Underneath the Golden Boy - Robson Hall Faculty of Law

Franchise Law Consultation Paper 2007 291
5. Alternative Dispute Resolution
The use of alternative dispute resolution mechanisms is growing in popularity in
the franchise industry; in part, it is said, because of the legislated requirements
for franchisors to disclose to franchisees the details of concluded or pending
litigation. Some franchisors have inserted mandatory binding arbitration or other
alternative dispute resolution provisions in their franchise agreements. 237
Alternatively, franchisors and franchisees may agree to voluntary mediation or
other alternative dispute resolution processes.
Alternative dispute resolution methods have benefits over litigation in that
they generally are cheaper and can be more private and less combative than the
court process. ADR is often considered to be particularly appropriate in the
context of ongoing business relationships, often enabling the business
relationship to be preserved. 238 The Ontario Franchise Sector Working Team
recommended that alternative dispute resolution methods be explored and
adopted, 239 and the concept was raised at the public hearings on the Ontario
Act. On the other hand, the American Franchisee Association has noted that
mandatory arbitration provisions can be a disadvantage to franchisees, in that
arbitration is private and does not result in useful precedents. 240 As well, in the
most flagrant fact situations, a contract providing for mandatory arbitration may
prohibit any award of punitive damages that might otherwise be available.
In the U.S., a national franchising mediation program was developed in
1993 by a steering committee of franchisor companies who were growing
increasingly concerned about media reports of unfair treatment of franchisees by
some franchisors. 241 The program operates through the Center for Public
(date accessed: May 12, 2007); Australia:
Franchising Code Review, DLA Phillips Fox (February 26, 2007), online:
(date accessed: May
12, 2007).
237
D.F. So, Canadian Franchise Law Handbook (2005) at 266.
238
Ibid. at 264.
239
Franchise Sector Working Team Report supra note 22 at 2-142J-142Z.4.
240
The Twelve Worst Franchise Agreement Provisions, American Franchisee Association, online:
(date accessed: May 12, 2007).
241
M. Aronson, “National Franchise Mediation Program: Where Do We Go From Here” 29:3
Franchising World (May/June 1997); P. Philipps, “The National Franchise Mediation Program:
A Business-like Alternative to Suing Your Business Partner” 33:1 Franchising World (Jan/Feb
2001).