UTGB Vol 5.pdf - Robson Hall Faculty of Law

contains numerous lawsuits commenced against the franchisor may dissuade
prospective franchisees from acquiring the franchise. Consequently, franchisors
have commenced to utilize mandatory arbitration or ADR clauses in their
franchise agreements, mandating that disputes must first be resolved through
ADR instead of through litigation, with the goal of having a smaller number of
disputes to disclose. 150 In doing so, the franchise may appear more appealing to a
prospective franchisee.
From a franchisee's perspective, ADR offers a less expensive means of dispute
resolution than litigation, removing barriers associated to justice such as cost,
location and duration. 151 For instance, although the length of mediation varies
with the complexity of the dispute, mediation of a typical franchise dispute may
take 10 15 hours and involve two or three sessions. 152 ADR will also allow a
franchisee to avoid the combative nature of litigation, fostering the preservation
of commercial relationships while parties attempt to resolve a dispute. 153
Furthermore, the franchise relationship presents some particular aspects which
make it critical that the courts have special tools to deal effectively with their
disputes. 154 Some of the concerns that franchisors and franchisees have to
address when a dispute arises between them include:
• It is very difficult for all parties to continue working together on a daily
basis while pursuing a court case between them;
• In many cases, a franchisee who decides to sue his franchisor is not, at
that time, in a good financial position;
• Where the amounts paid to franchisors by the franchisee are the only, or
main, source of income, franchisors have found themselves in
problematic positions toward their franchisees by reason of the slowness
of the court system; and
• Another problem encountered by franchisors and franchisees when
disputes arise is the uncertainty in regard of their contractual
relationship during the time when litigation has taken place, most
specifically in the event where the franchisor has terminated the
agreement by reason of one or several defaults committed by the
150
So, supra note 71 at 266.
151
Ibid.at 261.
152
International Institute for Conflict Prevention and Resolution (CPR), "National Franchise
Mediation Program: A dispute Resolution Process for Franchising," online:
at 4.
153
So, supra note 71 at 264.
154
Jean H. Gagnon, 11 Some Considerations Regarding the Judicial and NonJudicial Resolution
of Franchisors/Franchisees Disputes," (1 April 2003), online: Jean H. Gagnon Consulting
Services at 7.