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Franchise Arbitration

Michigan Franchise Arbitration

Most franchise agreements require that most disputes between franchisors and franchisees be resolved by arbitration. Franchise arbitration is a formal method of dispute resolution in comparison to negotiation and mediation. Franchise arbitration is a "private" court case where an arbitrator selected by the parties will issue a decision following a relatively formal "trial" process.

Arbitration is much like a private court. In most cases it is mandatory and binding on the parties. In franchise law, a franchisor and franchisee will argue their case with the assistance of legal counsel. Each side will present testimony and offer evidence in support of each party's position. If the parties do not settle the case, the arbitrator will issue an opinion in the case, which will be binding upon the parties. 

Franchise Arbitration Clauses

Franchise arbitration clauses are almost always included in franchise contracts. These clauses can declare arbitration as the primary method of dispute resolution to be used in disagreements or that arbitration is binding and cannot be appealed in trial courts.  A binding arbitration will provide a decision that can be taken to district court and be entered to have the same strength as a trial court decision. 

Benefits of Franchise Arbitration

Franchise arbitration may be cheaper than litigation, considering that you are only paying for the cost of the arbitrator and legal counsel, and avoiding additional court fees. Arbitration will also (generally) be less expensive depending on the number of arbitrators selected. While arbitration can involve a panel of arbiters, a single arbiter can do the job and cost two-thirds less. 

Another benefit of franchise arbitration is that it may produce a binding verdict which cannot be appealed in court. While there is a lot of finality in this decision, it also means that arbitration generally begins sooner than litigation, there is generally more limited discovery, and the hearing process is more easily scheduled without the crowded court docket. 

To directly compare litigation and arbitration, arbitration provides more privacy to each party involved in the franchise dispute. Litigation rulings are on the public record, whereas a dispute that is taken to arbitration will remain private between the two parties. Arbitration also means that both parties have a say in choosing their arbitrator. Litigation means that there is less certainty in who will be judging the case. Trial court also means that your case will be sharing a time-slot with others in the courtroom, meaning that the judge may pay the case less time and attention.

Where to Start With Franchise Arbitration

Not sure where to start? The franchise attorneys at Fahey Schultz Burzych Rhodes can review your case and will provide legal guidance in your arbitration or other methods of franchise dispute resolution, including negotiation, mediation, or litigation.


Have any questions regarding the best course of action? Schedule a Franchise Consultation Today ›


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