REPRINTED FROM THE FRANCISE VOICE, CANADIAN FRANCHISE ASSOCIATION
OFFICIAL MEMBER MAGAZINE, FALL 2024
Franchise Legal, pages 22-23
By: Frank Zaid
A number of years ago the International Franchise Association Franchise Relations Committee published a handbook entitled “Resolving Disagreements by Working Together: A Dispute Resolution Handbook for Franchisors and Franchisees.” The Introduction states that “Resolving disagreements to the satisfaction of both franchisors and franchisees has become the hallmark of successful franchise systems.” That premise has equal, if not greater, application today.
For the past 15 years I have continued my 40-year legal career in franchising as a franchise mediator and arbitrator. My diverse experience has convinced me that many franchisors and most franchisees are not prepared for disagreements or disputes and are not familiar with early or alternate dispute resolution to avoid litigation. And now there are several new and novel means of resolving disputes efficiently and inexpensively.
The easiest opportunity to resolve disputes is through the Canadian Franchise Association’s Franchise Ombudsman program. Any franchisee or franchisor operating in Canada can discuss an issue or concern regarding a franchise relationship with a neutral, objective and professional person. Often the first conversation is used to identify the root of the problem and discuss options. All conversations are private and confidential. If the ombudsman program is not the appropriate venue for handling a particular issue, a referral will be offered. There is no cost as the program is funded by the CFA. Further information is available via telephone toll-free: 1-866-443-8255, Toronto area: 416-928-1697, e-mail: ombudsman@cfa.ca.
If the CFA program doesn’t lead to a satisfactory resolution, the parties should consider their commitment to the Canadian Franchise Association’s Code of Ethics which states that “Both parties should make reasonable efforts to resolve complaints, grievances and disputes with each other through fair and reasonable direct communication, and where reasonably appropriate under the circumstances, mediation or other alternative dispute resolution mechanisms”.
Some franchisors provide for mediation in their franchise agreements or ancillary documents and it is often a pre-condition to commencing litigation or arbitration. The parties can agree to mediate a dispute at any time and appoint a mediator. A mediator should have significant experience in mediating franchise disputes and a fundamental understanding of franchising. The mediator does not make a decision but assists the parties to understand their case and options. The process is confidential and without prejudice and there is a high rate of settlement in mediated franchise disputes.
A new mediation program offered by ADR Chambers in Toronto may be useful for uncomplicated franchise disputes. The program, Roster Rate Mediation, is a time-saving and cost-effective process, similar to that outlined for mandatory mediation sessions in the Ontario Rules of Civil Procedure. The fees range from $600 to $825 plus HST, depending on the number of parties, and the fee covers one half hour of preparation time per party and up to three hours of mediation. ADR Chambers Panel Members available to facilitate a mediation at the roster rate can be accessed via the ADR Chambers website www.adrchambers.com or call 1-800-856-5154 or 416-362-8555 or email booking@adr.ca.
Arbitration can be used to resolve disputes if mediation is not successful. Arbitration is private and confidential. No documents are available for public review, and the public and the media cannot attend. The parties must sign an arbitration agreement which can be a standalone document or contained in another agreement like a franchise agreement. It can require the arbitrator to have specialized knowledge of franchising and can deal with the appointment of the arbitrator and the procedures and rules for arbitration. By creating a streamlined process, arbitration can be much quicker than an ordinary trial. An arbitration decision is private and confidential and usually cannot be appealed.
Again, ADR Chambers offers a new Expedited Arbitration designed for parties who want a fast and inexpensive arbitration. There are different models with fees as low as $1000 per party. Expedited arbitrations are fixed fee arbitrations, with strict time frames and limitations on the number of documents, length of briefs, and time for the hearing. The process takes less than 90 days from the appointment of the arbitrator to the issuance of the written award, and there is a maximum of one hearing day. The arbitrator will not have the discretion to extend timelines, nor increase page limits or number of documents, except in extraordinary circumstances (as set out in the Rules), or on consent (for an increased fee).
The fee for a full Expedited Arbitration with an oral hearing is $7,500 plus HST per party. The fee for an In-Writing arbitration is $3,000 plus HST per party. However, the fee for a No-Reasons Expedited Arbitration with an oral hearing is $3,000 plus HST per party and the fee for a No-Reasons Expedited Arbitration In Writing Only is $1,000 plus HST per party. Contact information: Tel: 416-362-8555, Toll-free: 1-800-856-5154, Fax: 416-362-8825, email adr@adrchambers.com.
Finally, a novel program offered by ADR Chambers is called Med/Arb. The Med/Arb process can give parties the benefits of mediation with a process that will produce a binding decision if the parties cannot agree. The mediator first tries to help the parties find a solution that works for them. If there is no agreement, the mediator becomes an arbitrator and makes a binding decision. The arbitration in a Med/Arb is often less expensive and faster than a regular arbitration because the arbitrator is already familiar with the case, having acted as mediator.
Hopefully these comments will encourage franchisors, franchisees and franchise lawyers to become informed of the use of early and alternate dispute resolution procedures and to include them as part of the franchise system. And with new innovative procedures, disputes can be resolved quickly and efficiently with reduced costs and minimal disruption, and most importantly the franchise system may become an example of a “hallmark of successful franchise systems”.
Frank Zaid
Franchise mediator, arbitrator, business operations consultant, expert witness, ADR Chambers
