The most important aspect that many franchise purchasers not consider at the time of buying a franchise is the location of the franchise arbitration will be done if a franchise dispute occurs in future with their franchisor. Recently, I noticed that there was an arbitration clause for the franchisee, which caused the entire process of franchise dispute resolution to be handled only in franchisor’s home country. This is a great problematic clause if an international franchise dispute occurs between the parties belonging to two different nations and in this, the main sufferer will only be the franchisee. When a legal dispute occurs between franchisor and franchisee, the clause also helps the franchisor to be free the tension that the franchisee will never bring a legal representative for the case, as bringing an attorney to a different nation is, obviously, a costly affair just to meet with the arbitrator who is actually playing a crucial role in Franchise Dispute Resolution. So, it is extremely crucial for the franchisees to check the franchise arbitration location before signing the franchise agreement just to have this knowledge in advance if in case there is a conflict in the future, where the franchisee will be required to visit for the arbitration procedure. It might be even a wise decision to ask your franchisor if he can modify that part of the franchise agreement before signing. In some states, the franchisor doesn’t allow arbitration to occur outside of the state where the franchisor owns his business. This is the thing that you should also check with your franchise attorney before purchasing the franchise. Many times, arbitration is considered as a problematic process because it makes tough for the class-action lawsuits, as these disputes are always resolved individually. Many franchise lawyers don’t like the idea of getting into the arbitration process as to settling a dispute; this is mainly because the franchisor failed in developing a good contract. So, it is always recommended to seek the legal counsel before buying a franchise.
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AuthorMr. Herman has lectured at the First Annual Franchise Conference held in Shanghai, China in October 1998. He has also lectured on Franchising Issues in San Jose, Costa Rica in September 2001, and with the ABA Forum on Franchising in Orlando, Florida in October 2005. Archives
May 2018
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