A recent International Franchise Association’s Franchise Business Network meeting focused on the effectiveness of mediation as a tool for resolving franchise disputes. The panel discussed how mediation can result in a quicker, more cost-effective resolution compared to arbitration or litigation. It also allows for early information sharing and the potential to preserve or peacefully end the business relationship. Mediation can lead to interest-based solutions that benefit both parties in a way that arbitration and litigation cannot.
However, successful mediation is not guaranteed. Some parties may not be open to discussions beyond their initial demands, and claims may not be adequately framed for a proper response. One of the key factors that affect the success of mediation is the execution of the process by the mediator and the counsel representing the parties. The mediator’s experience, emotional intelligence, personality, and energy are critical in ensuring a successful outcome. It is essential for the mediator to listen to both parties’ perspectives on the past relationship and encourage them to consider the future relationship or potential split.
The panel and audience highlighted several key points related to the execution of the mediation process. First, it is crucial for the parties to have an introductory meeting where they can introduce themselves and set the tone for the mediation. Omitting this step can create a feeling of separation between the parties, especially in a virtual environment. Second, it is important for both parties to submit written statements and supporting documents to the mediator before the mediation session. This helps ensure that both sides are adequately prepared for the negotiation process.
Preparation and planning by counsel before the mediation session are also critical for a successful outcome. Pre-mediation investigation of the claims, discussions with the other party, and strategy development can help optimize the mediation opportunity. While mediation is generally less expensive than arbitration or litigation, it still requires the investment of time and resources. It is important for both parties to take an active role in preparing for and participating in the mediation process.
The panel also discussed the value of including a mandatory mediation provision in franchise agreements. While parties can always agree to mediate a dispute without such a provision, having it included in the agreement can encourage parties to consider mediation as a first step in resolving conflicts. The key to successful mediation lies in the execution of the process, and attention to details such as having an introductory meeting, submitting written statements, and adequately preparing for the mediation session can enhance the chances of a positive outcome.
