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Arbitration Clauses in Franchising

Written by: Sebastien Page

Article Overview: As in any business partnership, the ups and downs along the way somewhat resemble those of a marriage. Sometimes everything is going smoothly and the parties involved couldn’t be happier.

Arbitration Clauses in Franchising

As in any business partnership, the ups and downs along the way somewhat resemble those of a marriage. Sometimes everything is going smoothly and the parties involved couldn’t be happier. However, at other times, everything is not quite as peachy. Success in the franchise business goes hand in hand with maintaining successful relations within the franchising organization. You can’t possibly dream of expanding your business, exploiting the market, further promoting the brand name or at the very least turning out a good profit, if everyone involved is bickering all the time.

Similarly, the ending of a business relationship is very similar to a divorce in the sense that, things can get ugly and they can get ugly very quickly. Not only can you find yourself watching a successful business and personal relationship go quickly down the drain, but you’ll be burdened with the costs of legal counseling as well as massive losses for both you and the franchiser. In a situation like this, the only winners are usually the lawyers !

Regarding Arbitration

Should any dispute or conflict arise besides injunctive relief regarding the agreement you have with your franchising company, its settlement is to be through binding arbitration. The outcome of arbitration may from then on be admissible in any court with jurisdiction. In the U.S., Arbitrations of this sort are to carried out via the nearest AAA office. The arbitrators are a panel of three, selected according to the recognized International Arbitration Rules, or whatever rules, laws and regulations of the AAA that are applied when international commercial issues are involved.

Any decisions reached by the arbitrators are to be in accordance and compliance with Arizona law. These decisions should be made in the light of evidence and facts provided by the concerned parties during the course of the arbitration.

Not all matters can be settled by arbitration, though. Disputes regarding certain issues such as public policy and security law violations, are to be ruled on separately. After matters which can be settled through arbitration are done with, the parties will then be brought into a court of jurisdiction. If the involved parties are finding it difficult to determine on their own which matters can be settled by arbitration and which cannot, then they will await and eventually abide by the ruling of the arbitrators regarding the fate of these controversial matters. In the absence of any other rulings on the matter by the arbitrators, the expense of the arbitration is to be equally provided by the parties involved.

It’s not necessarily a bad idea to seek legal consultation and try to include a clause regarding arbitration in your franchise contracts. Keeping yourself covered before entering into any business relationship is important because as I’ve mentioned at the beginning, it’s just like a marriage!

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Article Tags: aaa office, arbitrations, arbitrators, arizona law, binding arbitration, business partnership, business relationship, expanding your business, franchise business, franchiser, injunctive relief, international arbitration rules, laws and regulations, massive losses, personal relationship, public policy, security law, successful business, ups, ups and downs



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