As a franchisee, it’s important to know when it’s time to take legal action. While pursuing mediation or arbitration might be the last thing you want to do, when filing a claim is your best option, you need to be willing to do what is necessary to protect your investment. So, when should you file for mediation or arbitration against your franchisor? Find out from franchisee lawyer Jeffrey M. Goldstein.
5 Reasons to Consider Filing for Mediation or Arbitration as a Franchisee
While there are several reasons why you might need to consider mediation or arbitration with your franchisor, most of these reasons fall into five broad categories. These categories are:
1. You Received False or Misleading Information from Your Franchisor
If you have received false or misleading information from your franchisor—whether before or after buying your franchise—you may have a cause of action under your franchise agreement, your state’s franchise law or the common law in the jurisdiction where you need to file your claim. Even when a franchise agreement includes broad disclaimers and an “Integration” clause (as is typically the case), franchisees can still pursue fraud claims in a variety of circumstances.
2. You Are Being Treated Differently From Similarly-Situated Franchisees
Cases of franchisor discrimination and selective enforcement rarely get better on their own. If you are being singled out for enforcement, you may have little choice but to take legal action in order to hold your franchisor accountable. With that said, getting an experienced franchisee lawyer involved may help to facilitate a resolution outside of ADR—and, if it doesn’t, your lawyer will be able to take all necessary legal action on your behalf.
3. Your Franchisor Isn’t Complying with the Terms of Your Franchise Agreement
If your franchisor is refusing to comply with its obligations under your franchise agreement, this is another scenario where pursuing mediation or arbitration may be necessary. Regardless of the nature of your franchisor’s noncompliance, this is also an issue that is unlikely to resolve itself in most cases. If your franchisor’s noncompliance is putting your franchise’s profitability or viability in jeopardy, immediate legal action may be necessary.
4. Your Franchisor Has Deprived You of Your Rights
If your franchisor has deprived you of your rights by wrongfully refusing to renew your franchise, refusing to approve a transfer or terminating your franchise, immediate legal action may be necessary in this scenario as well. These types of issues can present risks for substantial losses, and pursuing mediation or arbitration may be your only viable option for protecting your investment.
5. You Have Unsuccessfully Attempted to Achieve an Amicable Resolution
Regardless of the specific issue(s) involved, if you have unsuccessfully attempted to achieve an amicable resolution with your franchisor, then mediation or arbitration may be the next step. While most franchisees never anticipate pursuing ADR when they sign their franchise agreements, franchisor-franchisee disputes are common, and many franchisees find that pursuing mediation or arbitration is a necessary step in the process of franchise ownership.
5 Steps to Take When Preparing for the Possibility of Franchise Mediation or Arbitration
If you think that you may need to pursue mediation or arbitration in order to protect your legal rights as a franchisee, there are some important steps that you should try to take promptly. These steps include (but are not limited to):
1. Review Your Franchise Agreement
If you are facing a dispute with your franchisor, you will want to carefully review the relevant terms of your franchise agreement. This includes the relevant substantive terms as well as your franchise agreement’s dispute resolution provisions. What do they say about mediation or arbitration? Where will you need to file your claim? How will the costs of ADR be apportioned between you and your franchisor? These are all important details to know as you make decisions about your next steps.
2. Stay in Compliance with Your Franchise Agreement
Regardless of whether your franchisor is in compliance with your franchise agreement, it is extremely important that you remain in compliance going forward. Your franchisor’s breach does not justify your breach, and when pursuing a claim against your franchisor, you do not want to give your franchisor any excuse to pursue counterclaims against you.
3. Document the Issue(s) as Thoroughly as Possible
To prepare for your next steps, you should try to document the issue(s) as thoroughly as possible. Be sure to preserve all relevant records and communications (both electronic and in hardcopy), and write down as many relevant facts as you can. This includes records, communications and facts from both before and during your dispute.
4. Keep Storing All Relevant Records and Communications
As you move forward, you should continue to preserve all records and communications that are relevant to your dispute. This includes letters, voicemails, text messages and emails that you receive from the franchisor’s representatives, as well as royalty reports, invoices and any other financial documents that are related to the issue(s) you are currently facing. When preparing for the possibility of mediation or arbitration, the more documentation you have on-hand, the better.
5. Talk to a Franchisee Lawyer
When facing the prospect of franchise mediation or arbitration, informed decision-making is also critical. To ensure that you are making informed decisions, you should talk to an experienced franchisee lawyer as soon as possible. An experienced franchisee lawyer will be able to thoroughly assess the implications of your franchise agreement and the governing law, help you weigh your options, and pursue any and all forms of legal action as warranted.
Schedule an Appointment with Franchisee Lawyer Jeffrey M. Goldstein
Do you need to know more about pursuing mediation or arbitration against your franchisor? If so, franchisee lawyer Jeffrey M. Goldstein can help you understand your situation and make informed decisions about your next steps. To schedule an appointment with Mr. Goldstein as soon as possible, please call 202-293-3947 or request a free initial consultation online today.
