been received the British Franchise Association will make contact with both parties and a brief discussion of the dispute will follow so that the basic nature of the situation can be ascertained, the status of any court proceedings in the United Kingdom or elsewhere can be determined and any matters which could derail or which will impinge upon the negotiation process can be identified.

Rules will then be fleshed out between the parties for a way that they can meet under the supervision of the British Franchise Association and discuss how the dispute may be resolved. At the meeting position statements will be presented to the mediator and to the opposing parties. Minimum and maximum settlement positions will be determined and kept confidential by the mediator. On the appointed day the parties will come together in the mediator’s presence to try and resolve the dispute and come to an agreement which works for everyone.

The arbitration process is similar – both parties will have to agree to accept the judgment of the arbitrator if the judgment of the arbitrator is going to be legally binding. The charge for the arbitration process is five hundred pounds, making it significantly more expensive than mediation or a direct agreement. In the event that both parties decide that they will work with the arbitrator, the arbitrator will have the ability to allow parties to introduce new evidence, order goods, documents or property to be submitted to the arbitration process for inspection, conduct all aspects of the inquiry and award any kind of interest.

The award which is made by the arbitrator in the end will be given in writing to both parties and will include reasons for the decision so that it will be clear to anyone who objects or who reads the description of the arbitration process in the future. While it may be possible in some extreme cases for a party unhappy with the outcome of an arbitration result to make a challenge through the United Kingdom court, much will depend upon the specific details recorded during the process and the strength of the agreement that both parties would abide by the arbitration results means that it is usually the final word when it is utilized.

These are the special considerations that you should know about when you want to find a resolution to a franchise related dispute in the United Kingdom. Be aware of the responsibilities that you have under the standard laws of the United Kingdom as well as the role of the British Franchise Association and you will able to understand the legal lay of the land and the possibilities which are open to you.