The relationship between the franchise and the master franchisee can sometimes become strained in terms of territory rights, performance expectations, and brand protection.
Arbitration offers a less time-consuming, more confidential, and often less expensive method of resolving franchise disputes, thereby possibly maintaining professional relationships.
Understanding The Master Franchisee Role
The master franchisee is a sub-franchisor for a given territory. Typically, master franchise contracts encompass a broader scope and often require a substantial amount of capital.
Common Franchise Disputes Requiring Arbitration
Conflicts between franchisors and master franchisees may occur from a few parts:
- Territorial disputes (superimposition of rights or incursion of territory)
- Performance obligations (non-observance of schedules in development)
- Payments of royalties or fees
- Brand integrity, trademark misuse
Such litigation can harm relationships and lead to public exposure. Therefore, a majority of the franchise contracts will include an arbitration clause that discreetly addresses such matters.
Why Choose Arbitration In Franchise Disputes?
Choosing arbitration for franchise disputes can expedite the resolution process and offer greater flexibility than a court system.
- Confidentiality: It protects sensitive information about the business and keeps it secret, as the information is not shared with the outside world.
- Competent Decision-Makers: Arbitrators can be selected who have a background in franchising.
- Cost and Time Efficiency: The arbitration process is not associated with tedious court proceedings and the expenditure of considerable legal costs.
- Binding: Arbitration decisions are enforceable in any state in the US.
International arbitration provides a neutral platform and a predictable legal framework for the franchisor and master franchisee to resolve disputes where there is a commitment boundary.
Drafting Effective Arbitration Clauses in Franchise Agreements
An arbitration policy that includes a properly drafted clause is necessary to establish and clarify its enactment. It must point out:
- The plug (e.g., AAA, ICC)
- The seat and the language of arbitration
- The arbitral panel and persons qualified to be arbitrators
- If interim measures (such as injunctions) are permitted
It is expected that franchisors and master franchisees will need to collaborate with an arbitration franchise disputes lawyer to customize these clauses to fit their business models and address specific risk hazards.
Conclusion
The franchise relationships are provided with clarity, structure, and trust. Arbitration is also a respectful and workable way for franchisors and master franchisees to resolve disputes without incurring the expense of litigation. The insistence on arbitration provisions in franchise agreements is a way to protect the business, the brand, and the future of collaboration.
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