Many franchise disputes are successfully resolved through the arbitration process. The franchisor and franchisee may have agreed to mandatory arbitration in the event a dispute arose within this context. Alternatively, one of the parties might suggest arbitration.
Arbitration is a form of alternative dispute resolution that mirrors litigation in some important aspects. The parties may still conduct discovery in which they try to uncover evidence relevant to their claim. A hearing is conducted in which the parties present evidence, arguments and witnesses. A neutral third party then makes a decision on the case. This decision is usually binding.
However, there are important distinctions within these similarities. First, the discovery is often limited. Second, the time may be limited on the hearing. The parties can usually agree to the parameters of arbitration before it occurs. Third, the neutral decision maker is someone that both parties select, as opposed to a randomly-selected judge or jury. Unlike litigation, the decision an arbitrator makes usually cannot be appealed.
Arbitration offers significant benefits to participants. Due to the limits imposed on the process, it usually takes much less time. This can result in less expense. Additionally, the parties have greater control of the process, which they usually hand over during litigation. Either party can call upon this process to resolve their dispute or enforce either party’s legal or contractual obligations.
Arbitration can also be confidential if the parties agree to this. This may be important if trade secrets or proprietary information may be communicated that neither party wants the public to have. Arbitration can usually help franchisors and franchisees resolve heated disputes for less time and money.